Potomac Economics sees RGGI CO2 futures prices climbing

Potomac Economics, the independent market monitor for the Regional Greenhouse Gas Initiative (RGGI) reported Nov. 23 that the average CO2 allowance futures price was $6.25 during the third quarter of 2015, or 13% higher than in the second quarter and 28% higher than in the third quarter of 2014.

Carbon dioxide prices ranged from $5.78 to $6.20 from July 1 until Auction 29 in early September, Potomac Economics said in its latest report. Prices then increased after Auction 29, ending the quarter at approximately $6.75.

The independent market monitor for the RGGI market continues to find no evidence of anti-competitive conduct in the RGGI CO2 allowance secondary market, according to the Report on the Secondary Market for RGGI CO2 Allowances: Third Quarter 2015, released Nov. 23

The report, which addresses the period from July to September 2015, is based on data reported to the Commodity Futures Trading Commission (CFTC) and the Intercontinental Exchange (ICE), as well as other data.

The total volume of CO2 allowance transfers between unaffiliated firms was 25.2 million, up from 15.1 million in the previous quarter and 16.2 million in the third quarter of 2014, according to the latest report.

The total volume of trading of RGGI futures listed on ICE was 52.7 million CO2 allowances in the third quarter of 2015, up from 29.3 million in the previous quarter and 11.2 million in the third quarter of 2014.

The Northeast and Mid-Atlantic states participating in the second RGGI control period (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont) have implemented the first mandatory market-based regulatory program in the United States to reduce greenhouse gas emissions.

RGGI’s CO2 allowance trading program has been praised by Environmental Protection Agency (EPA) Administrator Gina McCarthy as an example of regional cooperation. EPA has said RGGI could serve as a model for regional cooperation as a means to comply with the Clean Power Plan that EPA proposed earlier this year. The Clean Power Plan calls upon states to reduce power sector CO2 32% by 2030.

The 2015 RGGI cap is 88.7 million short tons. The RGGI cap then declines 2.5% each year until 2020. The RGGI states also include interim adjustments to the RGGI cap to account for banked CO2 allowances. The 2015 RGGI adjusted cap is 66.8 million short tons.

RGGI is composed of individual CO2 budget trading programs in each state, based on each state’s independent legal authority. A CO2 allowance represents a limited authorization to emit one short ton of CO2, as issued by a respective state. A regulated power plant must hold CO2 allowances equal to its emissions for each three-year control period. RGGI’s third control period began on Jan. 1, 2015 and extends through Dec. 31, 2017.

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.