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Secondary market Calif. carbon allowances end March with gains

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Essential Energy Insights - February 2021

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Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021


Secondary market Calif. carbon allowances end March with gains

Followingrecent softness, over-the-counter California carbon allowance prices were mixedto mostly higher during the final week of March. As of March 28,the spot California carbon allowance contract in the secondary market was eyedin a bid-and-ask spread of $12.53/tonne to $12.67/tonne, up 6 cents fromassessments seen the week before.

TheMarch 2016 vintage 2016 California carbon allowance futures contract was reportedin a bid-and-offer range of $12.50/tonne to $12.67/tonne, rising 4 cents on theweek. As of March 28, the benchmark December 2016 vintage 2016California carbon futures contract was marked in a bid-and-ask spread of$12.73/tonne to $12.88/tonne, easing 3 cents from the week prior.

Californiacarbon allowance prices in the over-the-counter market had been aimed lowerafter a heavy sell-off that was triggered after the release of the WesternClimate Initiative's latest auction resultsat the end of February. The current vintage carbon allowanceoffering in the Feb. 17 auction cleared at the new floor price and was alsoundersubscribed for the first time ever. About 95% of the more than 71.5million current vintage allowances cleared at $12.73/tonne. Also, almost 9.4million, or 93%, of the more than 10.0 million vintage 2019 allowances on offerwere purchased at $12.73/tonne.

WCI to offer more than 67.6million current allowances in May auction

Inthe WCI's next quarterly auction for the year, to be held May 18, Californiaand Quebec will offer for sale more than 67.6 million current vintage carbonallowances and more than 10.0 million vintage 2019 allowances, according to arecent auction notice.

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. Entitiesregistered under Quebec's system may participate in joint auctions in eitherU.S. dollars or Canadian dollars. To manage multiple currencies, an auctionexchange rate is determined prior to each sale. The reserve price is determinedthe business day prior to the joint auction and is determined as the higher ofthe California or Quebec reserve prices after applying the established exchangerate.

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.