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Calif. carbon allowance prices chop around after August allowance auction

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Calif. carbon allowance prices chop around after August allowance auction

California carbon allowance prices at the over-the-counter markets were mixed during the week ended Sept. 26, shaking out in the wake of the latest quarterly Western Climate Initiative, or WCI, auction.

The September 2019 vintage 2019 California carbon allowance contract was assessed in a bid and offer spread of $17.08/tonne to $17.17/tonne, up 3 cents from Sept. 12 prices. As of Sept. 26, the benchmark December 2019 vintage 2019 contract was quoted in a bid and ask range of $17.26/tonne to $17.28/tonne, easing 3 cents as well from Sept. 12 assessments.

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Secondary market prices for California carbon allowances have been trying to find their footing after the WCI's most recent quarterly allowance auction.

At the sale, 100% of the more than 66 million current vintage allowances sold at a clearing price of $17.16/tonne, well below the record high of $17.45/tonne in the May 14 auction. Also, 100% of the more than 9 million vintage 2022 allowances cleared at $16.85/tonne, down 55 cents from the prior sale in May.

In the August auction, compliance entities bought 87.2% of the current vintage allowances, which consisted of almost 2 million vintage 2016 allowances and more than 64 million vintage 2019 allowances.

Analysts noted that this was the third straight WCI auction in which Pacific Gas and Electric Co. did not participate aside from consigning directly allocated allowances for the benefit of ratepayers. The utility, along with its parent PG&E Corp., recently entered Chapter 11 bankruptcy protection and filed for a joint plan of reorganization. The decreased demand from the utility likely artificially depressed allowance prices, analysts said.

The California and Quebec cap-and-trade programs were joined under the WCI at the start of 2014. California's cap-and-trade system covers emissions from utility and industrial facilities that emit more than 25,000 tonnes of carbon each year and from entities that opted into the program. Those facilities must purchase either carbon allowances or offsets to account for their annual emissions under the yearly emissions cap. The cap is reduced annually until the 2020 target is reached.

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