RGGI Carbon Tax on Track to Hit New All-Time High of $27/Allowance
RGGI, a multi-state compact, would increase electricity rates for PA consumers, cut energy and manufacturing jobs, and lead to the closure of Pennsylvania power plants.
RGGI Carbon Tax on Track to Hit New All-Time High of $27/Allowance
ELECTRICAL GENERATION | INDUSTRYWIDE ISSUES | PENNSYLVANIA | REGULATION | STATEWIDE PA | TAXATION
September 5, 2024
In 2019, when then-Pennsylvania Gov. Tom Wolf announced he would unilaterally force the state to join the Regional Greenhouse Gas Initiative (RGGI), a carbon tax scheme aimed at forcing coal- and gas-fired plants out of business, he claimed the tax would only amount to a few dollars per allowance (or “short ton”) of CO2 (see Gov. Wolf Goes Bonkers: EO Destroying Gas-Fired Elec, Carbon Tax). That lie was exposed early on when, in March 2021, the price per allowance for CO2 under RGGI soared to $7.60 (see RGGI Carbon Tax Hits All-Time High – Gas-Fired Plants Close). Since then, it’s only continued to increase. S&P Global said the quarterly auction held yesterday was on track to clear $27 per allowance!!
RGGI, a multi-state compact, would increase electricity rates for PA consumers, cut energy and manufacturing jobs, and lead to the closure of Pennsylvania power plants. It would be an unmitigated disaster for the Marcellus industry. PA Republican Senators sued to block the measure and won in Commonwealth Court. Current Democrat Gov. Josh Shapiro then appealed the lawsuit to the PA Supreme Court, where it still sits (see PA Gov. Shapiro Proves He’s Radical Left – Appeals RGGI Decision).
While we don’t have the results of yesterday’s quarterly RGGI auction yet, we do have S&P’s reliable forecast of what was expected. And it’s not pretty.
Carbon allowances in the US Regional Greenhouse Gas Initiative are trading at all-time highs this August, likely leading to a record clearing price going into the third quarter auction in early September, according to S&P Global Commodity Insights analysts.
The upcoming Sept. 4 auction is expected to clear at an all-time high near $27 per allowance, Matt Williams, Aldo Muller and John Sequeria said in the Aug. 26 edition of the RGGI Scorecard. RGGI allowance prices are on a “bull run,” the analysts said.
“This bull run mirrors the one recently seen in the western US as California carbon allowances became overvalued in light of ongoing program design amendments,” they said.
Auction 65 would clear 24% higher than the previous auction in the lower end of the analysts’ projections. This sharp quarter-on-quarter increase follows a significant spike seen in Auction 64, which saw a 31% clearing price increase quarter on quarter. This Q2 auction saw the highest clearing price in the program’s history by far.
The dramatic spikes in allowance prices this year are caused in part by a complete depletion of the carbon market’s reserves in the Q1 auction. The Q1 auction triggered the program’s allowance cost ceiling, or “cost containment reserve” price, triggering the release of all of the program’s banked allowances for price stability. Despite the Q2 (and likely Q3) auction results breaching that CCR price limit, no additional mechanisms remain for tampering down costs.*
The clearing price for the last six quarterly RGGI auctions, from the RGGI website, shows how the price has increased dramatically, nearly doubling:
PA must NOT join RGGI nor a so-called alternative proposed by leftist Shapiro.
*S&P Global Commodity Insights (Sep 4, 2024) – RGGI carbon allowances continue trading at new highs ahead of Q3 auction