Emissions bourse operator Carbon Trade Exchange (CTX) saw the first activity on its new spot market for RGGI allowances (RGAs), it said on Wednesday, as prices soared by nearly 10% in the first two weeks of the year.
The bourse reported that 1,000 short tons (907.2 metric tonnes) changed hands at a price of $8.13 on Friday, which was in line with the Jan-16 futures on ICE – the main exchange for RGA trading.
CTX did not release further details including the identities of the counterparties.
CTX had delayed the launch of its spot RGA market for more than three months as it sought to build a “critical mass of participants”, giving them more time to set up their accounts and get approval from their compliance departments.
The spot price was also some 20 cents below ICE’s benchmark Dec-16 FGA contract, mirroring the Jan-Dec spread.
The bellwether futures were unchanged at $8.33 as of Tuesday’s close on ICE, but have recorded a nearly 10% rise since the end of 2015.
The market is heavily over-supplied but over 80% of the allowance surplus is held by speculators, Thomson Reuters Point Carbon said late last year, a situation that has created an artificial scarcity and lifted prices significantly.
That, in turn, will probably trigger the Cost Containment Reserve – the market’s supply safety valve in case prices get too high – for the third year running, observers said, with most expecting the event to occur during the first 2016 auction to be held in March.
If that transpires, it would be two quarters earlier than when the reserve was emptied in 2015.
By Mike Szabo – email@example.com