States Release RGGI Third Auction Results
The states participating in the Regional Greenhouse Gas Initiative (RGGI) on March 20 announced the results of the third auction for RGGI carbon dioxide (CO2) allowances. The March 18 auction was the first since compliance obligations under RGGI's first three-year control period began Jan. 1, 2009.
All of the 31,513,765 allowances for the 2009 vintage sold at a clearing price of $3.51 per allowance.
In a parallel offering, the RGGI states also auctioned allowances for the second three-year control period beginning in 2012, providing a first-look at future market prices for RGGI CO2 allowances. The 2,175,513 allowances for the 2012 vintage cleared at a price of $3.05 per allowance. By the end of 2009, the RGGI states will have offered for sale 5 percent of the total supply of 2012 vintage allowances.
The auction raised $117,248,629.80 for energy efficiency, renewable energy, and other consumer benefit programs in the ten RGGI states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont).
"The states are very pleased with the results from the latest RGGI auction," said Pete Grannis, chair of the Regional Greenhouse Gas Initiative, Inc. Board of Directors.
"Our continued success provides further support for President Obama's position that a national cap-and-trade program with allowance auctions is the right policy for the country and the right approach for addressing the most pressing environmental and economic issue of our time: climate change."
Potomac Economics, RGGI, Inc.’s independent market monitor, observed the auction and confirmed that it was fair and consistent with noticed auction procedures. In its "Auction Report," Potomac found that there was "no material evidence of collusion or manipulation by bidders" and that the results were "consistent with competitive expectations." Fifty separate entities submitted bids to purchase 2.5 times the available supply of 2009 allowances, and 20 entities submitted bids to purchase 2.3 times the available supply of 2012 allowances. A total of 42 entities won allowances for the 2009 offering, in which bid prices ranged from $1.86 (the minimum bid allowed) to $10. Twelve bidders won allowances for the 2012 offering, in which bid prices ranged from $1.86 to $4.40.
The Auction Report, issued by the market monitor following each RGGI auction, includes data on the dispersion of bids, provides summaries of purchased allowances, allowances won by bidders and bid prices, and, in accord with the Auction Notice for Auction 3, a list of Potential Bidders for Auction 3. Potential bidders are defined as "each Applicant that has been qualified and submitted a complete Intent to Bid." The list of 63 potential bidders includes compliance entities, financial institutions, and environmental organizations.
According to Potomac, compliance entities and their affiliates won 78 percent of the 2009 allowances and 93 percent of 2012 allowances. The high percentage of allowances won by compliance entities at auction continues a trend established in the two "pre-compliance" auctions held in September and December 2008 in which compliance entities won 80 percent and 85 percent of allowances, respectively.
"Once again RGGI, Inc. has administered a fair and competitive auction for RGGI CO2 allowances," said Jonathan Schrag, RGGI executive director. "The report by our market monitor ensures a high level of transparency for RGGI auctions and confirms that our contractors, especially World Energy Solutions, are doing excellent work."
Compliance obligations for fossil fuel-fired electric generators under the 10-state CO2 Budget Trading Programs took effect on Jan. 1, 2009.
The complete Auction Report is available at http://www.rggi.org/docs/Auction_3_News_Release_MM_Report.