Exchange for WCI, California credits to launch next year

Exchange for WCI, California credits to launch next year

A new exchange is getting ready for pre-compliance trading in WCI and AB32 markets.

Next year the Pacific Carbon Exchange is planning to implement a futures market for both Western Climate Initiative (WCI) and AB32 allowances which are slated to begin in 2012.

Emitters seeking have been showing their interest to hedge exposure to California’s future carbon market and the WCI, hoping to buy emission allowances before the program’s scheduled start.

Aaron Singer, co-founder of the start-up environmental commodities exchange noted, “Most entities that will be trading in environmental commodities markets out here have long-term outlooks on planning for their business so there is tremendous interest in starting trading for compliance.”

AB32 is California’s climate change law that aims to reduce greenhouse gas emissions to 1990 levels by 2020 through a cap-and-trade system paired with the WCI.

The WCI is a network between seven US states and four Canadian territories seeking to cut greenhouse gases 15 percent below 2005 levels by 2020, also through an economy-wide cap-and-trade system.

Ballot initiative
Still there is uncertainty about whether the WCI and AB32 will be implemented by 2012.

This uncertainty largely has to do with California’s upcoming November vote on Prop 23 which would drop AB32 until the state unemployment rate drops from its current level of 12 percent to 5.5 percent for a year.

As the largest emitter in the WCI, should California drop out of as a result of Prop 23, other members may fall out as well.

Until this matter is resolved, other members will be reluctant to proceed with their strategies.

REC opportunities
The Pacific Carbon Exchange also plans to offer renewable energy credits (RECs) and launch a new market for energy efficiency credits.

These RECs will be geared toward utilities that must conform to California’s renewable portfolio standard (RPS), which requires energy companies to acquire 33 percent of their electricity from renewable energy sources by 2020.

A partnership with the California Public Utilities Commission as well as the Air Resources Board will serve to allow utilities to comply with the RPS through the creation of a market for energy efficiency credits.

China business
The Pacific Carbon Exchange is also seeking to link up with Chinese environmental commodities markets, recently announcing a partnership with the Shanghai Environment and Energy Exchange to expand carbon and greentech markets.

Singer hopes that carbon allowances and offset credits will be exchangeable amongst both national trading systems in the future.

The Shanghai exchange in cooperation with the Pacific Carbon Exchange will provide certified emissions reductions (CERs) to both the California and WCI markets.

A small amount of CERs will be allowed for compliance with the WCI and AB32.

The Pacific Carbon Exchange is also engaging the Shanghai stage to generate a market for energy efficiency credits in the Chinese province, where the booming building sector will offer a great market for energy efficiency technology.