A Potomac Economics report on secondary market activity for Regional Greenhouse Gas Initiative (RGGI) carbon dioxide allowances found no evidence of anti-competitive behavior.
At the end of the second quarter, compliance-oriented entities held 122 million allowances, about 55% of the allowances in circulation, the report found.
- Prices for RGGI carbon dioxide allowance futures averaged $2.78, down 19% from the previous quarter and 46% from the same quarter last year, according to Potomac Economics.
As the market monitor for RGGI, Potomac Economics monitors secondary market activity for the initiative's CO2 allowances in order to identify anti-competitive behavior.
The secondary market gives entities the ability to purchase allowances in order to meet compliance targets between RGGI auctions. It also provides a mechanism for those entities to insulate themselves from future allowance price volatility.
However, as with any commodity market, there is also the potential that a firm could horde allowances in order to influence prices or as a means of preventing a competitor from obtaining allowances. The market monitor’s role is to watch the market for such anti-competitive behavior.
The market monitor evaluates the holdings of CO2 allowances, as well as demand for allowances to identify firms that may have acquired a position that raises competitive concerns.
The report found that many firms have significant “spreading positions,” that is, a combination of roughly equal long and short positions.
The report found that the top four firms accounted for an average of 78% of the total long positions in 2017 vintage contracts while 89% of net long positions were held by eight firms. The top four firms also accounted for 64% of total net short positions in 2017 vintage contracts while 82% of the net short positions were held by eight firms.