Last week’s Regional Greenhouse Gas Initiative (RGGI) carbon dioxide allowance auction cleared at $13/ton, representing both the highest price and single largest price jump in the program’s history.
There were 53 winning bidders, of which five received one million tons or more, according to the Market Monitor Report for Auction 54. While bids averaged $12.91/ton, the number of bids that were above a 2021 cost containment reserve (CCR) price of $13 exceeded the initial number of allowances offered.
RGGI, therefore, released 3.9 million additional allowances for the auction. Only two previous auctions have released allowances from the CCR, which are allowances held for sale when prices exceed a set amount.
“The 54th RGGI auction marks another successful year of RGGI operations and over $4.7 billion raised to date for the RGGI states to invest in clean energy, energy efficiency and direct consumer benefits,” RGGI Chair and Massachusetts Department of Environmental Protection Commissioner Martin Suuberg said in a statement.
Rising natural gas prices and the potential for Pennsylvania to join the program next year contributed to the clearing price hike, according to a ClearView Energy Partners’ report released Dec. 3.
In October, the Henry Hub gas spot price was higher than it has been in over a decade, reaching $5.51/MMBtu, according to the U.S. Energy Information Administration. It has been steadily rising this year from a low of $2.62/MMBtu in March. Rising gas prices could be improving the economics for coal-fired generation, which ClearView said drives more emission allowances in RGGI states.
EIA data show that coal-fired generation in the 11 RGGI states increased about 33% between September 2020 and September 2021. For that period, auction clearing prices increased from $6.82/ton for 16.1 million allowances to $9.30/ton for 22.9 million allowances.
The latest clearing price, which was 40% higher than the Sept. 8 price, could put Virginia’s new membership at risk and threaten Pennsylvania’s efforts to join RGGI, ClearView said.
RGGI states sold 27 million allowances in the Dec. 1 auction, which raised a total of $351 million. Virginia received $85.6 million, bringing the state’s total since joining the program in January to $227.6 million.
With Republican Glenn Youngkin beating Democrat Terry McAuliffe in last month’s Virginia governor’s race, there is a renewed interest by Republicans to roll back climate policy in the state. That could include pulling Virginia out of RGGI, but ClearView said Democratic control of the state Senate limits that possibility in 2022.
The high clearing price could also hinder Pennsylvania’s prospects for joining RGGI as opponents use it to sway opinions about the effect the program could have on state energy prices. In a Dec. 3 tweet, the Power PA Jobs Alliance, which opposes Pennsylvania’s participation in RGGI, called the auction price “criminal,” claiming it “will devastate poor and senior households.”
A rule that would authorize the state’s participation has received key approvals, but the General Assembly could still pass a resolution opposing the regulation. (See Pa. RGGI Regulations Approved by IRRC.)