Offset Pricing Monthly Market Digest – July 2020
Offset Supply Information:
All CCOs issued to date: 190.98 million
Compliance credits awaiting issuance: 23.12 million
CA and General Market Commentary:
- ARB’s next auction will be in August. With futures for August delivery trading at $16.83, $0.15 above the $16.68 auction floor price, it appears likely that the auction will see a substantially higher bid-to-cover ratio than the .37 seen at the May auction. It may even be fully subscribed (a bid-to-cover ratio of 1.00 or higher), but a clearing price materially higher than the minimum $16.68 floor seems unlikely given lower emissions in 2020 during the pandemic and given the large number of allowances that traded at a discount below the floor price on the futures exchange during the March-May period.
- ARB has begun marking CCOs as “DEBs” or non-DEBs in their tracking software and reports. This allows buyers to know whether the credits they are buying have been determined to meet the requirements. Offset projects that are located in California will automatically be marked as “DEBs”, while other projects can petition to have a determination made if the developer believes they should qualify.
- Due to ARB beginning to mark credits as “DEBs”, we would expect that the market will begin to differentiate between the two categories, and we will begin adding prices for both categories to this report if/when the market begins to price them differently.
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