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Secondary market Calif. carbon allowance prices head into mid-April firm to lower

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Secondary market Calif. carbon allowance prices head into mid-April firm to lower

Californiacarbon allowance prices were firm to lower, hovering near record lows headinginto the middle of the month. According to data as of April 12, the spotCalifornia carbon allowance contract was seen in a bid-and-ask spread of$12.40/tonne to $12.45/tonne, little changed from the week prior.

Asof April 12, the April 2016 vintage 2016 California carbon allowance futurescontract was seen in a bid-and-offer range of $12.40/tonne to $12.57/tonne,easing 5 cents week over week. The benchmark December 2016 vintage 2016California carbon futures contract was marked in a bid-and-ask range of$12.50/tonne to $12.68/tonne, down about 3 cents week over week.

Lookingahead, the Western Climate Initiative, which is comprised of California andQuebec, will hold their next joint auction on May 18, putting more than 67.6 millioncurrent vintage carbon allowances and more than 10.0 million vintage 2019allowances up for sale.

TheCalifornia and Quebec cap-and-trade programs were formally linked under the WCIat the start of 2014, with the first joint sale held in November 2014.

Inthe WCI's prior auction, which was held Feb. 17, the current vintage offering wasundersubscribed. About 95% of the more than 71.5 million current vintageallowances cleared at $12.73/tonne. Also, almost 9.4 million, or 93%, of themore than 10.0 million vintage 2019 allowances on offer were purchased at$12.73/tonne.

Inthe February auction, 97.5% of the current vintage allowances up for sale werebought by compliance entities, with demand for the current vintage allowanceseyed at 0.95 times the total available supply. It was also reported that 99.97%of the vintage 2019 allowances were purchased by compliance entities, withdemand for the vintage 2019 allowances pegged at 0.93 times the total availablesupply.

More than 366 millionallowances, offsets held in compliance accounts

Duringthe first quarter of the year, more than 366 million allowances and offsets wereheld in compliance accounts of covered entities in California and Quebec,according to quarterly data posted April 5. This compared to about 300 millionallowances and offsets held in such accounts during the fourth quarter of 2015.

Atthe end of the first quarter of 2016, a total of more than 254.3 millionvintage 2015 allowances and more than 1.7 million vintage 2017 allowances hadbeen retired. During the final quarter of 2015, a total of about 220.0 millionvintage 2015 allowances and more than 1.7 million vintage 2017 allowances hadbeen retired.

TheCalifornia cap-and-trade system covers emissions from utility and industrialfacilities, which emit more than 25,000 tonnes of carbon each year, as well asentities that opted into the program. Those facilities must purchase eitherstate carbon allowances or carbon offsets to account for their annual emissionsunder the annual emissions cap. Up to 8% of an entity's emissions can becovered using offset credits from certified projects.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including powerand naturalgas index prices, as well as forwardsand futures,visit our Commodities Pages.