Roger Caiazza
Last week I gave an update on RGGI and posed the question whether the Auction 73 clearing price would exceed the Auction 72 price of $35. Today RGGI announced that the Auction 73 price did indeed exceed $35 closing $2.65 higher at $37.65. This post summarizes the impact of the auction.
The RGGI press release stated:
NEW YORK — The eleven participating states in the Regional Greenhouse Gas Initiative (RGGI), the nation’s first market-based regulatory effort to reduce greenhouse gas (GHG) pollution, today announced the results of their 73rd auction of carbon dioxide (CO2) allowances. 28,537,847 CO2 allowances were sold at the auction at a clearing price of $37.65. This includes an initial offering of 27,389,847 allowances and 1,148,000 CCR allowances. The allowance offering included a supply of 5,740,000 allowances from Virginia, which resumed RGGI participation on July 1, 2026. Bids for the CO2 allowances ranged from $2.69 to $190 per allowance. Additional details are available in the Market Monitor Report for Auction 73, which is appended.
A quick summary of what I have documented since July
In my last post I summarized four things that happened in quick succession this summer. Two of them are relevant to this result.
In Hochul and RGGI Affordability I quantified the wholesale-market effect of RGGI allowance costs and showed that it contradicts 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., 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. At the Auction 73 cost of $37.65 the increase is 296%. For a typical residential customer, the RGGI-attributable share of the bill was around 4.2% in 2024 but at $37.65 the share is 7.8%.
I also described the report by RGGI’s market monitor Potomac Economics. 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. I believe the intent of the release of the report was to calm the market. However, 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. Given that the auction price still went up this attempt to keep prices stable failed.
Costs are not hypothetical
Put together, these my work tells a consistent story. RGGI’s own cost-containment mechanism — the CCR, which releases additional allowances once prices cross a trigger — was exhausted as soon as the allowances were available in 2026, 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 $1.1 to $3.4 billion annually at a sustained $37.65 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.
Auction 73 results
When I posed the question whether the costs would exceed $35 I noted that several signals pointed 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 did not absorb that pressure. Instead, it simply confirmed how much latent demand exists because the price exceeded $35 despite the bigger offering.
Prior to the auction I said I would not be surprised it the price exceeded $35 a ton. I noted that if it did it would be real-time confirmation that the price trajectory regulators have not acknowledged is 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. Given these cost impacts it is past time to pause RGGI.
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.