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News Update
- California AB-9 targets 2025 deadline for GHG market updates. California’s Assembly Committee on Natural Resources approved AB-9 on April 25th, requiring legislators to evaluate and implement potential changes to the state’s GHG cap-and-trade program by January 1st, 2025. ARB’s evaluation of the program includes examining methods of adjusting the allowance supply in respect to auction clearing prices, the rules for banking allowances, and the use of offsets.
- California AB-1305 passes, requires voluntary offset disclosures. The state Assembly Judiciary Committee passed AB-1305 by vote of 8-2 on April 25th. The bill requires buyers and sellers of voluntary carbon offsets to publicly disclose information on their websites about the projects and registries they purchase from. Sellers of voluntary offsets must display information regarding accountability if a project is not completed or does not meet the projected emission reductions or removal benefits. Buyers must display similar information if making claims of, or like, a net-zero emissions achievement. Failure to disclose offset information or providing wrong information carries a penalty of $5,000 per day with a maximum penalty of $500,000.
- Canada to improve reduction tracking and modeling of regulatory effects. The Canadian Office of the Auditor General (OAG) recommended that Environment and Climate Change Canada (ECCC) make improvements to their modeling of regulatory effects on GHG emissions. The OAG’s audit report states the ECCC did not fully realize to what extent individual regulations were contributing to the nation achieving its 2030 reduction target. The audit also, among other issues, found lapses in accounting for large sources of oil and gas methane emissions that were not covered by regulations. The ECCC says it welcomes OAG recommendations and is actively taking steps to address some of the issues found in the audit.
- WCI market volume up 11% in Q1 2023. The linked California and Quebec cap-and-trade programs saw nearly 109 million tons of allowance and offsets transfers in the first quarter of 2023. This is 11 million more than Q1 2022, but 19 million or 15% less than Q4 2022.
- California snowfall sets record, hydroelectricity expected to rise. California’s snowfall in 2022-2023 winter reached levels 4 times higher than the historical average. Increased snowfall should lead to higher water reservoir levels after melting and increase hydroelectric output for the state as temperatures rise.
Offsets Update
- ARB has issued an overall 401,363 carbon offsets in March 2023.
- 191,672 issued on April 11th
- 209,691 issued on April 25th
- 84,104 of the CCOs issued are listed as DEBs
- 247 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 |
March '23 |
25,485,683 |
8,871,730 |
199,396,539 |
- |
11,259,687 |
- |
245,013,594 |
April '23 |
25,538,455 |
8,913,603 |
199,544,228 |
- |
11,418,671 |
- |
245,414,957 |
Delta |
52,722 |
41,873 |
147,689 |
- |
158,984 |
- |
401,363 |
Quebec:
Issuance
|
ODS
|
Landfills
|
Covered Manure Storage
|
Active Coal Mines
|
Active Underground Coal Mines
|
Total
|
March '23
|
-
|
-
|
- |
- |
- |
1,311,034
|
April '23
|
-
|
-
|
- |
- |
- |
1,311,034
|
Delta
|
-
|
- |
- |
- |
- |
-
|
Offsets Pricing
Offsets Pricing as of May 10th, 2023:
- California Carbon Offset (CCO3) - (3 years of Buyer Liability): $18.15
- California Carbon Offset (CCO3 - DEB) - (3 years of Buyer Liability): $25.00
- Golden California Carbon Offset (CCOs) – Spot Delivery: $18.80
- Golden California Carbon Offset (CCOs- DEB) – Spot Delivery: $25.00
ARB Schedule
- 5/17/2023 - May 2023 Joint Auction #35
- 5/25/2023 - May 2023 Joint Auction #35 Summary Results
- 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 May 10th, 2023: $30.43 – Vintage 2023, April 2023 Delivery
- Allowance pricing as of May 10th, 2023: $31.50 – Vintage 2023, December 2023 Delivery
- The average daily price in April 2023: $30.41 – Vintage 2023
Market Update
- The average daily price in April 2023 was $30.41 which was a 3.22% increase compared to the average daily price of $29.46 in March 2023.
- The upcoming auction will take place on May 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 13.3 million shares on May 3rd, 2023 compared to 13.5 million carbon allowances on April 10th, 2023 which was a 1.48% decrease. Furthermore, we are now 5 million or 28.1% off the all-time high of 18.5 million California allowances as of February 2022.
- The market expects to continue recovering in 2023 after hitting price highs in 2021. Continued pressure from Gov. Newsom and the legislature has led ARB to make additional adjustments to environmental programs to reach the state’s ambitious GHG emissions targets, and we have seen this reflected through the year. While the all-time high of $35.20 seen in November 2021 is still in the distance, pricing has already surpassed $30.00 at the beginning of April and has continued trending upward.
- Prices expected to trend toward $32 or higher by the end of the year and procuring in Q2 ’23 is likely to yield lower costs for compliance entities.
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: $29.20 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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