Declining Emissions and Allowance Oversupply Keep RGGI Prices Low
Boston – Low emissions and a growing surplus of allowances kept prices modest in the latest Regional Greenhouse Gas Initiative (RGGI) auction. All 15,089,652 available allowances were sold at a clearing price of $4.53, which is 14% lower than the previous auction and 18% lower than the clearing price from one year ago. The RGGI states raised $68,356,124 dollars from Auction 32, and have now raised $2.52 billion for reinvestment since the program began, the majority of which has been used to fund energy efficiency and other consumer benefit programs. As energy ministers from around the globe gather to discuss means of implementing the Paris Agreement, RGGI provides a successful model for reducing power sector emissions. With forward-looking improvements through the 2016 Program Review, RGGI will help member states makes progress toward achieving their long-term emissions reduction commitments.
The Auction 32 results show a continuation of the decline of RGGI allowance prices that began following the Supreme Court’s stay of the Clean Power Plan in February. In the absence of a ruling on the Clean Power Plan’s merits or an indication from the RGGI states about the program’s future, the Auction 32 clearing price was primarily determined by market fundamentals. Emissions reductions have outpaced the trajectory of the RGGI cap, while surplus allowances purchased from the cost containment reserve have inflated supply. Considering the substantial allowance surplus that exists (130 million allowances through 2015), the modest price of $4.53/ton suggests an expectation of a sustained oversupply of allowances. Whether the RGGI states take further action to address this oversupply going forward will be determined in the coming months through the 2016 RGGI Program Review.
“The RGGI states used the previous program review to address the oversupplied market, and this time should be no different” said Acadia Center President, Daniel Sosland.
“Reducing the cap and adjusting for banked allowances were major improvements, but the market remains oversupplied due to a story that is beginning to sound repetitive” said Jordan Stutt, Policy Analyst with Acadia Center. “Emissions continue to decline more quickly than expected, with emissions reductions occurring at lower costs than projected. Accurately accounting for these trends during the program review will result in a stronger program for the future.”
“Despite this relatively low clearing price, RGGI auctions continue to generate significant revenue for investment in energy efficiency and clean energy programs,” said Peter Shattuck, Director of Acadia Center’s Clean Energy Initiative. “By establishing ambitious cap levels through 2030 the RGGI states will encourage a meaningful price on carbon emissions, supporting auction revenue for local energy improvements.”
Information on the 2016 RGGI Program Review, including meeting materials and stakeholder comments, can be found at: http://www.rggi.org/design/2016-program-review
Additional information on RGGI’s performance to date, and role in EPA’s regulatory process are described in Acadia Center’s July, 2015 report: RGGI: A Model Program for the Power Sector.
The Regional Greenhouse Gas Initiative (RGGI) is the first mandatory, market-based effort in the United States to reduce greenhouse gas emissions. Nine Northeastern and Mid-Atlantic states reduce CO2 emissions by setting an overall limit on emissions “allowances” which permit power plants to dispose of CO2 in the atmosphere. States sell allowances through auctions and invest proceeds in consumer benefit programs: energy efficiency, renewable energy, and other programs.
The official RGGI web site is: www.rggi.org
Jordan Stutt, Policy Analyst, Clean Energy Initiative
617-742-0054 x105, firstname.lastname@example.org
Peter Shattuck, Director, Clean Energy Initiative
617-742-0054 x103, email@example.com
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