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Calif. carbon allowances slump to near record lows in OTC market


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Calif. carbon allowances slump to near record lows in OTC market

Secondarymarket prices for California carbon allowances were trending near record lowsbeneath the current auction price floor during the first week of April. Brokerdata as of April 4 showed the spot California carbon allowance contract peggedin a bid-and-offer range of $12.40/tonne to $12.45/tonne, down 2 cents weekover week.

TheApril 2016 vintage 2016 California carbon allowance futures contract was talkedin a bid-and-ask spread of $12.40/tonne to $12.47/tonne as of April 4. Thebenchmark December 2016 vintage 2016 California carbon futures contract wasassessed, as of April 4, at a bid-and-offer level of $12.54/tonne to$12.61/tonne, losing 10 cents from the week before.

Californiacarbon allowance prices in the over-the-counter market have been poised to thedownside for the last few weeks in the wake of a sharp sell-off at the end ofFebruary that was triggered, in part, by the release of the Western ClimateInitiative's latest auction results.The current vintage carbon allowance offering in the Feb. 17 auction cleared atthe floor price and was also undersubscribed for the first time ever. About 95%of the more than 71.5 million current vintage allowances cleared at$12.73/tonne. Also, almost 9.4 million, or 93%, of the more than 10.0 millionvintage 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 in the auction by complianceentities, with demand for the vintage 2019 allowances pegged at 0.93 times thetotal available supply.

Inthe WCI's next quarterly auctionfor the year, to be held May 18, California and Quebec will offer for sale morethan 67.6 million current vintage carbon allowances and more than 10.0 millionvintage 2019 allowances.The California and Quebec cap-and-trade programs were formally linked under theWCI at the start of 2014, with the first joint sale held in November 2014.During the joint auctions, entities registered under Quebec's system mayparticipate in joint auctions in either U.S. dollars or Canadian dollars.

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