Updates for the period ending September 30, 2017


 

CA Compliance Offset Pricing
CCO 8s Bid 12.00 Ask 12.25
CCO 8s are ARB-issued offsets available for spot delivery and subject to 8 years during which they may be invalidated.
CCO 3s Bid 12.40 Ask 12.50
CCO 3s are ARB-issued offsets available for spot delivery and subject to 3 years during which they may be invalidated.  The reduction to 3 years is achieved by having a different verifier successfully verify the project the following year.
CA Compliance Allowances Bid 15.23 Ask 15.31
Allowances are the permits entities purchase to emit in CA.  Entities can substitute offsets for up to 8% of their total emissions. Prices shown are for the December futures contract.
CA Floor Price 2017 13.57  
The minimum price at which entities can purchase allowances in 2017.
Estimated CA floor price 2018 14.49  

Allowances are the permits entities purchase to emit in CA.  Entities can substitute offsets for up to 8% of their total (The minimum price at which entities can purchase allowances in 2018 increases by 5% annually plus CPI-U.

(Bid/Ask Prices are taken from multiple broker quotes for the period ended September 30, 2017. 2017 CA Floor price is the regulatory minimum auction price for allowances.  2018 estimate is based on regulatory rules and ClimeCo’s assumption of inflation in 2017 as measured by the CPI-U index.  Green numbers indicate positive changes during the month, red numbers indicate negative changes during the month, black numbers are unchanged.)

 

Offset Supply Information:
  • All CCOs issued to date: 83.52 million
  • Compliance credits awaiting issuance: 31.66 million
CA and General Market Commentary:
  • CA, Quebec, and Ontario jointly announced that Ontario would be linking its market to CA and Quebec beginning January 1, 2018. Ontario is expected to be short (a net buyer of allowances and offsets), which should provide a bullish signal to the market beginning in 2018.
  • Other states and provinces, including WA, OR, Prince Edward Island, Nova Scotia, and others, continue to discuss the implementation of carbon caps in their jurisdictions, and it appears likely that further linkages to the CA/Quebec/Ontario are on the horizon.
  • The CA Air Resources Board will begin discussions in October regarding the implementation of CA’s Cap and Trade extension bill. Topics will include the Ontario linkage, changes to offset usage limits post-2020, defining what offsets qualify as in-state offsets, and the creation of a variety of task forces required by the legislation.
  • The backlog of ARB offset issuances was reduced by approximately 14 million this month. The reduction, however, was almost entirely due to the issuance of 14.1 million CCOs to a single forestry project. There appears to be a substantial number of smaller projects still in the queue.


Questions?

Contact Derek Six, Senior Vice President of ClimeCo Corporation dsix@climeco.com or call 484.415.0501

 

 

Updates for the period ending August 31, 2017


 

CA Compliance Offset Pricing
CCO 8s Bid 11.60 Ask 12.10
CCO 8s are ARB-issued offsets available for spot delivery and subject to 8 years during which they may be invalidated.
CCO 3s Bid 12.00 Ask 12.40
CCO 3s are ARB-issued offsets available for spot delivery and subject to 3 years during which they may be invalidated.  The reduction to 3 years is achieved by having a different verifier successfully verify the project the following year.
CA Compliance Allowances Bid 15.33 Ask 15.41
Allowances are the permits entities purchase to emit in CA.  Entities can substitute offsets for up to 8% of their total emissions. Prices shown are for the December futures contract.
CA Floor Price 2017 13.57  
The minimum price at which entities can purchase allowances in 2017.
Estimated CA floor price 2018 14.48  

Allowances are the permits entities purchase to emit in CA.  Entities can substitute offsets for up to 8% of their total (The minimum price at which entities can purchase allowances in 2018 increases by 5% annually plus CPI-U.

(Bid/Ask Prices are taken from multiple broker quotes for the period ended August 31, 2017. 2017 CA Floor price is the regulatory minimum auction price for allowances.  2018 estimate is based on regulatory rules and ClimeCo’s assumption of inflation in 2017 as measured by the CPI-U index.  Green numbers indicate positive changes during the month, red numbers indicate negative changes during the month, black numbers are unchanged.)

