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News Update
- Carbon offsets issued to forestry projects on 8 March. The California Air Resources Board awarded 202,000 California Carbon Offsets (CCOs) to five projects on 9 March, including three forestry projects and two livestock methane initiatives.
- The Lyme Brimstone Timberlands improved forest managed project in Tennessee received the most CCOs, over 98,600. Finite Carbon built the project, which spans 4,800 acres of land that was previously held by International Paper.
- CARB also gave 14,300 CCOs to the Nisqually Land Trust, which established an enhanced forest management initiative in western Washington state.
- Forest Carbon Partners that established an improved forest managed project in Madison County, Kentucky, got roughly 56,400 CCOs. The project is around 7,500 acres in size.
All of the new offsets have an initial invalidation period of eight years.
- California issues 2.9 million CCOs on 22 March. The California Air Resources Board (CARB) issued the most forestry carbon offsets so far this year on March 23. More than 2.75 million California Carbon Offsets (CCOs) were given to forestry projects, with the majority of the credits going to two improved forest management (IFM) projects on Alaska's Kenai Peninsula.
- The first project, the Soldovia Native Association got more over 1.47 million CCOs. The English Bay Corporation, which owns the second project, received more than 1.24 million CCOs. Forest Carbon Partners developed both projects.
- The Van Eck Forest project in California, produced by the Pacific Forest Trust, obtained more than 35,600 CCOs, with all of the offsets classified as providing Direct Environmental Benefits (DEBS) to the state.
- CARB also issued more than 150,400 CCOs to two different Ohio Ozone Depleting Substance (ODS) projects, as well as roughly 11,900 CCOs to a single livestock project in New York.
CARB issued almost 2.9 million CCOs in all.
- New voluntary carbon trading platform hosts first trade. On March 25, the Voluntary Climate Marketplace (TVCM), a new global trading platform for carbon offsets, completed a trade for 25,000 vintage 2020 Verified Carbon Standard Corsia-eligible offsets at a price of $6.25 per metric ton. TVCS, a joint venture of IncubEx and Trayport, joins a number of new trading systems that have launched in response to increasing demand for voluntary offsets. TVCM offers live bids and on offsets from major registries: Gold Standard, Verified Carbon Standard, Climate Action Reserve and American Carbon Registry, and California Carbon Offsets. TVCM allows participants to search for and pick the sort of offset they want to acquire, as well as specify the issuance year, volume required, and price comparisons of similar offsets. Trades are matched in real time, confirmed with counterparties, and settled bilaterally. The marketplace is run by Chicago-based IncubEx and runs on Trayport's Joule electronic trading platform, which is situated in London.
- Prices in carbon markets soared in 2021. According to a recent report released on March 29 by the International Carbon Action Partnership (ICAP), allowance prices surged in nearly all carbon markets in 2021, earning a record amount in auction proceeds as governments set more ambitious greenhouse gas emission targets. Last year, global carbon markets recovered from the economic shocks caused by the Covid-19 outbreak and hit new highs. California Carbon Allowances, for example, began 2021 at roughly $18/metric ton and concluded the year at around $28/t. Allowances in the EU have risen above $100 per ton, whereas in South Korea, the price has risen from $21/ton to $30/ton. As of the end of 2021, carbon markets had raised $161 billion in global allowance revenues, with revenues last year more than 50 percent higher than the previous year. By the end of 2021, a country's net-zero goal had covered approximately 90% of global emissions, compared to approximately 50% in 2020, and emissions trading systems had covered more than a third of emissions in jurisdictions with legally enshrined net-zero targets. The report also revealed that some plans did not materialize, such as the Transportation and Climate Initiative in the United States' northeast, which lost political support in part due to concerns that the program would raise consumer fuel costs. The report highlights systems that are currently being developed or considered, and it focuses on Latin America and Southeast Asia as regions where new carbon markets may emerge in the near future.
