Forces driving the market:
RGGI ICE Price
Virginia
Virginia’s newly elected Governor Youngkin announced his intentions to exit the RGGI framework through executive action. The legality of using a step to withdraw is not tenable. The decision to withdraw would be up to a seven-member board, all of which are are currently Democratic appointees. Virginia sits firmly in the RGGI until the governor replaces the board members, who have staggered 4-year terms. But, the news was sufficient to scare the future’s price from $14 on Wednesday to $13.17 on Thursday, with allowances trading below $13 for a short interval. On Friday, the market returned quickly to $13.64 as it became evident that the threat lacked substance. (Source: Washington Post)
Pennsylvania
The Attorney General’s office has signed off on a rule that would let Pennsylvania join a regional program to cut emissions from power plants. There is currently a disapproval resolution of the RGGI rule awaiting a vote in the state’s house. The house has ten legislative days to vote on it, which could carry on into January. As long as the resolution is still in the legislature, the regulation will wait. Though the governor has veto power over the resolution, in the unlikely scenario that the resolution passes. The governor, Tom Wolf, also expects a prolonged court challenge to the rules, further delaying Pennsylvania’s addition to the program. (NRDC and Pittsburgh’s News station)
ICE RGGI Price
Price has consolidated between the $13 to $14 range. The market has moved at a price consistently above the CCR of 2021, and we might see prices hover over $13.9 as we enter 2022 since the CCR trigger price will be upgraded to $13.91. The new year will replenish the cost containment reserve to 11.6 million for 2022. Blended Dec 22 made up 37% of traded allowances, trading $0.25 higher than its Dec 21 counterparts.
ICE Volume
Traded volume witnessed a sharp 80% decline. The slowdown is a combination of a decline in interest after an action-packed prior-auction week and compliance entities closing books ahead of the holiday session.
Analyst Contact:
Craig Rocha (cmrocha@californiacarbon.info)
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