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Proposed program changes drive up Calif. carbon prices, volume

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Proposed program changes drive up Calif. carbon prices, volume

Over-the-counterprices for California carbon allowances edged slightly higher heading into thesecond half of July, extending prior-weekgains after the California Air Resources Board released apreliminary draft proposal that would allow for changes to the state'scap-and-trade program, including the implementation of new emissions caps after2020.

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Brokerdata as of July 19 showed that the spot California carbon allowance contractwas discussed in a bid-and-offer range of $12.69/tonne to $12.73/tonne, up 1cent from July 12 assessments.

TheJuly 2016 vintage 2016 California carbon allowance contract also was eyed in abid-and-ask spread of $12.69/tonne to $12.73/tonne, rising 4 cents on the week.

Asof July 19, the December 2016 vintage 2016 California carbon futures contractwas talked in a bid-and-offer range of $12.70/tonne to $12.77/tonne, gaining 1cent week over week.

Secondarymarket prices for California carbon allowances are gaining ground following theJuly 12 release ofthe 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,some lawmakers are looking to formally pass legislation that would do the samething before the California legislative session comes to a conclusion at theend of August.

In addition to price uplift, the proposed program amendmentsalso drove up traded volumes to 4,445,000 allowances, "a marked increasefrom the previous week's equivalent of just 370,000 [allowances],"according to Harry Horner, a market analyst with CaliforniaCarbon.info.

Horner said that most of the volume was recorded after theJuly 12 release of CARB's proposed regulatory amendments as the proposedchanges "very possibly … stirred up some interest and re-evaluation of themarket's post-2020 prospects."

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 preventemissions leakage in the most cost-effective manner; and extend the allocationof allowances to the state's utilities.

TheCARB will consider the proposed amendments at a hearing to be held Sept. 22-23and will vote on them at a meeting scheduled for March 23-24, 2017.

Market prices and included industry data are current as ofthe time of publication and are subject to change. For more detailed marketdata, including power, natural gas and coal index prices, as well as forwards and futures, visit our Commodities Pages.