Roger Caiazza
Two of my recent posts here explained why the Regional Greenhouse Gas Initiative (RGGI) allowance market had become both an affordability problem and a reliability risk: Implications of the Quarter 2 2026 RGGI Auction described the 40% jump in the auction clearing price to $35.00 and the consumer cost impacts that followed, and RGGI Cheerleaders and the Consumer Carbon Cash Grab took on the argument that record RGGI revenue should be celebrated as “climate cash” rather than treated as a warning sign. Since then, New York finalized a rule amendment that locks in the next round of allowance scarcity, and RGGI’s own market monitor confirmed the scarcity dynamic I had been documenting. Auction 73 is scheduled for September 9, 2026, with results due September 11, and the question I want to pose here is simple: will the clearing price exceed $35?
I acknowledge the use of Perplexity AI to help prepare this document.
A quick summary of what I have documented since July
Four things happened in quick succession this summer, and each matters to the price question.
First, on August 5, 2026, DEC and NYSERDA jointly finalized amendments to Part 242 (the CO2 Budget Trading Program) and the companion Part 507 auction regulation, aligning New York with the RGGI Third Program Review Model Rule effective January 1, 2027. I explained in New York State’s Short-Sighted Approval of RGGI Amendments why that was a mistake: DEC had eight months between the close of the comment period in February and final adoption in August during which the rule’s analytical basis was overtaken by events. The State Energy Plan it cited as validation was not yet final when the rule was proposed. The May 2026 budget bill included provisions that included reliability and affordability limits to the Climate Act’s statutory emission-reduction targets while the rulemaking was pending. The Q2 2026 auction cleared 40% higher than Q1, from $24.99 to $35.00, with 2026’s Cost Containment Reserve (CCR) allowances already exhausted by the March auction — none of which was reflected in DEC’s conclusion that the rule would produce “no significant change” in consumer bills. There is one CCR caveat. Virginia’s reentry into RGGI includes their pro-rated share of the Virginia CCR so there will be some more allowances available at the next auction. I have no doubts that those allowances will be released in the next auction.
Second, I looked at the ratepayer-benefit claim DEC and NYSERDA used to defend the rule: a “nearly 6-to-1” ratio of savings to cost, built from $12.334 billion in what NYSERDA itself calls “Energy Bill Savings to Participating Customers” against $2.188 billion invested. In Implications of the New York Approval of RGGI Amendments, I explained why that figure is a modeled, expected-lifetime estimate that includes savings from projects not yet operational, has generally not been adjusted through evaluation, measurement, and verification, and — critically — is compared only against auction-revenue-funded program costs, not against the program’s full cost including its effect on the wholesale electricity market.
Third, I quantified that wholesale-market effect and tied it to Governor Hochul’s affordability messaging. New York’s electricity market pays every accepted generator the market-clearing price for a given interval. When an emitting generator sets that price, its RGGI allowance cost is embedded in the bid and gets paid to every resource dispatched in that interval — including non-emitting and imported resources that bear little or none of the underlying RGGI cost. In Hochul and RGGI Affordability, I showed the RGGI allowance price has risen from $9.30 per ton in the first full auction of Hochul’s tenure to $35.00 at Auction 72 — a 276% increase — and that including the wholesale market cost adder alongside direct allowance purchases roughly doubles the annual New York consumer impact versus counting auction costs alone. For a typical residential customer, that pushes the RGGI-attributable share of the bill from around 4.2% in 2024 toward more than 7% at a sustained $35 allowance price.
Fourth, and most tellingly, RGGI’s market monitor Potomac Economics validated nearly everything I had been tracking. On August 21, 2026, RGGI, Inc. released an unprecedented special report — the Report on the Supply and Demand for RGGI CO2 Allowances: Second Quarter 2026 — timed roughly eleven weeks after the record $35 auction. I covered this in RGGI’s Market Monitor Confirms the Scarcity I’ve Been Tracking. The report confirms 2026’s CCR allowances are fully exhausted, confirms compliance entities and investors are increasingly hoarding rather than selling allowances as the compliance deadline approaches, confirms Virginia’s return adds less new supply than the demand it brings, and — most importantly — declines to say anything about whether the steep post-2027 cap trajectory is sustainable, because that question was “beyond the scope” of the report. DEC leaned on “the allowance bank” as reassurance in finalizing Part 242. The one independent accounting of that bank refuses to vouch for the period the amendments actually govern.
Costs are not hypothetical
Put together, these four pieces tell a consistent story. RGGI’s own cost-containment mechanism — the CCR, which releases additional allowances once prices cross a trigger — will be exhausted for 2026 after the next auction, months before the compliance deadline. The regional cap is scheduled to tighten by more than 10% of the 2025 budget each year from 2027 through 2033, a pace never sustained historically. Virginia’s re-entry adds demand faster than supply. And New York adopted its conforming rule in August without grappling with any of this, relying on cost-impact modeling that predates the price spike and a ratepayer-benefit claim that ignores the wholesale market cost adder.
None of this is abstract for consumers. My estimates put the total New York consumer impact of RGGI — direct allowance costs plus the wholesale market cost adder — at $1.8 to $3.2 billion annually at a sustained $35 allowance price, more than double the direct-allowance-cost figure that state messaging emphasizes. Scaled across all eleven RGGI states, the same mechanism plausibly adds several billion dollars more. That is the real price of a program whose defenders describe rising auction revenue as a “big opportunity” for new spending rather than a cost signal ratepayers are already absorbing.
So will Auction 73 clear above $35?
That brings me to the question in the title. Auction 73 is scheduled for September 9, 2026, offering 27,389,847 allowances with results due September 11 (RGGI, Inc.). Several signals point toward continued upward pressure on the clearing price rather than relief. Secondary-market allowances have been trading well above the $35 auction price throughout August, with Argus Media reporting 2026-vintage RGGI allowances in the high-$30s to around $40 per short ton in mid-to-late August (Argus Carbon), with December 2026 futures trading even higher. The market monitor’s own Q2 2026 report shows the share of the allowance surplus held by compliance entities — as opposed to investors with no obligation to sell — has fallen, and that investors holding 68% of the surplus have little incentive to release allowances for anything less than what the market has already shown it will pay. The 2026 CCR is gone. Virginia is a net new claim on the bank, not a source of relief. The larger Auction 73 offering could absorb some of that pressure, or it could simply confirm how much latent demand exists if it still clears at or above $35 despite the bigger offering.
I do not see a credible scenario in which Auction 73 clears meaningfully below $35. The more interesting question is whether it clears above it — and given where the secondary market has traded, and given that every structural signal in the market monitor’s report points toward tightening rather than loosening conditions, I would not be surprised to see it. If it does, that will be real-time confirmation that the price trajectory DEC dismissed in finalizing Part 242 is not leveling off, and one more sign that the states’ own cost-containment tools — the mechanism they cite as evidence that consumer costs will be manageable — can no longer do the job they were designed to do.
Roger Caiazza blogs on New York energy and environmental issues at Pragmatic Environmentalist of New York. Dealing with the RGGI regulatory and political landscapes is challenging enough that affected entities seldom see value in speaking out about fundamental issues associated with the program. He has been involved in the RGGI program process since its inception and has no such restrictions when writing about the details of the RGGI program. This represents his opinion and not the opinion of any of his previous employers or any other company with which he has been associated.
