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Calif. carbon allowance prices slide to start new month

Secondary market prices for California carbon allowances eased to kick off the month of June. As of June 6, the June 2017 vintage 2017 contract was quoted in a bid-and-ask spread of $14.03/tonne to $14.08/tonne, down 5 cents week over week.

The benchmark December 2017 vintage 2017 California carbon allowance futures contract was pegged in a bid-and-offer range of $14.20/tonne to $14.27/tonne, as of June 6, slipping 4 cents from the week prior.

SNL Image

SNL Image

Ontario held its second carbon allowance auction June 6, with results to be released June 13. At the Canadian province's first greenhouse gas allowance auction in March, 100% of the 25,296,367 2017 vintage allowances on offer sold at C$18.08/tonne. Also, 812,000, or more than 25%, of the 3,116,700 2020 vintage allowances on offer sold at the market reserve, or floor price, of C$18.07/tonne.

In February 2016, officials in Ontario proposed legislation to reduce greenhouse gas pollution to 15% below 1990 levels by 2020 and to 37% below 1990 levels by 2030. At the start of 2018, the Ontario carbon market is expected to be linked with the Western Climate Initiative, which is comprised of California and Quebec.

The WCI members held their most recent quarterly greenhouse gas allowance auction in mid-May, with 100% of the more than 75,311,960 current vintage allowances selling at US$13.80/tonne. Also, 2,117,000 of the more than 9,723,500 vintage 2020 carbon allowances were purchased at the market reserve price of US$13.57/tonne.

In the WCI's prior auction held in February, more than 11.67 million of the 65,104,273 current vintage allowances, or roughly 18%, were scooped up at US$13.57/tonne. Additionally, 701,000, or about 7%, of the more than 9,723,500 vintage 2020 carbon allowances on offer in the February auction were bought at US$13.57/tonne.

In other California carbon news, state lawmakers defeated Assembly Bill 378, a proposal to extend the state's cap-and-trade program through 2030, a key component of California's effort to cut greenhouse gas emissions 40% below 1990 levels by that time. The program's legal authority currently expires after 2020. The bill faltered amid worries about the creation of new air-quality standards for industrial facilities, in addition to Gov. Jerry Brown's refusal to sign a cap-and-trade extension bill without a two-thirds majority. A.B. 378 sought only simple majority consent.

Still active in the Senate, S.B. 775, would deliver two-thirds approval to circumvent an ongoing legal challenge to the program on the claim that it represents an illegal tax. The Senate bill, however, does not seek to integrate local pollution controls with the cap-and-trade program.

Meanwhile, market sources said over-the-counter California carbon allowance prices were little swayed overall by news June 1 that President Donald Trump plans to withdraw the U.S. from the Paris Agreement on climate change. California Gov. Jerry Brown is one of many state governors who has pledged that his state will remain committed to its climate change efforts.

Brown also recently inked agreements to cooperate with China and two of its provinces on emissions reduction programs and renewable energy and low-carbon technologies, among other things.

Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power and natural gas index prices, as well as forwards and futures, visit our Commodities Pages.