RGGI Allowance (RGA) prices flatlined this week on the lowest volume recorded in years amid the US Independence Day stretch, even as a heat wave engulfed the region and Virginia readied its hotly-contested regulatory withdrawal from the bloc for publication this month.

The Jul-23 V23 RGA contract slid two cents over the July 3-7 period to settle at $13.28, as the Dec-23 V23s remained unchanged from last week at $13.63, according to ICE data.

Weekly volume came in at nearly 317,000 over the week, a massive drop from last week’s 10.5 mln and the lowest since Oct. 2020, as far back as current Carbon Pulse records of 5-day RGA ICE volume totals go.

Additionally, no RGAs transacted or cleared on Nodal Exchange over the holiday-shortened week, down from 2 mln during the previous five days.

The Dec-23 V23 RGA contract began the week by losing four cents before regaining the small drop on Wednesday and Thursday.

FUTURE FORCAST

Despite hotter temperatures blanketing the RGGI region, market participants were not sold on weather increasing demand for emitters over the past week, though a trader at a commodity shop said producers should have some allowance needs right now.

While the emitter demand might not be enough to move the RGA market, the commodity shop trader said, companies still have an incentive to maintain their allowance bank even in a low demand scenario.

London-based Energy Aspects also recently kept their second half of 2023 forecast unchanged at $13.70, due to an expected emissions shortfall and mild weather predictions.

But a broker disagreed with Energy Aspects’ outlook on prices, pointing to progress on RGGI’s ongoing Third Programme Review as an expected mover.

“We could easily get some more detail from the programme review which shoots things higher or lower,” the broker said.

The commodity shop trader said the only way RGA prices stay at current levels is if the programme review delivers no concrete revelations by the end of the year.

The broker agreed.

“These markets are always very quiet, until they aren’t,” the broker said.

The 11 RGGI states are aiming to finalise an updated Model Rule for the power sector carbon market by December, but they have not yet announced the date for the next programme review meeting this summer.

Member states are modelling more ambitious CO2 budget reduction scenarios for the US Northeast and Mid-Atlantic cap-and-trade system, as well as other measures to trim the allowance bank or support RGA prices.

VIRGINIA EXIT

Meanwhile, Virginia’s RGGI repeal regulation will be published in the state registrar for public comment on July 31 and take effect Aug. 30, according to an announcement on Monday by the state’s Department of Planning and Budget.

After receiving approval from the Air Pollution Control Board last month, a review of Virginia’s planned exit from the trading bloc by Governor Glenn Youngkin (R) and the Office of Regulatory Management was completed on Friday and submitted to the Registrar of Regulations on Monday.

The repeal would sever the state’s RGGI-linked cap-and-trade regulation on Dec. 31, 2023, with the state’s power generators required to fulfil their compliance obligations by the Mar. 1, 2024 true-up deadline for the 2021-23 trading period.

However, Democratic lawmakers and green groups have contended Youngkin’s regulatory repeal is unlawful, as Virginia legislators passed a bill in 2020 to enshrine the state’s RGGI participation.

Future lawsuits against the RGGI repeal may move the market, the commodity shop trader said, but more so on speculation than on actual fundamentals.

“Someone will probably either overinterpret it, or use it to test whether others are going to overinterpret it,” the trader said.

Back-and-forth lawmaking decisions that move prices on minutiae could come in the wake of a trial, whether or not a lawsuit has a chance of stalling or preventing a repeal, the source added.

The broker said they have written off Virginia staying in the market, with uncertainty expected for the time being.

The Dec-23 V23 RGA contract was valued at a closing bid/offer midpoint of $13.58 on Monday, down five cents from the previous day, according to broker data.

By William Koblensky Varela – william@carbon-pulse.com