Emissions from power plants in the nine member states of RGGI declined by 4% in 2015, EPA data showed, as allowance prices receded following several weeks of gains.
RGGI installations reported total emissions of 84.6 million short tons in the year, compared with 88.2 million in 2014.
Q4 emissions were down 8.35% at 15.9 million tons, the lowest for any three-month period since the market started in 2009, while year-on-year declines in Q1 and Q4 more than outweighed a 10% increase in Q3 emissions.
The fall in emissions is not a surprise, according to Jordan Stutt of think tank Acadia Center.
“We had a pretty mild start to the winter in the last three months of the year… the year-end total shows a decline in line with the trend that we’ve seen since RGGI began,” he said.
The drop in emissions, combined with the release of 10 million RGGI allowances from the scheme’s Cost Containment Reserve (CCR) last year, has added to the oversupply of allowances in the market, Stutt noted.
“States are going to have to consider this when setting the cap for the period after 2020.”
RGGI participants are discussing changes to the market for the period after 2020, when they will need to comply with the EPA’s Clean Power Plan as well as consider how they will reach longer-term targets set by individual states.
One of the elements under discussion is whether or not to continue to allow the use of carbon offsets or to operate the CCR, which is designed to release additional allowances when an auction’s clearing price crosses a set threshold.
Meanwhile, RGGI allowances prices tumbled 2.2% last week, with the benchmark 2016 vintage futures for Dec-16 delivery closing Friday at $8.28 on ICE.
Traders were unable to pinpoint the exact reason behind the selling, though it may have been related to one or any of the following: profit-taking, pre-auction positioning by speculators, last week’s stakeholder meeting, or anticipation of the Q4 emissions data.
The contract peaked at $8.60 on Jan. 26, marking an 11.7% rise from the end of 2015.
RGGI states hold their first auction on Mar. 9, when the trigger price for the CCR will be $8.00.
By Alessandro Vitelli – email@example.com