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News Update
- California AB-9 advances, targets 2025 deadline for GHG market updates. California’s Assembly Appropriations Committee advanced AB-9, requiring California ARB to evaluate and implement potential changes to the state’s GHG cap-and-trade program, such as steeper reduction targets or a possible linkage with Washington state’s program by January 1st, 2025. The bill now falls to the full Assembly for a potential floor vote.
- California SB-253 & SB-261 advance, requires climate disclosures. California’s Senate Appropriations committee advanced two bills requiring businesses to disclose their GHG emissions and climate-related financial risk. SB-253 requires companies that do business in California and generate over $1B/year in revenue to publicly report their annual scope 1, 2, and 3 emissions. SB-261 requires companies that do business in California and generate over $500M/year in revenue to annually report their climate-related financial risks and related measures. The bills will go before the state Assembly for a hearing.
- WCI May auction clears 2nd highest level to date. May’s allowance auction settled at $30.33, $8.12 above the reserve price of $22.21, reaching its highest point since Q2 of 2022. The settlement price nearly matches secondary market prices according to the data released by CARB.
- WCI announces joint cap-and-trade workshop. WCI partners California and Quebec announced June 14th as the date for a joint workshop to discuss potential amendments to their cap-and-trade programs including potentially addressing oversupply of allowance. Staff will address the status of regulations, the scope of potential updates, and how they plan to evaluate the potential amendments in alignment with California’s scoping plan.
- ACR unveils world’s first well-plugging offset methodology. The American Carbon Registry released its carbon offset methodology for plugging orphaned oil and gas wells in US and Canada. At least 120,000 orphaned wells have been documented across 30 states in the US, with millions more estimated to be present between US and Canada. ACR removed abandoned wells from the methodology to the disappointment of many oil and gas producers that were hoping they may have some old wells qualify as abandoned.
- California seeks federal waiver for Advance Clean Cars 2 rule. California state officials have formally requested a federal waiver from the EPA towards the state’s Advanced Clean Cars 2 rule, which would prohibit the sale of gasoline-only vehicles in California by 2035. The rule would begin in the 2026 model year and apply to all light-duty vehicles. The EPA granted the state a waiver earlier in the year which allowed California to require half of commercial trucks sold in-state to be zero-emissions vehicles by 2035.
Offsets Update
- ARB has issued an overall 2,390,563 carbon offsets in May 2023.
- 298,573 issued on April 11th
- 2,091,990 issued on April 25th
- 342,767 of the CCOs issued are listed as DEBs
- 249 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 |
April '23 |
25,538,455 |
8,913,603 |
199,544,228 |
- |
11,418,671 |
- |
245,414,957 |
May '23 |
25,538,455 |
8,982,318 |
201,838,117 |
- |
11,450,060 |
- |
247,808,950 |
Delta |
0 |
68,715 |
2,293,889 |
- |
0 |
- |
2,393,993 |
Quebec:
Issuance
|
ODS
|
Landfills
|
Covered Manure Storage
|
Active Coal Mines
|
Active Underground Coal Mines
|
Total
|
April '23
|
-
|
-
|
- |
- |
- |
1,311,034
|
May '23
|
-
|
-
|
- |
- |
- |
1,311,034
|
Delta
|
-
|
- |
- |
- |
- |
-
|
Offsets Pricing
Offsets Pricing as of June 1st, 2023:
- California Carbon Offset (CCO3) - (3 years of Buyer Liability): $18.15
- California Carbon Offset (CCO3 - DEB) - (3 years of Buyer Liability): $24.35
- Golden California Carbon Offset (CCOs) – Spot Delivery: $18.80
- Golden California Carbon Offset (CCOs- DEB) – Spot Delivery: $25.00
ARB Schedule
- 6/14/2023 - California-Quebec Joint Workshop: Potential Amendments to the Cap-and-Trade Regulation
- 8/16/2023 - August 2023 Joint Auction #36
- 8/23/2023 - August 2023 Joint Auction #36 Summary Results
California Carbon Allowances (CCA)
- Allowance pricing as of June 1st, 2023: $30.75 – Vintage 2023, April 2023 Delivery
- Allowance pricing as of June 1st, 2023: $31.78 Vintage 2023, December 2023 Delivery
- The average daily price in May 2023: $30.56 – Vintage 2023
Market Update
- The average daily price in May 2023 was $30.56, which is a 0.49% increase compared to the average daily price of $30.41 in April 2023.
- The latest allowance auction took place on May 17th. All of the 56.1 million allowances offered in the current auction were sold at $30.33, and all of the 7.6 million allowances offered in the advance auction were sold at $30.05. This marks the second highest settlement price seen in the WCI market since its inception.
- Krane Shares Carbon ETFs (both ETFs) held to 13.1 million shares on June 1st, 2023 compared to 13.3 million carbon allowances on May 3rd, 2023 which was a 1.73% decrease. Furthermore, we are now 5.4 million or 29.4% off the all-time high of 18.5 million California allowances seen in February 2022.
- The market expects to continue recovering in 2023. Recent legislative efforts to increase GHG reduction stringency will likely lead ARB to make additional adjustments to environmental programs to reach the state’s increasingly ambitious emissions targets. While the all-time high of $35.20 seen in November 2021 is still in the distance, pricing has trended upward for the past 6 months and will likely continue.
- Prices expect to trend toward $32.00 or higher by the end of the year and procuring in Q2 2023 is likely to yield lower costs for compliance entities.
Figure 1. CCA Daily Transactions (Spot Contract - January 2022 to Present)
|
|
2022 Average Daily Price: $28.93 per ton |
2023 Average Daily Price: $29.40 per ton |
2022 Highest Daily Price: $33.50 per ton (January 1st, 2022) |
2023 Highest Daily Price: $31.16 per ton (April 27th, 2023) |
Questions? Contact our team for more information: environmental@aegis-hedging.com
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