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Secondary market prices for Calif. carbon allowances edge higher

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Secondary market prices for Calif. carbon allowances edge higher

Atthe over-the-counter market, California carbon allowance prices were firm toslightly higher during the week ended May 10. The spot California carbonallowance contract was eyed again in a bid-and-ask spread of $12.50/tonne to$12.60/tonne, according to broker data as of May 10.

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TheMay 2016 vintage 2016 California carbon allowance futures contract was markedin a bid-and-offer range of $12.50/tonne to $12.68/tonne, increasing 6 centsfrom the week prior. As of May 10, the benchmark December 2016 vintage 2016California carbon futures contract was assessed in a bid-and-ask spread of$12.60/tonne to $12.78/tonne, rising 6 cents week over week.

Comprisedof California and Quebec, the Western Climate Initiative will hold their nextjoint auction May 18,putting more than 67.6 million current vintage carbon allowances and more than10.0 million vintage 2019 allowances up for sale.

Secondarymarket prices for California carbon allowances faltered and eventually slumpedto all-time record lows in April after the WCI held its first quarterly auctionof the year in February. In the WCI's Feb. 17 , about 95% of the more than 71.5million current vintage allowances cleared at $12.73/tonne. Also, almost 9.4million, or 93%, of the more than 10.0 million vintage 2019 allowances on offerwere purchased at $12.73/tonne.

Inthe auction, 97.5% of the current vintage allowances up for sale were bought bycompliance entities, with demand for the current vintage allowances eyed at0.95 times the total available supply. It was also reported that 99.97% of thevintage 2019 allowances were purchased in the auction by compliance entities,with demand for the vintage 2019 allowances pegged at 0.93 times the totalavailable supply.

TheCalifornia and Quebec cap-and-trade programs were formally linked under the WCIat the start of 2014, with the first joint sale held in November 2014. Entitiesregistered under Quebec's system may participate in joint auctions in eitherU.S. dollars or Canadian dollars. To manage multiple currencies, an auctionexchange rate is determined prior to each sale. The reserve price is determinedthe business day prior to the joint auction and is determined as the higher ofthe California or Quebec reserve prices after applying the established exchangerate.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including SNL powerand naturalgas index prices, as well as forwardsand futures,visit our Commodities Pages.