The auction floor, the reserve-price (APCR) tiers and the ceiling are the rails this market trades on. In our view, for years the price simply tracks them; only when the bank draws down far enough does supply and demand start to bind and pull prices up the rails — bounded, in the end, by what carbon can politically add to a gallon of gasoline.
Nominal $/allowance. The band is widest in the late-2020s — the open question is when the market tightens — then narrows through the 2030s as policy limits clamp the range.
From EDF/Greenline at the floor to CARB’s own commissioned UC Davis model near the ceiling — our house view sits right around CARB’s $60 average — Washington linkage lifts it, but our bank, a 12-month floor, two-phase MDI and a mild 2027 recession hold it back.
The adopted path removes allowances from 2027–30 budgets, steepening the annual decline. Cumulative 2027–45 supply falls to a level set in our assumptions register.
The industrial decarbonization reserve adds allowances back above the cap. Our release share, timing and demand effect are model assumptions.
The private bank is the shock absorber. Its starting level and the floor it defends set the timing of reserve reliance.
A political limit on combined CCA + LCFS pass-through to pump prices caps the forecast below the nominal reserve ceiling.
The public view above is our base case. Clients get the full interactive model — change any assumption and watch the balance and price re-solve, then export it.
Washington's Climate Commitment Act market is modeled separately today; on linkage the two pools merge into a single price. Washington allowances (WCA) currently trade well above California (~$55 vs ~$33) — a convergence dynamic our model captures across candidate linkage years (2027 / 28 / 29). The full Washington price forecast is in build-out.
LCFS credits crashed to ~$40 in mid-2025 on a renewable-diesel and RNG flood, then recovered to ~$76 as the amended carbon-intensity target stepped up to 22.75% (Jul 2025). The program targets a 30% CI reduction by 2030 and 90% by 2045 — bullish for deficits — but the credit surplus is still projected to grow to ~41 Mt by Q4 2027 on RD, biomethane and EV credits. The new auto-acceleration mechanism is the swing factor: it auto-tightens targets to draw the bank down and restore prices.
LCFS credit price, $/credit. The 30%-by-2030 step-down and the auto-acceleration mechanism support a recovery; the pace depends on how fast the ~41 Mt surplus draws down.
Carbon intensity in gCO2e/MJ. The heavy lines are the regulatory benchmarks — the CI score a fuel must beat — falling to 90% below the 2010 baseline by 2045. The flat lines are the blended consumed CI of the major credit and deficit pathways, held constant so the chart isolates the benchmark’s movement against them. A pathway earns credits while the benchmark sits above its line and owes deficits once it drops below. Dairy-digester RNG is off-scale below the axis (roughly −150 to −350) and is not plotted.
The amended target jumped to 22.75% in Jul 2025 and steps toward 30% by 2030 — rising benchmarks generate more deficits and demand for credits.
RD, RNG and EV credits kept the surplus growing — projected ~41 Mt by 2027. Until it draws down, it caps the recovery.
The 2025 amendments' AAM auto-tightens targets when the surplus stays high — the mechanism designed to draw the bank down and restore prices.
LCFS is the second half of the affordability ceiling on gasoline — combined CCA + LCFS pass-through is what caps our carbon-price forecast.
Three demand forces pull in different directions. Data-center/AI load growth and cancelled offshore-wind projects push covered emissions up and erode carbon-free power (both bullish); emissions leakage to generators outside RGGI pulls covered emissions down — the carbon shifts out of the region rather than disappearing (bearish). Against a Model-Rule cap that plunges from 2027 (offsets eliminated), Virginia rejoins July 1, 2026 (11.48M half-year budget + 1.148M CCR at the Sep/Dec auctions) as a structurally short state — net new demand; its full 2027+ budget is pending (HB 29). But watch the supply valves: the enlarged two-tier CCR (from 2027) is a bigger release, and in 2026 RGGI is auctioning ~9 million allowances beyond regular volumes (Virginia’s re-entry, state set-asides and CCR) — if the states repeat those additions in future years, the extra supply could pull prices down. On balance the market tightens, but the CCR and any repeat allowance additions are the swing factors.
Anchored to the current OTC secondary-market Dec-26 mark. The two-tier CCR holds price near today's level for a few years; from ~2030 the Model-Rule cap outpaces cap+CCR and price rises, bending as high prices pull gas→clean switching forward.
Combined 11-state supply/demand including Virginia (from H2 2026). VA is structurally short, so the market tightens faster than the 10-state view. Million short tons CO₂; 2027+ VA budgets provisional pending the HB 29 rulemaking.
