RGGI CO2 prices rose during first quarter, report says

The market monitor for the Regional Greenhouse Gas Initiative (RGGI) reports that carbon dioxide (CO2) allowance prices increased throughout the first quarter of 2013, ranging from $1.93 at the beginning of the quarter to $3.42 at the end of the quarter.

Potomac Economics, the independent market monitor for the RGGI market, issued its report for the 1Q secondary market on May 17.

The report continues to find no evidence of anti-competitive conduct in the RGGI CO2 allowance secondary market. 

The clearing price in Auction 19 of $2.80 was 45% higher than the clearing price in Auction 18 (held in December 2012) and was consistent with the prices recorded for RGGI CO2 Allowance Tracking System (RGGI COATS) transactions leading up to the auction.

The volume of CO2 allowance transfers in COATS between unaffiliated firms was 5.8 million, an increase from 3.6 million allowances in the prior quarter. However, volume was down from 38.7 million in the first quarter of 2012 when volumes were elevated in the weeks leading up to the compliance deadline for the first control period, according to the report.

The primary market for RGGI CO2 allowances consists mainly of the auctions where allowances are initially sold. Once a CO2 allowance is purchased in the primary market, it can then be resold in the secondary market. The secondary market for RGGI CO2 allowances comprises the trading of physical allowances and financial derivatives, such as futures and options contracts.

The secondary market is important for several reasons. First, it gives firms an ability to obtain CO2 allowances at any time during the three months between the RGGI auctions. Second, it provides firms a way to protect themselves against the potential volatility of future auction clearing prices. Third, it provides price signals that assist firms in making investment decisions in markets affected by the cost of RGGI compliance.

The report, which addresses the period from January to March 2013, is based on data reported to the Commodity Futures Trading Commission (CFTC), Intercontinental Exchange (ICE), and the New York Mercantile Exchange (NYMEX), as well as other data.

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


About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.