Offset Pricing Monthly Market Digest – August 2020

Offset Supply Information:

All CCOs issued to date: 190.88 million

Compliance credits awaiting issuance: 21.96 million

CA and General Market Commentary:

  • ARB’s August auction saw a $16.68 clearing price for its current vintages, with a bid-to-cover ratio of 0.89. The advance vintage auction cleared at $16.73 with a bid-to-cover ratio of 1.29.  This is an unusual result, typically entities would expect to receive a discount for purchasing future years’ allowances that cannot be used for 3 years.  It was also interesting to see that while only 3.5% of current vintage allowances were purchased by speculators, 19.9% of future vintage allowances were purchased by speculators.
  • Allowances continued to inch higher in August, while CCO prices inched lower. The spread between Allowance and CCO is historically high.  Because 2020 is not triennial compliance true-up year, we believe the lack of interest in CCOs is because compliance entities do not need to purchase CCOs for compliance until 2021, and many entities may be waiting until closer to the true-up deadline in order to observe the uncertain economy and better understand their emissions for 2020.

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