The 2025 Model Rule cuts the regional budget −8.5 Mt/yr through 2033 (~44 Mt by 2030, ~9 Mt by 2037) and ends offsets & the ECR. 2038–40 is our glide toward state 2040 clean-power goals.
VA rejoined July 1 2026; emissions (~33 Mt, rising on data-center load) far exceed its ~23 Mt budget — net new demand. Full 2027+ budget pending the HB 29 rulemaking.
Sustained trading above the Tier-2 trigger pulls in additional state set-aside allowances well beyond planned CCR volumes — until price corrects back below it. The trigger escalates only ~7%/yr ($29 in 2027 → $50 by 2035), so the ladder, not the cap, sets the price.
2026 already shows it: Auction 73 offered >9 Mt beyond the regular 10-state volume, plus 2.2 Mt more in December. Sustained, this adds ~234 Mt through 2040 — volume that eventually overwhelms the shrinking cap.
Virginia/PJM demand is projected +183% by 2040. Data-center load and cancelled offshore wind push emissions up and cut carbon-free power; leakage pulls covered emissions down (generation shifts outside RGGI). Net: still tightening.
RGGI's own IPM modeling clusters near the reserve floor ($9–18, ~$39 by 2037 only in the high-demand case) and EDF's sits at the ECR trigger — yet spot is already ~$40. Our bullish structural-short view holds RGGI elevated. Dots: RGGI-IPM high-demand (~$39, 2037) and Veyt (~$36, 2030).
| Source | View | Stance | Basis |
|---|---|---|---|
| Alpha Inception | $40 → $75 (2040) | Bullish | Structural short (cap −8.5/yr, VA + data centers) above cap+CCR; anchored to the ~$40 tape. |
| RGGI-IPM / ICF (Case A) | ~$39 (2037) | Range | High-demand case (EPA rules + renewables); other cases at the floor. Sept 2024. |
| Veyt | ~$36 (2030) | Bullish | Only published long-horizon number; strong-bullish through 2035. Apr 2026. |
| RGGI-IPM (base) / EDF | reserve floor | Bearish | Prices at/near the floor or ECR trigger even to 2040 — the market has blown past this. |
Compliance RECs (PCC1) are structurally long near-term: a ~50 TWh accrued bank plus voluntary CCA over-procurement hold spot near ~$7. The market tightens through the late 2020s — the OBBBA tax-credit cliff lifts cost-of-new-entry, SB100/CCA demand pushes the effective RPS above 60%, and Diablo plus legacy supply erodes. The bank depletes ~2028–2029; spot then ramps from the floor toward cost-of-new-entry and the $50 ACP.
PCC1 tradeable spot, the long-term PPA / compliance-period clearing level, and the $50 ACP reference. $/MWh, base (“soft”) scenario, 2026–2035.
The 2025 law ends the wind/solar PTC/ITC for projects in service after 2027 — solar net LCOE ~2×, lifting the REC a new project needs.
The accrued bank keeps the market soft; it depletes ~2028–2029, after which PCC1 is structurally short and prices ramp.
Historical ~1% vs ~4% electrification (data centres, EVs) roughly doubles PCC1 demand by 2035 — the single biggest swing factor.
SB100 pushes the effective RPS toward 90% clean; Diablo retirement and slow build (~1.4 vs ~5 GW/yr needed) tighten supply.
National voluntary RECs — the Green-e-certified certificates corporates buy to back renewable claims — have long been cheap ($1–15/MWh depending on vintage, certification and bundling) because national renewable supply is plentiful. That is changing: “enormous” data-center and AI power demand plus 300+ Science-Based-Target companies (Google, Amazon → 100% renewable by 2030) are driving voluntary demand sharply higher. Green-e-certified volume reached ~160M MWh in 2024; the total voluntary market ~319M MWh in 2025 and keeps climbing.
National voluntary REC demand, million MWh — an illustrative path off the confirmed 2024–25 volumes as hyperscaler and corporate demand accelerates.
“Enormous” AI-driven power demand is the new marginal buyer — hyperscalers procuring at scale are tightening the premium end of the market.
300+ Science-Based-Target firms — Google, Amazon and peers targeting 100% renewable by 2030 — are structural voluntary buyers.
Green-e certification, recent vintage and additionality command a premium; abundant older/unbundled RECs stay cheap — a widening quality split.
National renewable build keeps baseline supply plentiful, capping the low end — this is a quality-and-vintage story more than raw scarcity.
Models are rebuilt as new data lands; each release is validated against published program data and independent forecasts. Figures are indicative and not investment advice.
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