RGGI Moves Allowances in Second CO2 Auction

The states participating in the Regional Greenhouse Gas Initiative (RGGI) recently announced the results of the second auction of carbon dioxide (CO2) emissions allowances in the United States. All of the 31,505,898 allowances offered for sale on Dec. 17, were sold at a clearing price of $3.38 per allowance.

RGGI, Inc. reported that 69 participants from the energy, financial, and environmental sectors took part in the bidding, indicating continued strong performance for RGGI CO2 allowance auctions. The demand for the allowances was robust at 3.5 times available supply.

The approximately $106.5 million in proceeds produced from this auction will be distributed to all 10 RGGI states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont) in proportion to the CO2 allowances offered for sale by each state. The states will invest those funds in energy efficiency and clean energy technologies.

“The RGGI auctions continue to be the place where market participants come to buy the allowances they need,” said Pete Grannis, chair of Regional Greenhouse Gas Initiative, Inc. Board of Directors. “Once again the results prove that distributing allowances via auctions in a carbon dioxide cap-and-trade program can be successful. We look forward to developing a partnership with the Obama Administration to create a strong federal climate action plan.”

Potomac Economics, RGGI’s Market Monitor, reported that the second auction was administered in a fair and transparent manner. They also noted in their report that, “the auction generated a result that is consistent with competitive bidding.” Their report is at http://www.rggi.org/docs/Auction_2_Post_Auction_Market_Monitor_Report_08_12_19.pdf

In the first “pre-compliance” auction on September 25, 2008, all of the 12,565,387 CO2 allowances offered for sale were sold at a clearing price of $3.07 per allowance. That auction raised nearly $38.6 million for use by the six RGGI states that offered CO2 allowances for sale during the first auction.

The next allowance auction is set for March 18. The two auctions held this fall were termed “pre-compliance” auctions because actual compliance obligations under the 10 state CO2 Budget Trading Programs do not take effect until Jan. 1, 2009. These auctions, combined with quarterly auctions to be held in the first compliance period, which runs from Jan. 1, 2009 through Dec. 31, 2011, will ensure an ample opportunity for bidders to obtain the CO2 allowances they will need for compliance across the entire 10-state region.

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