Glossary

Offset Pricing Monthly Market Digest – July 2022

Offset Pricing Monthly Market Digest – July 2022

Offset Pricing Monthly Market Digest – July 2022

by Derek Six | August 8, 2022

 
Offset Supply Information:

All CCOs issued to date: 238.34 million

CA and General Market Commentary:

  • Issuances of CCOs in July totaled 506,768. This brings the issuances of CCOs in 2022 YTD to 6.8 million. This continues a trend of decreasing issuances of CCOs:


  • At least three factors may be at work influencing this severe downturn in CCO issuances: 
    1. Many of the largest potential forestry and ODS projects may have already been developed, and we may be observing a permanent decline in opportunities under the current protocols.
    2. The pandemic may have delayed the development of new projects and/or the process of verification site visits for existing projects.
    3. Many projects have elected to switch their registration.  Dairy methane projects have largely transferred over to the LCFS program.  Other projects may have elected to register under voluntary protocols given the high voluntary market prices seen in late 2021.

ClimeCo is a respected global advisor, transaction facilitator, trader, and developer of environmental commodity market products and related services. We specialize in voluntary carbon, regulated carbon, renewable energy credits, plastics credits, and regional criteria pollutant trading programs.  Complimenting these programs is a team of professionals skilled in providing sustainability program management services and developing and financing of GHG abatement and mitigation systems.

For more information or to discuss how ClimeCo can drive value for your organization, contact us at 484.415.0501, info@climeco.com, or through our website climeco.com. Be sure to follow us on LinkedIn, Facebook, Instagram, and Twitter using our handle, @ClimeCo.

Offset Pricing Monthly Market Digest – July 2022

Offset Pricing Monthly Market Digest – June 2022

Offset Pricing Monthly Market Digest – June 2022

by Derek Six | July 6, 2022

 
Offset Supply Information:

All CCOs issued to date: 237.83 million

CA and General Market Commentary:

  • Issuances of CCOs in June totaled 183,143. This brings the issuances of CCOs in 2022 YTD to 6.3 million. This is the lowest total recorded in this period, and continues a trend of decreasing issuances of CCOs:

 

  • At least three factors may be at work influencing this severe downturn in CCO issuances: 
    1. Many of the largest potential forestry and ODS projects may have already been developed, and we may be observing a permanent decline in opportunities under the current protocols.
    2. The pandemic may have delayed the development of new projects and/or the process of verification site visits for existing projects.
    3. Many projects have elected to switch their registration. Dairy methane projects have largely transferred over to the LCFS program. Other projects may have elected to register under voluntary protocols given the high voluntary market prices seen in late 2021.

ClimeCo is a respected global advisor, transaction facilitator, trader, and developer of environmental commodity market products and related services. We specialize in voluntary carbon, regulated carbon, renewable energy credits, plastics credits, and regional criteria pollutant trading programs.  Complimenting these programs is a team of professionals skilled in providing sustainability program management services and developing and financing of GHG abatement and mitigation systems.

For more information or to discuss how ClimeCo can drive value for your organization, contact us at 484.415.0501, info@climeco.com, or through our website climeco.com. Be sure to follow us on LinkedIn, Facebook, Instagram, and Twitter using our handle, @ClimeCo.

Offset Pricing Monthly Market Digest – July 2022

Offset Pricing Monthly Market Digest – May 2022

Offset Pricing Monthly Market Digest – May 2022

by Derek Six | June 7, 2022


Offset Supply Information:

All CCOs issued to date: 237.65 million

CA and General Market Commentary:

  • ARB released the results of its May auction on May 26th. Current vintage allowances cleared at $30.85, $11.15 above the reserve price of $19.70. The bid-to-cover ratio was 1.62.
  • The strong results of the auction propelled futures prices higher over the last few trading days in May.
  • Issuances of CCOs in 2022 through the end of May totaled 6.1 million. This is the lowest total recorded in this period, and continues a trend of decreasing issuances of CCOs:

ClimeCo is a respected global advisor, transaction facilitator, trader, and developer of environmental commodity market products and related services. We specialize in voluntary carbon, regulated carbon, renewable energy credits, plastics credits, and regional criteria pollutant trading programs.  Complimenting these programs is a team of professionals skilled in providing sustainability program management services and developing and financing of GHG abatement and mitigation systems.

For more information or to discuss how ClimeCo can drive value for your organization, contact us at 484.415.0501, info@climeco.com, or through our website climeco.com. Be sure to follow us on LinkedIn, Facebook, Instagram, and Twitter using our handle, @ClimeCo.

Offset Pricing Monthly Market Digest – July 2022

Offset Pricing Monthly Market Digest – April 2022

Offset Pricing Monthly Market Digest – April 2022

by Derek Six | May 6, 2022


Offset Supply Information:

All CCOs issued to date: 237.48 million

CA and General Market Commentary:

  • ARB holds its next quarterly auction on May 18, 2022, with results announced May 26, 2022.
  • Several new bills dealing with Cap-and-Trade issues have been introduced in the CA legislature. The most noteworthy for offset market participants is SB 1391, which includes a number of new linking requirements including the requirement that, “If a market-based compliance mechanism proposed for linking has issued or is authorized to issue an offset credit that can be used for compliance purposes, then the market-based compliance mechanism includes a provision that automatically reduces the number of emissions allowances it makes available for compliance purposes by a number that is equivalent to the climate benefits claimed by either of the following:
    • The issuance of all offset credits, as observed historically and on an ongoing basis.
    • The retirement of all offset credits used for compliance purposes, as observed historically and on an ongoing basis.”
  • This proposed rule appears to attempt to mirror a Washington state rule.

