Houston, Texas, August 16, 2021 – Modeling CO2 emissions is a vital component for developing workable strategies to achieve the goals of the energy transition. RBAC’s enhanced GPCM® CO2 market model incorporates existing CO2 markets into a model framework and empowers users to evaluate a wide range of scenarios to gain insight about the possible evolution of increasingly important markets.
Beginning with the 21Q2 GPCM database release, RBAC’s new updated CO2 emissions model is more flexible and includes existing CO2 markets in North America with the potential for adding developing new geographically limited markets or integrating existing markets into larger, more geographically comprehensive ones.
The new model consists of the following objects: markets, market locations, sectors covered, prices, and allowed emissions.
Currently there are two emissions markets operating in the United States: the Regional Greenhouse Gas Initiative (RGGI) in the US Northeast and the California Air Resources Board (CARB) Carbon Emissions Market.
RGGI has 11 member states from Maine to Virginia. RGGI’s market concerns CO2 emissions from electric power generation. It does not include industrial emissions or emissions of other greenhouse gases.
CARB includes California, but Quebec is also a member. Ontario was a member for two quarters but is no longer one. CARB’s coverage includes any facility emitting more than 25,000 short tons (1 short ton equals 2000 lbs.) of CO2 equivalent per year. It includes not only CO2, but methane, and other gases as well.
Both markets are based on quarterly auctions. Emitting companies must obtain allowances to emit the covered gases. They submit bids to the auction to emit a certain number of tons at a certain price. The auction rules determine the clearing price which everyone will pay and how many allowances are awarded to each participant.
GPCM uses several tables to model these markets and is flexible enough for the GPCM analyst to build customized scenarios of future markets.
Analysts can build customized CO2 emissions scenarios to specify how much CO2 is emitted for each million btu worth of natural gas, and the CO2 market start dates and prices can be set by each sector in each market.
The CO2 Price data contains the number of allowances and the clearing price associated with each prior auction as well as assumptions about the results of future auctions. Currently these auctions are held four times a year prior to the beginning of each quarter (Jan-Mar, Apr-Jun, Jul-Sep, Oct-Dec). The CO2 Price table contains the CO2 Case, Market identifier, Beginning and Ending Dates, the maximum CO2 emissions allowed, and the price. The RBAC research team has collected data for the two markets and included that in this table.
Currently the GPCM database includes two CO2 emissions reports: 1) a detailed report by market, state, sector, and time period consisting of the amount of gas consumed, CO2 produced (i.e., emitted), CO2 price (from the auction), and the CO2 “cost” – the dollar value of the CO2 produced; and 2) a summary report by market and time period consisting of the total over all states and sectors for each market and time period of gas consumed, CO2 produced, CO2 allowed (the allowance “cap”), the ratio of CO2 produced to allowed, the marginal value of more CO2 allowances (functionality under development), the CO2 price, and the CO2 “cost” (as defined in report 1).
As the energy transition continues to build momentum across the globe, energy firms, investors and regulators alike look to create a workable strategy that achieves their energy transition goals while increasing access to affordable clean energy. In order to create these workable strategies, it is vital to have the tools in place to be able to simulate the possible outcomes of different CO2 emissions market scenarios and create an achievable strategy.
RBAC, Inc. has been the leading provider of market fundamental analysis tools used by the energy industry and related government agencies for the past two decades. The GPCM® Market Simulator for North American Gas and LNG™ is the most widely used natural gas market modeling system in North America. RBAC’s G2M2® Market Simulator for Global Gas and LNG™ has been instrumental in understanding evolving global gas and LNG dynamics and is vital in fully understanding the interrelationship between the North American and global gas markets.
