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Latest RGGI allowance auction sells out at $3.79/ton

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Latest RGGI allowance auction sells out at $3.79/ton

In the Regional Greenhouse Gas Initiative's first quarterly auction of the year, 100% of the more than 13.5 million carbon dioxide allowances on offer were purchased at a clearing price of $3.79/ton. Results of the March 14 sale were released March 16 and showed the clearing price was down 1 cent from the program's prior auction price of $3.80/ton.

March auction bids ranged from a low at the market reserve price of $2.20/ton to a high of $5.80/ton. There were 40 bidders in the latest sale, with the ratio of bids coming in at 2.9 times the total amount of allowances. RGGI said 64% of the allowances sold in the March auction were bought by compliance entities or their affiliates. Compliance-oriented entities purchased 60% of the allowances.

The auction RGGI clearing price was not high enough to trigger the sale of allowances from the cost containment reserve, or CCR. The CCR is a fixed additional supply of allowances that are only available for sale if CO2 allowance prices exceed certain price levels: $10.25/ton this year and rising by 2.5% each year thereafter to account for inflation.

This was the first auction of the fourth RGGI control period. RGGI compliance is structured based on three-year control periods, the fourth of which started at the beginning of this year and will run through the end of 2020.

At the end of that year, covered entities must provide one allowance for each short ton of CO2 emitted during the period. They also must provide allowances equal to half their emissions at the end of each interim control period, or the first two calendar years of each three-year control period.

The latest RGGI auction netted more than $51 million for the participating states. Cumulative proceeds from all of the RGGI's 39 allowance auctions to date total $2.89 billion.

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Secondary market prices for CO2 allowances under the RGGI have largely been aimed lower for the last several weeks. As of March 15, the March 2018 vintage 2018 RGGI CO2 allowance contract was eyed in a bid-and-offer spread of $3.79/ton to $3.90/ton, down 3 cents from March 1 assessments.

The benchmark December 2018 vintage 2018 RGGI CO2 allowance contract was seen in a bid-and-ask range of $3.91/ton to $4.00/ton as of March 15, sinking 24 cents from March 1.

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The RGGI states are made up of Connecticut, Delaware, Maine, Massachusetts, Maryland, New Hampshire, New York, Rhode Island and Vermont. The nine states use a market-based cap-and-trade program to reduce greenhouse gas emissions from regional power plants, selling nearly all emissions allowances through auctions and investing proceeds in energy efficiency projects. The 2017 model rule, released in December 2017, sets a 30% reduction in regional carbon dioxide emissions between 2020 and 2030.

Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power and natural gas index prices, as well as forwards and futures, visit our Commodities pages.