The Regional Greenhouse Gas Initiative (RGGI) recently held its third auction for the year early this month. Carbon prices cleared at a new record yet again as compliance buyer appetite remains strong.
RGGI is a carbon market in the Northeastern U.S. and spans 11 states. It held its third auction of the year on September 3, with prices that cleared at $25.75 per short ton. Also of note, compliance buyers scooped up three-quarters of the available permits, reported KraneShares in their Climate Market Now blog.
“The auction cleared at ten times the reserve price ($2.56/ton), signaling that demand remains strong,” Kraneshares wrote. The resilient demand remains ongoing “even after the market’s annual Cost Containment Reserve volumes had been exhausted in 2024’s first sale.”
While carbon allowance futures spiked briefly in the wake of the auction, they settled back around $25 a ton within a week. With no forecasted regulatory clarity for RGGI before the election this year, secondary market price action remains largely dependent on speculative traders.
Positive price momentum, for now, is driven by continued demand from compliance buyers. RGGI futures are currently up 49.7% YTD and 44.7% year-over-year as of 09/13/24, reported KraneShares.
Invest in RGGI With KRBN
The KraneShares Global Carbon ETF (KRBN ) is the only fund to offer exposure to RGGI. The fund was the first of its kind to offer an investment take on carbon allowance trading. KRBN tracks the S&P Global Carbon Credit Index, which follows the world’s most liquid carbon allowance futures contracts.
This includes contracts from the European Union Allowances (EUA) and California Carbon Allowances (CCA). It also includes the Regional Greenhouse Gas Initiative (RGGI) markets and the United Kingdom Allowances (UKA).
RGGI currently accounts for 6.4% of KRBN’s total carbon market weighting as of 09/19/2024. KRBN carries a management fee of 0.79%.
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