RGGI allowance prices moved above $7/short ton for the first time ever on Wednesday as the market’s bullish trend continued into a third week.
The benchmark Dec-15 contract closed at a record $7.18 that day before slipping by one cent on Thursday.
Some sources suggested Wednesday’s price increase of more than 3% may have been due to bullish sentiment stemming from a stakeholder meeting on Tuesday, which discussed a review of the programme for the next compliance period from 2018 to 2020, as well as the market’s anticipated relationship with the looming federal Clean Power Plan.
These events “give people reasons to do things,” one New York-based broker said, pointing out that the market has few other market-driving events.
“There are only four auctions a year, the quarterly emissions data, and then it’s regulatory news and changes.”
Permits have risen by $1 since buyers purchased all available allowances in the Sept. Auction plus 10 million additional units from the market’s Cost Containment Reserve.
RGGI is due to hold its final auction of the year on Dec. 2, when more than 15 million permits will be on offer.
The CCR has been exhausted for 2015, but a replenished reserve will offer up to 10 million allowances if the auction price exceeds $8 at any sale next year.
The trigger can act as a ‘soft’ cap, damping price increases if demand is not particularly strong, one broker said.
However, they predicted that the market will “blow through” $8 next year. “In the last two sales we went through the soft caps very fast. If we stop at $8, it’s against the trend.”
WCI PRICE EDGES UP
Meanwhile, WCI prices were fairly steady over the past week, advancing from $12.91 per metric tonne last Friday to close at $12.95 on Thursday.
Total ICE trading volume was nearly 6 million tonnes, with some large block spread trades involving delivery dates as late as 2020 also said to have been done.
Earlier in the week, California and Quebec held a joint auction of 85.5 million 2015- and 2018-vintage allowances, with results due Nov. 24.
“It’s been typically quiet for an auction week,” a third broker said.
“I don’t expect the market to move much. I think the auction will be fully subscribed for both vintages, and it’ll probably clear at $12.65-12.70, around the expected floor price for next year.”
By Alessandro Vitelli – news@carbon-pulse.com
