RGGI’s Third Auction Looks Into the Future

RGGI, Inc. announced today that its third auction of CO2 allowances will be held on March 18, 2009, and will offer allowances from all ten states participating in RGGI – Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont. The sealed bid format and the reserve price of $1.86 remain the same as the previous two auctions, but one big change is in the works.

New for this auction: the participating states will offer approximately 2.2 million allowances from vintage 2012, in addition to the 31.5 million CO2 allowances from 2009. These 2.2 million allowances from 2012 comprise about 5% of that year’s cap, and will be sold in a separate, but parallel offering from the 2009 allowances. The offerings occur simultaneously from 9 AM to 1 PM on March 18, a bidding window that is 1 hour longer than in previous auctions.

The sale of 2012 allowances could offer an interesting insight into how bidders perceive the future of carbon cap and trade and RGGI itself. Will the 2012 allowances go for a higher price than the 2009 vintage? On one hand, since RGGI allowances may be banked without limitation into future years, a 2009 allowance is arguably the most valuable of them all. On the other hand, 2012 allowances are our first taste of allowances within RGGI’s second three-year compliance period (2012-2015), a period which spans 2015, the first year that the RGGI cap decreases by 2.5%. Then there’s the question of RGGI’s future amid federal legislation. We might have a national cap-and-trade system by 2012, or some other system entirely, and it might (or might not) allow for the exchange of RGGI allowances.

We shall see. RGGI, Inc. plans to announce the results of the third auction on March 20.

3 thoughts on “RGGI’s Third Auction Looks Into the Future

  1. Now if wall street can find a way to offer segments of the RGGI allowances, like the home mortgages, we may have the financial bubble of the next decade. Maybe this time I can predict the bursting of the bubble better!

  2. Perhaps I was too cynical in my first comment, the point I was trying to make was that the “Market Economy” that promised us an end to the necessity of regulation because of its self-regulating abilities has shown itself to be an unfounded dream to all but its most ardent admirers. I wonder if this is the best model for the environmental regulators to choose? I admit that I do not have a better idea, but I wonder if better minds than mine could come up with one.

  3. RGGI’s Third Auction Brings In Divergent Bids of $3.51 and $3.05

    RGGI, Inc. the operators of the Regional Greenhouse Gas Initiative (RGGI) today announced the results of its third auction of CO2 allowances, held on March 18, 2009. The auction offered allowances from all ten states participating in RGGI — Connecticu…

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