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News Update
- California advances SB12 to tighten 2030 GHG target. The California Senate Environmental Quality Committee voted to advance SB12 which would increase California’s 2030 reduction target to 55%, up from the previous target of 40%, by setting tougher state regulations and potentially lowering GHG limits for the state’s cap-and-trade program.
- California YoY offset issuances fall by nearly 60% in Q1. ARB has issued about 1.9 mln California Carbon Offsets (CCOs) since the start of 2023– almost 57% less than the number issued by ARB this time last year.
- Canada officials quell concerns from low offset supply and demand. The Canadian federal offset system has only received one project application since adopting its first and only protocol in June 2022. Normally, low supply and demand levels would spell a rocky future for the program, but the slow uptake is due to the protocol already being covered at the provincial level, thereby eliminating the need for the federal system to be involved unless a province does not already have a methodology in place for projects. The Canadian agency is currently developing four additional offset protocols to improve forest management on private lands, livestock feed management, sustainable agricultural land management activities, and direct air capture and sequestration, but have yet to release further details.
- California CITSS accounts reach 800 registrants, over 200 still pending. California Air Resources Board (CARB) released their most recent CITSS Registrant Report on March 30th. The reported data shows California-registered CITSS accounts totaled 800 registrants in Q1, however, there are still 230 companies that have applied for CITSS since July 2022 that have yet to see approval. ARB has previously stated they will not disclose the number of pending applications, deeming it to be market-sensitive information, so just how many of these 230 are truly waiting and how many have given up hopes of approval is unknown.
- Linkage considerations between CCA and WCA urge rule alignments. As Washington continues to consider linking its carbon allowance market with California, many stakeholders and officials have pointed out Washington’s flexibility in adopting the California program’s designs as a critical factor in the linkage’s success. Altering Washington's program rules to align with California’s could be a challenge as many aspects of the Washington program that differ from California’s are mandated by statute, which would require any changes to go through standard legislative and regulatory processes before implementation. The Washington Department of Ecology (ECY) is still taking public input concerning the linkage, aiming to decide this summer on whether to join the jurisdictions in 2025.
Offsets Update
- ARB has issued an overall 470,119 carbon offsets in March 2023.
- 320,957 issued on March 7th
- 149,162 issued on March 21st
- 142,768 of the CCOs issued are listed as DEBs
- 246 mln offsets have been issued since inception by ARB and Quebec.
- 1.3 mln Quebec offsets have been issued in total;
California:
Issuance |
ODS |
Livestock |
U.S. Forest |
Urban Forest |
MMC |
Rice Cultivation |
Total |
February '23 |
25,352,815 |
8,868,645 |
199,141,169 |
|
11,180,846 |
|
244,543,475 |
March '23 |
25,485,683 |
8,871,730 |
199,396,539 |
|
11,259,687 |
|
245,013,594 |
Delta |
132,823 |
3,085 |
255,370 |
|
78,841 |
|
470,119 |
Quebec:
Issuance
|
ODS
|
Landfills
|
Covered Manure Storage
|
Active Coal Mines
|
Active Underground Coal Mines
|
Total
|
February '23
|
-
|
-
|
- |
- |
- |
1,311,034
|
March '23
|
-
|
-
|
- |
- |
- |
1,311,034
|
Delta
|
-
|
- |
- |
- |
- |
-
|
Offsets Pricing
Offsets Pricing as of April 10th, 2023:
- California Carbon Offset (CCO3) - (3 years of Buyer Liability): $18.15
- California Carbon Offset (CCO3 - DEB) - (3 years of Buyer Liability): $23.75
- Golden California Carbon Offset (CCOs) – Spot Delivery: $18.80
- Golden California Carbon Offset (CCOs- DEB) – Spot Delivery: $24.40
ARB Schedule
- 5/17/2023 - May 2023 Joint Auction
- 5/25/2023 - May 2023 Joint Auction Summary Results
- 8/16/2023 - August 2023 Joint Auction
- 8/23/2023 - August 2023 Joint Auction Summary Results
California Carbon Allowances (CCA)
- Allowance pricing as of April 10th, 2023: $29.76 – Vintage 2023, April 2023 Delivery
- Allowance pricing as of April 10th, 2023: $30.99 – Vintage 2023, December 2023 Delivery
- The average daily price in March 2023: $29.46 – Vintage 2023
Market Update
- The average daily price in March 2023 was $29.46 which was a 4.69% increase compared to the average daily price of $28.14 in February 2023.
- May’s auction notice was released on March 17th. The Current Auction will offer 56,084,237 allowances and the Advance Auction will offer 7,577,000 allowances, with an auction reserve price of $22.21.
- Krane Shares Carbon ETFs (both ETFs) held to 13.5 million shares on April 10th, 2023 compared to 13.8 million carbon allowances on March 3rd, 2023 which was a 2.17% decrease. Furthermore, we are now 5 million or 27.1% off the all-time high of 18.5 million California allowances as of February 2022.
- The market expected to continue recover prices in 2023 after hitting highs in 2021 as Gov. Newsom and others continued to pressure ARB to make additional cuts to environmental programs to reach ambitious targets on GHG emissions for the state, and we have seen this reflected through the 1st Quarter. While the all-time high of $35.20 in November 2021 may take some time to reach, pricing has already reached $30.00 in 2023 and is expected to continue climbing.
Figure 1. Open Interest on the Intercontinental Exchanges (ICE) - Vintages 2017-2023
Figure 2. CCA Daily Transactions (Spot Contract - January 2022 to Present)
|
|
2022 Average Daily Price: $28.93 per ton |
2023 Average Daily Price: $28.75 per ton |
2022 Highest Daily Price: $33.50 per ton (January 1st, 2022) |
2023 Highest Daily Price: $30.00 per ton (April 3rd, 2023) |
Questions? Contact our team for more information: environmental@aegis-hedging.com
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