ClimeCo is a respected global advisor, transaction facilitator, trader, and developer of environmental commodity market products and related services. We specialize in voluntary carbon, regulated carbon, renewable energy credits, plastics credits, and regional criteria pollutant trading programs.  Complimenting these programs is a team of professionals skilled in providing sustainability program management services and developing and financing of GHG abatement and mitigation systems.

For more information or to discuss how ClimeCo can drive value for your organization, contact us at 484.415.0501, info@climeco.com, or through our website climeco.com. Be sure to follow us on LinkedIn, Facebook, Instagram, and Twitter using our handle, @ClimeCo.

Cost-Saving Strategies for California and Quebec Regulated Emitters

Cost-Saving Strategies for California and Quebec Regulated Emitters

Cost-Saving Strategies for California and Quebec Regulated Emitters


by: Derek Six | Chief Business Officer | June 29, 2021


November 1, 2021, is the compliance deadline for emitters covered under the California and Quebec Cap-and-Trade programs. By November 1st, emitters are required to submit the compliance instruments representing their full triennial (2018-2020) emissions. One of the simplest compliance cost-saving strategies is for entities to take full advantage of their ability to substitute offsets for up to 8% of their total obligation. However, for the previous compliance period covering 2015-2017, California entities surrendered only 6.36% of the possible 8% offsets, and Quebec entities surrendered only 3.5% of the possible 8% offsets. Why did emitters leave so much potential savings on the table? With offsets currently selling at a historically large discount to allowances, will entities again leave substantial savings on the table, or will they utilize new offset buying options to help them realize all of the possible savings? 


Missing Out on Potential Savings
 

Allowances (permits for one metric ton of CO2e) are currently priced at approximately US$21.77.  Offsets are currently priced between US$13.00 and US$15.00, depending on type and risk profile, providing emitters a discount of 30-40%. It should be hard to ignore such significant cost savings, but there may be a few possible reasons emitters would choose not to maximize their savings: 

  1. In previous compliance periods, information about offsets may have not been available or widely understood 

  2. Market access to offsets may have been limited 

  3. Perceived risks may have prevented buyers from utilizing offsets

While the first two explanations may have been valid in the past as emitters became accustomed to the program, we suspect that it is the last possibility of perceived risks that had the greatest impact on offset utilization. Would-be buyers of offsets may have been dissuaded by the complexity of California’s invalidation rules, and their accounting departments may have warned them about the difficulty of accounting for the possibility of invalidation.  While less than 0.1% of California-issued offsets have been invalidated, such a possibility may have outweighed the cost savings for some buyers.


Understanding the Risk
 

Before emitters consider a solution, it is important for them to understand the various types of offset buying options that currently exist in the market: 

  1. Quebec-issued Offsets:  these offsets do not have buyer liability, but because Quebec has issued only 1.05 million offsets, this category is not an available buying choice. 

  2. California CCO-8s:  when initially issued, California has regulations that would allow them to invalidate offsets for up to 8 years if a regulatory compliance violation is later discovered. 

  3. California CCO-3s:  offsets whose invalidation period has been reduced to 3 years. 

  4. California GCCOs:  offsets exposed to invalidation risk but sold by a seller offering to replace them if they are ever invalidated. 

  5. California CCO-0s:  offsets whose invalidation period has expired. 

Confusing, no doubt, and definitely likely to dissuade many buyers. However, one option in this list is relatively new to buyers that offers no risk and a simple transaction.


Consider California CCO-0s
 

California CCO-0s, the final category in our list above, are California compliance offsets that are not exposed to the possibility of invalidation because their invalidation period has expired.  CCO-0s are the most expensive of the quality levels, currently at US$15.00 or a 30% discount to allowances, but they cannot be invalidated.  Because the risk period has expired, there is no need to enter into complicated GCCO (Golden/Guaranteed California Compliance Offset) contracts where the buyer relies on the contractual promises of the seller and the quality of the seller’s financial credit.  CCO-0 purchase contracts are simple and easy to execute. 

Some buyers will find that the price savings of purchasing CCO-8s or CCO-3s outweigh the risks, but the CCO-0 offsets represent an exciting new opportunity to reduce upcoming compliance costs for many emitters. 

If you would like to learn more about your options or purchase CCO-0s, please feel free to contact us.  We are happy to help and currently have CCO-0s available for purchase.


About the Author

Derek Six serves as Chief Business Officer at ClimeCo, where he leads the company’s cross-cutting business functions, the firm’s ODS management program, and a private equity fund ClimeCo manages. He holds an MBA in Investment Management and Portfolio Analysis from Pennsylvania State University’s Smeal College of Business.