Participating states in the Regional Greenhouse Gas Initiative released auction documents Oct. 10 for the program's last quarterly auction of the year, kicking off the bidding process for the Dec. 6 sale.
Part of an effort by nine Mid-Atlantic and New England states to cap and reduce CO2 emissions from the region's power plants, the 38th RGGI auction will offer a total of 14,687,989 CO2 allowances. The offering will comprise allocation year 2017 CO2 allowances, as well as 88,808 allocation year 2015 and 227,595 allocation year 2016 allowances from state set-aside accounts, RGGI said.
The RGGI states will again use a reserve price of $2.15/ton. Additionally, there will be a 10 million allowance cost containment reserves available for the upcoming auction. The reserve will be accessed if the interim clearing price exceeds the cost containment reserve trigger price of $10.00/ton.
In the RGGI program's prior quarterly auction held in September, 100% of the 14,371,585 carbon dioxide allowances on offer were purchased at a clearing price of $4.35/ton. Results of the Sept. 6 sale showed that the price spiked $1.82, or almost 72%, from the program's previous auction price of $2.53/ton, which was the lowest since December 2012.
The rally in the auction price followed a similar surge in allowance values in the secondary market at the end of August after the RGGI states announced a proposal to cut to the program's emissions ceiling by an additional 30% by 2030 relative to 2020 levels.
RGGI is made up of Connecticut, Delaware, Maine, Massachusetts, Maryland, New Hampshire, New York, Rhode Island and Vermont. The 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.
The December auction will be the last quarterly sale in which states will be able to buy allowances to fulfill compliance obligations for the third control period, which began on Jan. 1, 2015. All CO2 allowances for the third control period must be provided for compliance by March 1, 2018.
More information about the December RGGI allowance auction will be provided during a webinar scheduled for 2 p.m. ET on Oct. 12.