RGGI 2010 allowances fetch $2.07 in auction /// Point Carbon

: 12 Mar 2010 16:12 CET Last updated: 12 Mar 2010 16:37 CET


RGGI 2010 allowances sold for $2.07 in the cap-and-trade scheme’s first auction of this year.

All 40.6 million allowances for the 2010 allocation year were sold at the auction held on 10 March, the Regional Greenhouse Gas Initiative (RGGI) administrator said.
Demand for 2010 allowances was 2.3 times higher than supply, with 51 participants submitting bids.

This was the largest number of allowances RGGI states have sold at one auction since the programme’s official start on 1 January 2009.

At the last auction on 2 December 2009, when RGGI states sold 28.6 million allowances, demand was 2.6 times higher than available supply.

Those allowances sold for $2.05 – the lowest price the 2009 emissions permits had fetched since the programme’s officially began.

The 10 northeastern states participating in RGGI also put up for sale 2.14 million allowances for the 2013 allocation year. These sold for the minimum bid price of $1.86.

December 2010 (v10) allowances settled as low as $2.09 on the Chicago Climate Futures Exchange on Wednesday as market participants positioned themselves ahead of today’s auction result.
The allowances rebounded 3 cents Thursday to close at $2.12.

Bidders
Compliance entities – the electricity generators subject to carbon caps – bought 85 per cent of the allowances in the auction.

Participation from power companies was higher than in December’s auction when utilities bought 64 per cent of the allowances in the auction.

Bid prices for 2010 allowances ranged from the minimum bid price of $1.86 to $5.

For the 2010 offering, 40 bidders won allowances, with seven bidders buying 2 million or more emission permits, eleven bidders buying 1 million or more, and 24 bidders buying 250,000 allowances or more. Ninety-eight per cent of the 2013 vintage allowances were sold, with nine entities submitting bids.

Compliance entities and their affiliates bid for 100 per cent of the vintage 2013 allowances.
The largest bidder in the auction for the 2010 contract bought 7 million allowances, or 17 per cent of allowances available.
According to RGGI rules, no single entity can buy more than 25 per cent of allowances for sale.

Proceeds
The auction raised $88 million in proceeds to be distributed to the 10 participating RGGI states for investment in energy efficiency programmes, renewable energy and green jobs.

The total amount of proceeds raised from all the auctions so far is $582.3 million.

RGGI member states are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New Hampshire, New York, Rhode Island and Vermont.

The cap-and-trade programme, the first mandatory market-based greenhouse gas reduction scheme in the US, seeks to cap carbon dioxide emissions from the electricity sector.

States have agreed to cap emissions levels at 188 million short tons until 2014 and reduce that cap by 2.5 per cent each year from 2015 to 2018.

By Kim Moore – kmo@pointcarbon.com