- GHG restrictions are raising prices in California. California intends to significantly reduce its greenhouse gas (GHG) emissions through 2030 and beyond, which will necessitate even greater reductions under cap-and-trade and is already influencing the price of California Carbon Allowances (CCAs). Allowances for December 2022 began this year at or above $34/metric ton, nearly matching the program high of $35.20/t set last November. CARB anticipates that the cap-and-trade program will perform "much differently" than it did in the previous decade beginning in 2021, as prices rise and the cap's decline becomes steeper.As part of its climate change scoping plan, CARB made changes to the cap-and-trade program in 2017, including adding a mechanism to remove unsold allowances and a price ceiling. Currently, the Agency is working on the plan's next update, which is expected to be completed by the end of 2022, with the goal of assessing progress toward meeting the 2030 target of reducing GHG emissions by 40 percent below 1990 levels and laying out a path to carbon neutrality by 2045.
Offsets Update
- ARB has issued an overall 3,115,776 carbon offsets in March 2022
- 202,385 issued on March 8th
- 2,913, 391 issued on March 22nd
- 186,090 of the CCOs issued are listed as DEBs
- On March 8th ARB cut down the invalidation period from eight years to three years on 437,400 credits, the total being 134.36 mln
- On March 22nd ARB cut down the invalidation period from eight years to three years on 40,000 credits, the total being 134.40 mln
- 92 mln offsets have been issued since inception by ARB and Quebec
- 4 mln offsets have been issued for CCOs with no invalidation risk left
- 1,052,400 Quebec offsets have been issued in total; 0 credits issued in March 2022
California:
Issuance
|
ODS
|
Livestock
|
U.S. Forest
|
Urban Forest
|
MMC
|
Rice Cultivation
|
Total
|
February '22
|
24,585,936
|
8,375,930
|
190,851,730
|
0
|
8,994,363
|
0
|
232,807,959
|
March '22
|
24,736,379
|
8,420,944
|
193,772,049
|
0
|
8,994,363
|
0
|
235,923,735
|
Delta
|
150,443
|
45,014
|
2,920,319
|
0
|
0
|
0
|
3,115,776
|
Quebec:
Issuance
|
ODS
|
Livestock
|
U.S. Forest
|
Urban Forest
|
MMC
|
Rice Cultivation
|
Total
|
February '22
|
578,785
|
0
|
0
|
473,615
|
0
|
0
|
1,052,400
|
March '22
|
578,785
|
0
|
0
|
473,615
|
0
|
0
|
1,052,400
|
Delta
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Offsets Pricing
Offset Pricing as of April 19th, 2022:
- California Carbon Offset (CCO3) - (3 years of Buyer Liability) $15.25
- Golden California Carbon Offset (CCOs) – Spot Delivery $16.10
- California Carbon Offset (CCO3 - DEB) - (3 years of Buyer Liability) $16.70
- Golden California Carbon Offset (CCOs- DEB) – Spot Delivery $17.55
ARB Schedule
- 04/13/2022 California Carbon Offsets issued
- 04/19/2022 Auction Application deadline (May 2022 Joint Auction)
- 04/27/2022 California Carbon Offsets issued
- 05/06/2022 Bid Guarantees deadline (May 2022 Joint Auction)
- 5/19/2022 Auction – California and Quebec Cap and Trade
California Carbon Allowances (CCA)
- Allowance pricing as of April 19th, 2022: $31.13– Vintage 2022, April 2022 Delivery
- The average daily price in March 2022: $27.46 – Vintage 2022
Market Update
- Prices rallied from a low of $23.80 on March 7th to $31.13 on April 19th. The short term provided good opportunity for compliance entities to buy on this overreaction to the downside.
- KraneShares Carbon ETFs (both ETFs) which increased holdings to over 18.5 million California allowances as of February 14th, 2022, saw a pullback to 16.85 million California allowances as of March 8th, 2022 and decreased to 16.6 million on April 19th.
- The 2022 floor price is $19.70 and current inflation is at 8.5%. If that remained through October 2022, the 2023 floor price would be $22.36.
Figure 1. Open Interest on the Intercontinental Exchanges (ICE) - Vintages 2017-2023
Figure 2. CCA Daily Transactions (Spot Contract - 1/1/2018 to Present)
2021 Average Daily Price: $22.99 per ton |
2022 Average Daily Price: $29.40 per ton |
2021 Highest Daily Price: $35.14 per ton (November 15th, 2021) |
2022 Highest Daily Price: $33.48 per ton (January 1st, 2022) |
Figure 3. CCA Daily Transactions (Spot Contract - 3/13/2020 to Present)
Questions? Contact our team for more information: environmental@aegis-hedging.com
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