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RGGI to offer more than 15 million CO2 allowances in June auction

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Essential Energy Insights - February 2021

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RGGI to offer more than 15 million CO2 allowances in June auction

Participatingstates in the Regional Greenhouse Gas Initiative released auction April 4 for the program's secondquarterly auction of the year to be held June 1. The 32nd RGGI auction will offerfor sale 15,089,652 allocation year 2016 CO2 allowances, using a reserve price of$2.10/ton.

The costcontainment reserve for calendar year 2016 is 10 million allowances. All 10 millioncost containment reserve allowances are available in the June auction. The costcontainment reserve is a fixed additional supply of CO2 allowances that is onlyaccessed if the interim clearing price exceeds the cost containment reserve triggerprice. For this year, that price level is $8.00/ton.

Moreinformation about the June RGGI auction will be provided during a webinar held from2 to 3 p.m. ET on April 7.

DuringRGGI's previous quarterly auction,held in March, 100% of the more than 14.8 million allocation year 2016 CO2 allowanceson offer were purchased at a clearing price of $5.25/ton. The March auction pricedropped $2.25, or 30%, from the program's prior quarterly sale price in December2015, which was a record high at $7.50/ton.

RGGIis comprised of Connecticut, Delaware, Maine, Massachusetts, Maryland, New Hampshire,New York, Rhode Island and Vermont. The participating states use a market-basedcap-and-trade program to reduce greenhouse gas emissions from regional power plants,selling nearly all emissions allowances through auctions and investing proceedsin energy efficiency projects in the residential, commercial and municipal sectors.

It isexpected that the RGGI program will be used as a compliance mechanism for the participatingstates to meet obligations under the U.S. EPA's Clean Power Plan rule. In its finalversion of the rule, released in early August 2015, the agency accounted for theuse of programs like RGGI, providing final targets in mass-based terms, facilitatingthe use of multistate trading programs, and allowing states to treat emissions fromnew and existing units equally.

Topping$8.00/ton in January, secondary market RGGI CO2 allowance prices almost 50% in value in mid-Februaryto between $4.00/ton and $5.00/ton following a wave of selling and liquidation triggeredby the news that the U.S. Supreme Court unexpectedly granted a stay of the CleanPower Plan, effectively putting the rule on hold.