Offset Pricing Monthly Market Digest – May 2019
Offset Supply Information:
All CCOs issued to date: 154.78 million
Compliance credits awaiting issuance: 23.06 million
CA and General Market Commentary:
On May 22nd, ARB released the results of the second quarterly allowance auction for 2019. The clearing price for current vintage allowances was $17.45. The auction cleared $0.76 over our estimate for the 2020 auction reserve price. The auction was strongly subscribed with a bid-to-cover ratio of 1.46. The result may be even more bullish than it appears considering that PG&E did not participate in the auction, likely due to PG&E’s ongoing bankruptcy negotiations. As an entity with one of the largest compliance obligations in the program, their absence may lead to a later need to procure allowances.
Year-to-date, only 13.32 million offsets have been issued by ARB. If this issuance rate continues at a similar pace for the remainder of the year, 2019 would see only 32 million offsets issued. That result would be a substantially lower annual issuance rate than the 54.17 million offsets issued in 2018.
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