The auction held last Wednesday, March 14th, by the Regional
Greenhouse Gas Initiative (RGGI) was the fifteenth held so far --
making it seem far from novel -- but as we
highlighted in January, this first auction of RGGI's
second compliance period could provide interesting insight
into the future of the program.
According to the market monitor report, 21.5 million (62%) of
the 34.8 million allowances offered for sale by the 9-state group
sold at last week's auction, with the 20 participating bidders
paying $1.93 (the new floor price). Although two of the
entities who submitted bids for allowances were not compliance
entities, 99% of the allowances purchased were sold to the
generators regulated under RGGI or their corporate
affiliates. Participation in this quarter's auction was
slightly lower than December's auction, which featured 38
bidders, but much more robust than the
September 2011 auction, which set a record low, with only 18%
of the allowances offered for sale being purchased. The next
auction, held in June, will bring the total cumulative proceeds
since the beginning of RGGI to over a billion dollars, as the total
currently stands at $993.7 million.
The first compliance period for RGGI ran from January 1, 2009
through December 31, 2011 and regulated generators had until this
month to prove that they had purchased enough allowances to cover
the tons of CO2 they emitted during that period. The RGGI
states plan to release more information about such compliance in
June. RGGI's second compliance period began on January 1
and runs through the end of 2014.
One of the big changes between the 2011 and 2012 auctions is
that at last year's auctions, a small offering of 2012-2014
vintage allowances were also offered for sale in a parallel
auction. RGGI announced in January that they would
discontinue this practice for the upcoming
This change may be as simple as RGGI, Inc.'s response to
changes in market demand -- at both the September and December 2011
auctions, no one bid on the future-compliance period
allowances. Especially since running two auctions for two
sets of allowances increases RGGI's costs, eliminating this
parallel auction makes sense. We noted in January that this
change could be seen as a statement about RGGI's own view of
its future beyond this compliance period's end in 2014, but it
also seems likely that it is another way that RGGI can make small
adjustments to the cap, while awaiting the official determination
by the RGGI member states of what to do with the cap going
Through the future compliance period auctions held in 2009-2011
and last week's auction, RGGI has already sold over 43 million
allowances for the 2012-2014 period. This amount is nearly a
quarter of the current annual cap, and will likely be an even
higher percentage of the eventual cap for 2012, because the cap is
expected to be reduced to correspond to decreased emissions in the
comprehensive review process currently under
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Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
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