 

Offset Supply Information:
  • All CCOs issued to date: 68.42 million
  • Compliance credits awaiting issuance: 41.21 million
CA and General Market Commentary:
  • CA held its allowance auction on August 15th. Results were published on August 22nd. The auction for current (2017) vintage allowances cleared at $14.75, $1.18 higher than the floor price. Future (2020) allowances cleared at $14.55. Perhaps more impressively, the Bid-to-Cover ratio for the current auction was 1.79, meaning that almost twice as many bids were made as allowances available. This was the first auction since CA passed its Cap and Trade extension bill, and demand was strong as a result of the certainty the bill provides.
  • ClimeCo has reduced its estimated 2018 floor price from $14.50 to $14.48. This change does not reflect any market dynamics, it is merely an update based on published historical CPI-U data. Inflation in the US is slightly lower for 2017 to date than expected. ARB will incorporate CPI-U data through October, 2017, when it determines the official floor price for 2018.
  • As of this writing, CA Allowance prices have continued to increase, with the December 2017 contract now $15.52.


Questions?

Contact Derek Six, Senior Vice President of ClimeCo Corporation dsix@climeco.com or call 484.415.0501

 

 

Updates for the period ending July 31, 2017


 

CA Compliance Offset Pricing
CCO 8s Bid 11.55 Ask 11.95
CCO 8s are ARB-issued offsets available for spot delivery and subject to 8 years during which they may be invalidated.
CCO 3s Bid 12.00 Ask 12.35
CCO 3s are ARB-issued offsets available for spot delivery and subject to 3 years during which they may be invalidated.  The reduction to 3 years is achieved by having a different verifier successfully verify the project the following year.
CA Compliance Allowances Bid 15.24 Ask 15.29
Allowances are the permits entities purchase to emit in CA.  Entities can substitute offsets for up to 8% of their total emissions. Prices shown are for the December futures contract.
CA Floor Price 2017 13.57  
The minimum price at which entities can purchase allowances in 2017.
Estimated CA floor price 2018 14.50  

Allowances are the permits entities purchase to emit in CA.  Entities can substitute offsets for up to 8% of their total (The minimum price at which entities can purchase allowances in 2018 increases by 5% annually plus CPI-U.

(Bid/Ask Prices are taken from multiple broker quotes for the period ended July 31, 2017. 2017 CA Floor price is the regulatory minimum auction price for allowances.  2018 estimate is based on regulatory rules and ClimeCo’s assumption of inflation in 2017 as measured by the CPI-U index.  Green numbers indicate positive changes during the month, red numbers indicate negative changes during the month, black numbers are unchanged.)

 

Offset Supply Information:
  • All CCOs issued to date: 66.96 million
  • Compliance credits awaiting issuance: 30.27 million
CA and General Market Commentary:
  • On July 17th, the CA legislature approved AB398, a bill that extends the current Cap and Trade program through 2030. Even more significantly, both the Senate and the Assembly approved the bill by a 2/3 majority in a bi-partisan effort. The 2/3 majority is extremely significant because it now removes a key legal uncertainty- whether the program is a tax, and whether ARB had the right to implement it. Having achieved the threshold necessary to authorize the program, tax or not, the question becomes irrelevant.
  • This legislation should clear the path for linkage of California’s program to Ontario, and potentially WA and OR in the near future.
  • The legislation does make an unwelcome change to the offset rules. Rather than being able to use offsets to satisfy up to 8% of an entities emissions compliance, that threshold is reduced to 4% initially, with the possibility of an increase to 6% in 2025 if allowances prices reach a high ceiling. Furthermore, the legislation requires that half of the 4% be from projects with direct environmental benefits in the state of California. These restrictions potentially reduce demand for offsets from states outside of CA after 2020. However, ClimeCo believes that other jurisdictions will be linking with CA and may provide additional demand sufficient to make up for the lost demand in CA.
  • The CA Air Resources Board approved amendments to the Cap and Trade program on July 28th. These amendments had been in the works since last Fall, but had been delayed while the extension of the program was undertaken by the legislature. These amendments offer some helpful changes to ODS, Ag Methane, and Coal Mine Methane offset projects. For these project types, provisions regarding regulatory compliance have been adjusted so that rather than losing all the credits in a reporting period when a compliance issue occurs, the project can now limit the loss of credits to the period of the non-compliance if it can demonstrate the timing of the violation.
  • CA will hold its next allowance auction on August 15th. Results will be published on August 22nd, and ClimeCo will issue a report on the auction at that time. This will be an interesting auction, as it is the first since the new legislation.


