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Investment Firms Still Lining Up To Buy RGGI Allowances

Results have been posted from the latest auction of allowances for emitting a ton of carbon dioxide under the Regional Greenhouse Gas Initiative or RGGI. After rising in the first half of the year prices and demand have leveled off this quarter. The right to emit a ton of carbon sold for $2.67 this quarter.

That’s down nearly 17 percent from the last auction, but still substantially higher than the floor price where it had been trading for more than two years.

Banks who are buying up carbon allowances are goosing the market, hoping prices will rise and they will be able to resell at a profit.

“That’s the big story of the auction is that almost half the allowances were bought by firms that don’t have any compliance obligation,” says Ashley Lawson, a carbon market analyst with Thomson Reuters, “By far this is the largest number that’s ever gone to those financial firms.”

Lawson notes that the higher percentage could also be reflective of emitters feeling that they have purchased enough allowances for the year and scaling back their purchasing. “Those entities are focusing just on this year,” says Lawson, “as opposed to the speculators who are looking three, four, or five years down the road.”

The RGGI states voted to lower the cap on carbon dioxide this spring, which once it takes place next year will likely have the effect of lifting carbon prices even higher.

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