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OTC RGGI CO2 allowance prices tumble back below $5.00/ton

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OTC RGGI CO2 allowance prices tumble back below $5.00/ton

Atthe over-the counter market, prices for Regional Greenhouse Gas Initiative CO2allowances plunged back below $5.00/ton following a recently failed attempt tocrack through $6.00/ton. Broker data as of July 13 showed the RGGI spotallowance contract in a bid-and-offer range of $4.52/ton to $4.88/ton, slumping77 cents from prior-week assessments.

TheRGGI July 2016 vintage 2016 contract was marked in a bid-and-ask spread of $4.52/tonto $4.88/ton, unwinding 70 cents from the week before. As of July 13, thebenchmark December 2016 vintage 2016 futures contract was pegged in abid-and-offer range of $4.60/ton to $4.90/ton, also losing 70 cents week overweek.

TheRGGI participating states, which include Connecticut, Delaware, Maine,Massachusetts, Maryland, New Hampshire, New York, Rhode Island and Vermont, areundergoing a program review this year, with a focus on dovetailing the programwith eventual implementation of the Clean Power Plan.

Thecurrent RGGI cap extends until 2020, while the Clean Power Plan complianceperiod begins in 2022 and ends in 2030. "RGGI caps must extend at leastuntil 2030 to continue the downward trajectory of emissions to comply with CPPtargets and provide market certainty," according to a July 13 note fromEnerKnol Research.

"RGGI'sdecision on whether to adjust the program to ensure participating states'compliance with the CPP will significantly impact the allowance prices, whichmust be sufficient to incentivize investments in low-carbon generation andsupport state emissions reduction goals. The clarifications regarding RGGI'spost-2020 cap will help reduce regulatory uncertainty and improve the stabilityin the RGGI market," EnerKnol said.

RGGICO2 allowances have been volatile for some time. In 2015, RGGI CO2 allowanceprices reached record highs "in response to EPA's final [Clean Power Plan]rule, nuclear retirements, and low natural gas prices that reduced theprofitability of zero-emitting generation," Enerknol said.

"However,clearing prices have been dropping during the last two auctions since theSupreme Court's stay of the CPP in February 2016. The June 2016 auction soldall allowances at a clearing price of $4.53, approximately 40 percent lowerthan the $7.50/allowance record in December 2015," EnerKnol said.

TheRGGI states released auction documents July 11 for the program's third quarterlyauction of the year. The upcoming auction will offer 14,911,315 allocation year2016 RGGI CO2 allowances for sale. A reserve price of $2.10/ton will be used.There will be a 10 million allowance cost containment reserve available for theupcoming auction. The reserve will be accessed if the interim clearing priceexceeds the cost containment reserve trigger price of $8.00/ton.

AtRGGI's prior quarterly auction held in June, 100% of the more than 15.0 million allocationyear 2016 CO2 allowances on offer were purchased at a clearing price of$4.53/ton. The clearing price was down 72 cents, or 13.7%, from the Marchauction price.

Market prices and includedindustry data are current as of the time of publication and are subject to change.For more detailed market data, including powerand naturalgas index prices, as well as forwardsand futures,visit our Commodities Pages.