Questions?

Contact Derek Six, Senior Vice President of ClimeCo Corporation dsix@climeco.com or call 484.415.0501

 

 

Updates for the period ending June 30, 2017


 

CA Compliance Offset Pricing
CCO 8s Bid 10.80 Ask 11.20
CCO 8s are ARB-issued offsets available for spot delivery and subject to 8 years during which they may be invalidated.
CCO 3s Bid 11.15 Ask 11.50
CCO 3s are ARB-issued offsets available for spot delivery and subject to 3 years during which they may be invalidated.  The reduction to 3 years is achieved by having a different verifier successfully verify the project the following year.
CA Compliance Allowances Bid 14.78 Ask 14.82
Allowances are the permits entities purchase to emit in CA.  Entities can substitute offsets for up to 8% of their total emissions. Prices shown are for the December futures contract.
CA Floor Price 2017 13.57  
The minimum price at which entities can purchase allowances in 2017.
Estimated CA floor price 2018 14.50  

Allowances are the permits entities purchase to emit in CA.  Entities can substitute offsets for up to 8% of their total (The minimum price at which entities can purchase allowances in 2018 increases by 5% annually plus CPI-U.

(Bid/Ask Prices are taken from multiple broker quotes for the period ended June 30, 2017. 2017 CA Floor price is the regulatory minimum auction price for allowances.  2018 estimate is based on regulatory rules and ClimeCo’s assumption of inflation in 2017 as measured by the CPI-U index.  Green numbers indicate positive changes during the month, red numbers indicate negative changes during the month, black numbers are unchanged.)

 

Offset Supply Information:
  • All CCOs issued to date: 66.42 million
  • Compliance credits awaiting issuance: 27.73 million
CA and General Market Commentary:
  • The current Cap and Trade program in California is authorized through 2020. The CA legislature is seeking to extend the authorization and to provide certainty about the program. As of this writing, a draft proposal from Governor Brown’s office for program extension includes a reduction in the offset usage limit from 8% to 4% initially, with the possibility of an increase to 6% in 2025 if allowances prices reach a high ceiling. ClimeCo believes it is a mistake to reduce the offset usage limit as it will reduce incentives for new investments in offset projects, and possibly even endanger the continuation of existing projects. ClimeCo continues to advocate for the extension of the program with the current 8% offset usage limit.
  • Allowance prices continued to climb in June, likely affected by a combination of the positive lawsuit decision previously reported, the May auction being fully subscribed, and the possibility of a post-2020 deal.


Questions?

Contact Derek Six, Senior Vice President of ClimeCo Corporation dsix@climeco.com or call 484.415.0501

 

 

Updates for the period ending May 31, 2017


 

CA Compliance Offset Pricing
CCO 8s Bid 10.55 Ask 10.85
CCO 8s are ARB-issued offsets available for spot delivery and subject to 8 years during which they may be invalidated.
CCO 3s Bid 10.85 Ask 11.15
CCO 3s are ARB-issued offsets available for spot delivery and subject to 3 years during which they may be invalidated.  The reduction to 3 years is achieved by having a different verifier successfully verify the project the following year.
CA Compliance Allowances Bid 14.25 Ask 14.30
Allowances are the permits entities purchase to emit in CA.  Entities can substitute offsets for up to 8% of their total emissions. Prices shown are for the December futures contract.
CA Floor Price 2017 13.57  
The minimum price at which entities can purchase allowances in 2017.
Estimated CA floor price 2018 14.52  

Allowances are the permits entities purchase to emit in CA.  Entities can substitute offsets for up to 8% of their total (The minimum price at which entities can purchase allowances in 2018 increases by 5% annually plus CPI-U.

