On December 4, 2015, the nine member states of the Regional Greenhouse Gas Initiative (RGGI) released the results of their 30th quarterly carbon auction (Auction 30) held on December 2. All allowances were sold at a clearing price of $7.50 each, generating approximately $115.3 million. The clearing price reached a new high, in line with the trend since 2013, demonstrating growing confidence in the RGGI carbon market, which established the nation’s first mandatory cap-and-trade program to reduce greenhouse gas (GHG) emissions. RGGI involves nine states—Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont. The program applies to carbon dioxide (CO2) emissions from more than 160 electric power plants, all with capacities to generate 25 megawatts or more.
The latest auction price is nearly 25 percent higher than that of the previous auction in September, which then set a record high of $6.02/allowance. Rising allowance prices raise the potential for developing carbon offset projects, which have not seen growth under RGGI due to low allowance prices rendering them uneconomical. Offset allowances may be used to satisfy up to 3.3 percent of a regulated source’s compliance obligation during each interim control period.
Despite reaching record high levels, RGGI allowance prices are still far below the $12.73 price in California’s most recent auction held in November. However, the RGGI allowance price has more than doubled from the settlement price before its 2014 updated Model Rule took effect. Prior to the announcement of the 2014 revisions, the RGGI carbon trading market remained sluggish for three years due to an overabundance of allowances that caused allowances to trade at the market’s floor prices.
RGGI’s 2014 revisions to its Model Rule–a set of proposed regulations that form the basis for each RGGI state’s CO2 budget trading program–have renewed market participants’ confidence in the stability and longevity of the program. RGGI will receive another significant boost from its 2016 program review, which includes considerations for compliance with the Environmental Protection Agency’s (EPA) Clean Power Plan (CPP) and potential market expansions. Expectations of RGGI’s compatibility with CPP have driven an increasing awareness of its cost-effective, market-based approach among non-RGGI states. The results of the RGGI program – as well as the California auctions – will continue to inform stakeholders engaged in crafting implementation pathways for CPP compliance, as their design elements and activities can help address the mix of state and regional emissions reduction requirements.
Originally published by EnerKnol.
EnerKnol provides U.S. energy policy research and data services to support investment decisions across all sectors of the energy industry. Headquartered in New York City, EnerKnol is proud to be a NYC ACRE company.
