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RGGI CO2 allowance futures prices slip during fourth quarter of 2017

At the secondary market, Regional Greenhouse Gas Initiative carbon dioxide allowances futures prices posted an average of $4.09/ton during the fourth quarter of 2017, down just 3 cents from the prior quarter of that year.

According to a report released by independent market monitor Potomac Economics, RGGI CO2 allowance prices were volatile in the third quarter of 2017, ranging between $3.75/ton and $4.25/ton before ultimately ending the three-month period near $4.00/ton.

Although RGGI CO2 allowance prices eased in the fourth quarter of 2017, secondary market trading activity increased during the final three months of the year, which is typical for the time of the year since the benchmark December futures contract rolls off the board. Volumes for RGGI futures contracts listed on the Intercontinental Exchange Inc. were 56.7 million in the fourth quarter of 2017, up 20% on the quarter but down 28% on the year.

In the final quarter of 2017, the total volume of RGGI CO2 allowance transfers between unaffiliated firms was 67.2 million, more than nine times the volume seen in the third quarter of 2017.

During the fourth quarter of 2017, there were 255 million RGGI CO2 allowances in circulation. Compliance-oriented entities held approximately 156 million, or 61%, of the RGGI allowances in the market. About 175 million, or 69%, of the allowances are believed to be held for compliance purposes, the report said.

RGGI requires a regulated power plant to hold CO2 allowances equal to its emissions to demonstrate compliance for each three-year control period. RGGI is made up of nine states: Connecticut, Delaware, Maine, Massachusetts, Maryland, New Hampshire, New York, Rhode Island and Vermont.

The RGGI participating 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 in the residential, commercial and municipal sectors.