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RGGI seeks applications for last quarterly CO2 allowance auction of 2021

Highlights

Auction 54 to offer 222,987,719 CO2 allowances for sale

A minimum reserve price of $2.38/st used in 2021

The final Regional Greenhouse Gas Initiative auction of 2021 will take place Dec. 1 with 23,121,518 quarterly CO2 allowances for sale, according to the notice for the 54th quarterly CO2 allowance auction.

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The states will use a minimum reserve price of $2.38/st in 2021, according to the Oct. 5 RGGI statement. Applications for Auction 54 must be submitted by Oct. 20.

"The December 21 auction will be the last quarterly auction in which states will offer CO2 allowances for purchase to meet CO2 compliance obligations for this interim control period, which began on Jan. 1, 2021 and extends through Dec. 31, 2021," RGGI said in the statement. "Market participants can continue to obtain CO2 allowances through various secondary markets."

The clearing price of the RGGI CO2 allowances so far in 2021 have averaged $8.29/st, 37% higher year on year with Auction 53 reaching a RGGI auction high of $9.30/st.

Auction 54 details

Auction 54 will offer allocation year 2021 CO2 Allowances (Initial Offering) and allow for activation of an Emissions Containment Reserve or a Cost Containment Reserve, according to RGGI auction notice. The CCR contains a number of CO2 allowances in addition to the Initial Offering, which will be offered for sale when the Interim Clearing Price exceeds a threshold, while the ECR represents a number of CO2 allowances, which will be withheld from the Initial Offering when the Interim Clearing Price falls below a threshold.

There are 11,976,778 CCR allowances available for Auction 54 that will be assessed if the interim clearing price exceeds the CCR trigger price of $13, according to the RGGI statement. Auction 54 also include 11,307,333 ECR allowances, which are available to be withheld if the interim clearing price is less than the ECR trigger price of $6.

All allowances offered for sale in Auction 54 will be recognized for compliance purposes without limitation by the participating states, according to the RGGI auction notice.

RGGI background

RGGI is a cooperative effort of 11 New England and Mid-Atlantic states to reduce CO2 emissions from the power sector. It became the first mandatory cap-and-trade program to limit carbon emissions in the US in 2009.

Under RGGI, power plant owners Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont and Virginia, with generating capacity at or above 25 MW are required to obtain a number of allowances equal to the number of tons of CO2 they emit.

Virginia joined RGGI in January 2021 after the state legislature moved from Republican to Democratic control. The addition of Virginia increased the regional emissions cap coverage by nearly 30%.

New Jersey rejoined January 2020 after an eight-year hiatus.

The latest state in discussions to join RGGI is Pennsylvania with the governor trying to bring the state into RGGI without legislative approval. In September, the Independent Regulatory Review Commission approved a rulemaking for Pennsylvania to participate in RGGI.

"Participating in RGGI is one more way for Pennsylvania, which is a major electricity producer, to reduce carbon emissions and achieve our climate goals," Governor Tom Wolf said in a Sept. 1 statement. "In addition to the environmental benefits, participating in this cap-and-trade initiative will allow Pennsylvania to make targeted investments that will support workers and communities affected by energy transition."