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Calif. carbon allowance prices edge up after release of draft proposal

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Calif. carbon allowance prices edge up after release of draft proposal

Over-the-counterprices for California carbon allowances edged higher heading into the middle ofJuly. Carbon allowance prices at the secondary market in California advanced afterthe California Air Resources Board released July 12 a preliminary draft proposalthat would allow for changes to the state's cap-and-trade program, including theimplementation of new emissions caps post-2020.

Brokerdata as of July 13 showed the spot California carbon allowance contract was discussedin a bid-and-offer range of $12.68/tonne to $12.73/tonne, up 6 cents from priorweekly assessments. The July2016 vintage 2016 California carbon allowance contract was eyed in a bid-and-askspread of $12.68/tonne to $12.74/tonne, rising 6 cents as well from previous assessments.

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As ofJuly 13, the December 2016 vintage 2016 California carbon futures contract was talkedin a bid-and-offer range of $12.71/tonne to $12.79/tonne, gaining 7 cents week overweek.

Secondarymarket prices for California carbon allowances are gaining ground following thewidely anticipated release of the CARB's initial draft proposal of amendments to the cap-and-trade regulation. Whilethe draft proposal would extend the state's cap-and-trade program beyond 2020, somelawmakers are looking to formally pass legislation that would do the same thingbefore the California legislative session comes to a conclusion at the end of August.

Apartfrom the new emissions caps after 2020, the draft proposal would also allow forthe continued linkage with the Quebec cap-and-trade market beyond 2020, as wellas future linkage with Ontario and other jurisdictions; continue to prevent emissionsleakage in the most cost-effective manner; and extend the allocation of allowancesto the state's utilities. The CARB will consider the proposedamendments at a hearing to be held Sept. 22-23 and will vote on them at a meetingscheduled for March 23-24, 2017.

Secondarymarket trading activity for California carbon allowances has been sluggish due,partly, to an ongoing lawsuit challenging the auction process of the Golden State'scap-and-trade program. In November 2012, the California Chamber of Commerce fileda suit to invalidate the state's cap-and-trade auctions. The suit asserts that theauction process is an unconstitutional state tax because it was not enacted by two-thirdsmajorities in both chambers of the California Legislature and that A.B. 32 doesnot authorize the creation of an auction process to sell emission allowances.

Market prices and included industrydata are current as of the time of publication and are subject to change. For moredetailed market data, including SNL powerand naturalgas index prices, as well as forwardsand futures,visit our Commodities Pages.