CO2 emissions allowance prices increased in latest RGGI auction

The most recent Regional Greenhouse Gas Initiative (RGGI) quarterly auction (held on December 1, 2021) resulted in a clearing price of $13.00 per allowance, surpassing the previous auction’s record price of $9.30 per allowance. Each allowance represents a limited authorization for power plants to emit one short ton of CO₂.

The RGGI is a market-based effort in Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont, and Virginia to cap and reduce CO₂ emissions from the electric power sector. The latest RGGI auction sold 27 million CO₂ allowances, an increase from 23 million allowances sold at the previous auction.

Individual CO₂ budget trading programs in each participating state implement the RGGI. The number of allowances for sale declines over time so that the power plants in RGGI states can reduce or eliminate the need to purchase emission allowances.

In the most recent auction—the 54^th since the inaugural September 2008 auction—the clearing price reached the threshold that triggers more allowances to be available for sale to help provide market stability. This trigger, known as the cost containment reserve (CCR), becomes available if the interim clearing price is $13.00 per allowance or more. In the December auction, RGGI initially offered 23.1 million allowances, all of which were sold. After the CCR was triggered, RGGI sold another 3.9 million allowances. This CCR threshold price increases at 7% per year and will be $13.91 per allowance in the next auction, which will take place on March 9, 2022.

The December auction generated $351.5 million for RGGI states. States can invest these funds into programs that encourage the adoption of energy efficiency and renewable energy, reduce customers’ energy expenditures, or otherwise support greenhouse gas abatement programs.

Climate goals and commitments of the RGGI participating states, such as renewable portfolio standards (RPS) (which require increasing renewable-powered electricity generation), have been changing since 2018. For example, Maine increased the stringency of its RPS in mid-2019, and Maryland revised its standard in 2021. RGGI initiated its third program review in early 2021, and according to its preliminary timeline, RGGI plans to complete the latest program review by early 2023.

Principal contributor: O. Nilay Manzagol