After recent weakness, California carbon allowance prices at the secondary market increased in value during the week ended Dec. 19. The benchmark December 2017 vintage 2017 California carbon allowance contract was assessed in a bid-and-offer spread of $14.95/tonne to $15.10/tonne, up 4 cents on the week, according to broker data as of Dec. 19.
The December 2018 vintage 2018 California carbon contract was quoted in a bid-and-ask range of $15.35/tonne to $15.55/tonne, rising 8 cents from the week prior.
The California Air Resources Board, or CARB, on Dec. 14 updated its strategy for slashing the state's greenhouse gas emissions 40% below 1990 levels by 2030.
In its update of the so-called "scoping plan," initiated in response to the California Global Warming Solutions Act of 2006, the agency detailed measures to meet the 2030 target and put the state on a path to achieve an even deeper decarbonization of 80% by 2050.
The 2017 version incorporates several new laws enacted over the past two years, including a measure that extended the state's cap-and-trade program to 2030 and one that requires utilities to cover 50% of their retail sales with renewable energy by 2030.
The California cap-and-trade system covers emissions from utility and industrial facilities, which emit more than 25,000 tonnes of carbon each year, as well as entities that opted into the program. Those facilities must purchase either state carbon allowances or carbon offsets to account for their annual emissions under the annual emissions cap. The cap is reduced annually until the 2020 target is reached.
Carbon allowances are sold at quarterly auctions run by the CARB. Up to 8% of an entity's emissions can be covered using offset credits from certified projects. Carbon offset credits, as well as carbon allowances, can be purchased in the secondary market.
The first compliance phase of the program went into effect Jan. 1, 2013, and ran through Dec. 31, 2014. The first phase of the program included all major industrial sources, along with electric utilities. The second phase of the cap-and-trade program kicked off in January 2015 and brought in distributors of transportation fuels and natural gas under the caps. The second compliance period ends Dec. 31.
California's cap-and-trade program was linked with Québec's system in 2014.
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