Summary:

1. Total Weekly Volume of 3.103M tons, -35.20% WoW change.
2. RGGI ICE weekly weighted average settlement price was $14.18, +0.33% WoW.
3. Governor Glenn Youngkin signs Executive order to re-evaluate Virginia’s participation in the RGGI and begin regulatory processes to end it.

RGGI prices drifted -$0.2 (1.4%) down in the first four trading sessions. The market saw a resurgence of trade volumes on Friday with 2.17M tons of allowance traded, and prices increased by +$0.11 (0.77%). The market is set up for a volatile February, with important updates on the RGGI membership of Pennsylvania and Virginia due, along with the interim compliance surrender deadline at the end of February.

1. Virginia Executive Action

On the 15th of January, Virginia’s Governor signed Executive Order Nine, which aims to remove Virginia from the RGGI, either through executive order or regulatory action. The action though imposing does not dwell on a pathway to the state’s exit from the RGGI. Virginia’s Attorney General Herring has expressed his official advisory position on the issue of Virginia’s exit stating that the Governor may not repeal or eliminate through an executive order or other action the enacted status and regulations pertaining to Virginia’s participation in the RGGI. The remaining pathways through the legislature look difficult, with the Democratic party holding a majority in the state Senate. ( Attorney General of Virginia Office, Governor of Virginia)

2. Pennsylvania Finalisation

Governor Tom Wolf vetoed the anti-RGGI resolution on January 10. The legislature can now override the veto but would require a 2/3 majority. The Republican Party currently holds 28 seats in the 50 seat Senate, falling short of that 2/3rd majority. The Senate has another three weeks or ten legislative days to vote on the override of the veto. In the likely event that the override fails, Pennsylvania would successfully join the RGGI through executive action.

3. Compliance Entity Surrender Deadline

Compliance entities will have to surrender 50% of their total emission obligations for 2021 by March 1, 2022. The entities purchased 18.36 million allowances (67% of allowances) in the December 2021 auction, including 4 million excess CCR allowances. The estimated surrender in the upcoming compliance surrender is expected to be  53.75 million allowances. 

Volumes

The ICE futures market saw 3.103M tons of allowances traded. Market volumes remain low, as buyers remain hesitant and sellers are bullish.

CFTC Traders position Data

Market players opened 0.886M Tons of new positions and closed 0.59M tons of positions during last week (W02 2022). Compliance entities closed 0.55M Tons positions, with 0.47M tons of long positions and 0.075M tons of short positions. Managed Money increased their long positions with 0.28M tons of new long positions. Even at the high price of allowances, managed money has remained bullish on RGGI allowances across the board.

Analyst Contact:

Craig Rocha (cmrocha@californiacarbon.info)