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Calif. carbon allowance prices up; WCI auction credits clear at record highs

Secondary market prices for California carbon allowances extended higher during the week ended May 22 due to active buying after the latest quarterly auction held by the Western Climate Initiative, or WCI, which saw record high clearing prices.

Broker data as of May 21 showed the May 2019 vintage 2019 California carbon allowance contract in a bid-and-ask range of $17.79/tonne to $17.89/tonne, up 7 cents from prior assessments made May 7. The benchmark December 2019 vintage 2019 contract was seen in a bid-and-offer spread of $18.33/tonne to $18.37/tonne as of May 21, rising 5 cents from May 7.

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According to results released May 22 by the California Air Resources Board, 100% of the more than 66 million current vintage allowances offered in the WCI's latest greenhouse gas allowance auction held May 14 sold at a record-high $17.45/tonne. This was up $1.72 from the previous auction clearing price of $15.73/tonne in February.

Additionally, 100% of the more than 9 million vintage 2022 allowances in the latest auction were purchased at $17.40/tonne, increasing $1.78 from the prior sale and also reaching all-time highs.

In the May 14 auction, compliance entities bought 86.1% of the current vintage allowances, which was comprised of almost two million vintage 2016 allowances and more than 64 million vintage 2019 allowances, and purchased 84.9% of the future vintage 2022 allowances.

Demand for the current vintage allowances was pegged at a 1.46 bid-to-cover ratio, with demand for the future vintage allowances coming in at a 1.48 bid-to-cover ratio.

The California and Quebec cap-and-trade programs were joined under the WCI at the start of 2014.

California's cap-and-trade system covers emissions from utility and industrial facilities that emit more than 25,000 tonnes of carbon each year and from entities that opted in to the program. Those facilities must purchase either carbon allowances or offsets to account for their annual emissions under the yearly emissions cap. The cap is reduced annually until the 2020 target is reached.

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