Over-the-counter market prices for California carbon allowances continued to ascend during the week that ended July 19 following news that the state legislature passed a bill in both houses to extend the state's cap-and-trade system.
According to broker data as of July 19, the July 2017 vintage 2017 California carbon allowance contract was eyed in a bid-and-ask spread of $15.18/tonne to $15.35/tonne, up 9 cents from the prior week's assessments. As of July 19, the benchmark December 2017 vintage 2017 California carbon allowance futures contract was quoted in a bid-and-offer range of $15.34/tonne to $15.50/tonne, also rising 9 cents.
Secondary market prices for California carbon allowances had been gaining ground in recent weeks and ramped sharply higher of late as the California state legislature overwhelmingly approved a package that, among other things, would extend the state's carbon cap-and-trade program through 2030. The program's legal authority expires after 2020.
"The market sentiment has been overwhelmingly positive ... after plans for the cap-and-trade extension program solidified with prices skyrocketing after the extension proposal became public knowledge with the current front price now being USD 0.42 more than what it was before the proposal was known," CaliforniaCarbon.info analyst Ronjoy Bezbarua wrote in a July 17 posting.
The quick passage of the legislation July 18 came just a week after Gov. Jerry Brown and Senate and Assembly leaders announced agreement on the package.
Assembly Bill 398, the cap-and-trade program bill, passed its house of origin by a 55-22 vote.
Lawmakers also passed A.B. 617, a companion measure that was created to address the concerns of environmental justice advocates who were concerned that the cap-and-trade legislation would allow refineries and other heavy industries to buy credits to continue polluting the air in disadvantaged communities. The measure, which is directed at requiring more stringent pollution controls for those industries, passed the Assembly by a 50-24 vote and the Senate by 27-13.
The International Emissions Trading Association said the approval to extend California's cap-and-trade law until 2030 is a welcome boost for market confidence.
"Business needs clear rules and predictability, and that is what the California state policymakers have provided," IETA CEO and President Dirk Forrister said in a July 18 press statement.
IETA Managing Director Katie Sullivan said, "Now that we have clarity on California's future direction, efforts to expand the reach of the linked market can ramp up. There is a great opportunity to build a market with sizeable impact — one which can lead to meaningful emissions reductions at a lower cost than if each jurisdiction acted alone."
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