(Bid/Ask Prices are taken from multiple broker quotes for the period ended May 31, 2017. 2017 CA Floor price is the regulatory minimum auction price for allowances.  2018 estimate is based on regulatory rules and ClimeCo’s assumption of inflation in 2017 as measured by the CPI-U index.  Green numbers indicate positive changes during the month, red numbers indicate negative changes during the month, black numbers are unchanged.)

 

Offset Supply Information:
  • All CCOs issued to date: 62.65 million
  • Compliance credits awaiting issuance: 25.25 million
CA and General Market Commentary:
  • The current Cap and Trade program in California is authorized through 2020. The CA legislature is seeking to extend the authorization and to provide certainty about the program, but recent proposals have provided anything but certainty to the market- no progress was made in May, or in June to date, in moving toward a re-authorization bill. Uncertainty exists as to whether a bill will come in this current legislative session, with a 6/15/2017 deadline for the CA budget.
  • ARB’s May auction was fully subscribed for the first time since November, 2015. The auction had a bid-to-cover ratio of 1.23, and cleared at a price of $13.80, well above the $13.53 floor. The auction results in our view are a result of clarity provided by the ARB lawsuit decision. While the long-term fate of the program post-2020 is uncertain, firms now understand that they will have to comply at least through 2020, and so will have to make allowance and offset purchases to meet their obligation.


Questions?

Contact Derek Six, Senior Vice President of ClimeCo Corporation dsix@climeco.com or call 484.415.0501

 

 

Updates for the period ending April 30, 2017


 

CA Compliance Offset Pricing
CCO 8s Bid 10.20 Ask 11.00
CCO 8s are ARB-issued offsets available for spot delivery and subject to 8 years during which they may be invalidated.
CCO 3s Bid 10.95 Ask 11.60
CCO 3s are ARB-issued offsets available for spot delivery and subject to 3 years during which they may be invalidated.  The reduction to 3 years is achieved by having a different verifier successfully verify the project the following year.
CA Compliance Allowances Bid 14.35 Ask 14.39
Allowances are the permits entities purchase to emit in CA.  Entities can substitute offsets for up to 8% of their total emissions.
CA Floor Price 2017 13.57  
The minimum price at which entities can purchase allowances in 2017.
Estimated CA floor price 2018 14.52  

Allowances are the permits entities purchase to emit in CA.  Entities can substitute offsets for up to 8% of their total (The minimum price at which entities can purchase allowances in 2018 increases by 5% annually plus CPI-U.

(Bid/Ask Prices are taken from multiple broker quotes for the period ended April 30, 2017. 2017 CA Floor price is the regulatory minimum auction price for allowances.  2018 estimate is based on regulatory rules and ClimeCo’s assumption of inflation in 2017 as measured by the CPI-U index.  Green numbers indicate positive changes during the month, red numbers indicate negative changes during the month, black numbers are unchanged.)

 

Offset Supply Information:
  • All CCOs issued to date: 57.60 million
  • Compliance credits awaiting issuance: 27.07 million
CA and General Market Commentary:
  • The current Cap and Trade program in California is authorized through 2020. The CA legislature is seeking to extend the authorization and to provide certainty about the program, but recent proposals have provided anything but certainty to the market.
  • Three competing bills, AB378, AB151, and SB775 have been proposed by California legislators. Each bill addresses some element of the CA Cap and Trade program, and the three bills appear to be mutually exclusive to some extent.
  • SB775 would authorize a new Cap and Trade program starting in 2021. This program would be a complete re-start, with no banking allowances from the current program, no offsets, and a very limited trading component- the bill might be more aptly called a Cap and Tax program.
  • AB378 continues the current Cap and Trade program, but imposes severe limits on emissions at facilities in disadvantaged communities in CA.
  • AB151 focuses on job dislocation and training and on encouraging offset projects inside disadvantaged communities in CA.
  • We will be watching political developments in California very carefully, and will continue to advocate for a sensible, market-based program with flexibility that leverages the many benefits of offset projects.


Questions?

Contact Derek Six, Senior Vice President of ClimeCo Corporation dsix@climeco.com or call 484.415.0501