September 8, 2022

RGGI carbon dioxide emissions price reached new quarterly record in June 2022

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The 56th Regional Greenhouse Gas Initiative (RGGI) quarterly auction, held June 1, 2022, resulted in a record-high clearing price of $13.90 per ton for CO₂ emissions allowances, surpassing the previous quarter’s clearing price ($13.50 per ton) by 3% and the June 2021 clearing price ($7.97 per ton) by 74%. Allowance prices set in the RGGI auctions have been increasing since the June 2017 auction, which cleared at $2.53 per ton.

RGGI is a cooperative agreement among 11 U.S. states to reduce CO₂ emissions from power plants; it was the first program in the country to place a cap on power sector CO₂ emissions. In RGGI states, regulated power plants are required to purchase one RGGI CO₂ allowance for every short ton of CO₂ they emit. Emissions allowance prices are influenced by several factors, such as the predefined limit on allowable emissions, the number of participants in the market, and energy prices.

RGGI is implemented through CO₂ Budget Trading Programs specific to each member state. The RGGI-wide CO₂ cap is a regional budget for CO₂ emissions from the power sector and is an aggregation of the individual state program targets. As states join or withdraw from RGGI, the aggregated cap is modified to reflect those changes.

The original RGGI member states were Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont. New Jersey withdrew from RGGI in 2012 but rejoined in January 2020. Starting in January 2021, Virginia became a full participant in the RGGI CO₂ emission allowance market. Pennsylvania was set to join RGGI as its 12th member; however, in July 2022, the Pennsylvania Commonwealth Court entered a preliminary injunction that temporarily prevents the state from implementing its CO₂ Budget Trading Program.

RGGI held its first auction in September 2008. Between 2009 and 2011, emissions were capped at 188 million short tons of CO₂ per year. The cap was lowered in 2012 and 2014, but emissions have consistently been under the limit for each year of the program. RGGI’s emissions cap increased from 80.2 million short tons of CO₂ in 2019 to about 96 million short tons of CO₂ in 2020. Most of that increase was to accommodate New Jersey as it reentered RGGI. RGGI’s plan allows state emissions caps to decline (tighten) at 3% per year through 2029, falling to a regional total of 30% below 2020 emissions levels by 2030.

In 2015, as a part of their climate change plans, a number of participating RGGI states, including Connecticut, Massachusetts, New Hampshire, New York, Rhode Island, Vermont, and Virginia, agreed to pursue emission reductions of 80% to 95% below 1990 emissions levels by 2050 or achieving a per capita annual emission goal of less than two metric tons by 2050.

The 57th quarterly RGGI auction was held on September 7, 2022.

Principal contributors: O. Nilay Manzagol, Kevin Nakolan