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Calif. carbon allowance prices slide in more active post-new year trading

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Calif. carbon allowance prices slide in more active post-new year trading

Benchmark California carbon allowance prices in the secondary market worked lower during the week ended Jan. 14, even as trading activity picked up with the arrival of the new year.

The December 2019 vintage 2019 California carbon allowance contract was seen in a bid-and-ask spread of $16.29/tonne to $16.32/tonne as of Jan. 14, down about 7 cents from a week earlier.

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By the end of December 2018, the December 2018 vintage 2018 California carbon contract concluded its run in a bid-and-offer range of $15.57/tonne to $15.60/tonne, up 6 cents on the month.

Over-the-counter prices for California carbon allowances are expected to chop around ahead of the Western Climate Initiative's next quarterly auction scheduled for Feb. 20, at which time a total of more than 90 million allowances will be up for sale.

According to an auction notice released at the end of December 2018 by the California Air Resources Board, which runs the auctions, almost 81 million current vintage allowances and more than 9 million future vintage allowances will be placed on the auction block. More than 64 million vintage 2019 allowance comprise the current vintage offering, with the remainder made up of vintage 2016 and 2017 allowances.

During this year's auctions, the market reserve, or floor, price will rise to $15.62/tonne, up from $15.31/tonne used in the 2018 auctions.

In the WCI's previous quarterly auction in November 2018, 100% of the more than 78.8 million current vintage allowances sold at US$15.31/tonne a piece, up 26 cents from the August 2018 sale.

The California cap-and-trade system covers emissions from utility and industrial facilities, which 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 carbon offsets to account for their annual emissions under the annual emissions cap. The cap is reduced annually until the 2020 target is reached.

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