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Secondary market RGGI allowance prices kick off June firm to higher

During the week ended June 5, Regional Greenhouse Gas Initiative carbon dioxide allowance prices were firm to higher. The June 2017 vintage 2017 contract was assessed in a bid-and-ask spread of $2.52/ton to $2.63/ton, unchanged on the week.

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The benchmark December 2017 vintage 2017 futures contract was marked in a bid-and-offer range of $2.55/ton to $2.75/ton, up 3 cents from prior weekly assessments.

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Market participants are bidding their time, most likely, ahead of the latest RGGI quarterly allowance auction, to be held June 7. Results will be issued June 9. At the sale, a total of 14,597,470 allowances will be offered. A reserve price of $2.15/ton will be used.

Additionally, 10 million cost containment reserve allowances will be available in the June auction. The cost containment reserve is a fixed additional supply of RGGI allowances that is only accessed if the interim clearing price exceeds the reserve trigger price, which is set at $10.00/ton this year.

At the RGGI program's previous quarterly auction in March, which cleared at $3.00/ton, the lowest clearing price since December 2013, 100% of the more than 14.3 million CO2 allowances on offer were sold. The clearing price was down 55 cents, or more than 15%, from the December 2016 RGGI auction.

The RGGI participating states — Connecticut, Delaware, Maine, Massachusetts, Maryland, New Hampshire, New York, Rhode Island and Vermont — 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.

The RGGI states are considering tightening the Northeast carbon cap-and-trade program's emissions cap and tweaking additional model rules post-2020. Another stakeholder meeting regarding the potential changes to the program will be held June 27.

During the program's first review period and in an effort to align the RGGI ceiling with actual emissions levels at the time, the states opted to cut the emissions cap by 45%, to 91 million tons in 2014. The RGGI cap drops 2.5% each year thereafter through 2020.

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.