360,000 California carbon allowances trade
California carbon allowances (CCAs) to be delivered in 2013 continued to move in healthy volumes as over 360,000 traded over the week.
Since May over 4 million 2013 California carbon allowances have exchanged hands on the secondary market.
Prices for California carbon allowances were also up as they closed at $14.65.
For most of this year prices for CCAs have hovered in the $14-15 range, largely reflecting the anticipated cost of electricity in the state.
Large energy suppliers such as Southern California Edison (SCE) and Pacific Gas & Electric are required to account for the emissions associated with their electric generation.
As the summer season heats up and electric demand rises, market analysts expect California carbon allowance prices to increase proportionately.
The permanent closure of the SCE San Onofre nuclear power plant will further strain energy availability, and shift electric generation to fossil fuel combusting facilities.
Since nuclear energy creation does not create any carbon emissions, the increased reliance on coal and natural gas burning power plants will result in the emission of millions of additional tons of carbon dioxide.
SCE will need to purchase extra California carbon allowances to account for their total annual emissions.
However, since California carbon allowances cleared at $14.00 apiece at last May’s quarterly allowance auction, SCE will likely look to purchase carbon offset credits generated from emission reduction programs approved by the state’s Air Resources Board.
Carbon credits are typically sold at a discount to allowances in order to keep the cost of compliance for regulated businesses from skyrocketing.
Regulated companies can purchase carbon credits to account for up to 8% of their emissions, creating the demand for up to 28 million credits between now and 2014.
However, with only a few project protocols-Forestry, Livestock Methane Capture, and the Destruction of Ozone Depleting Substances-approved for use in the market, the supply of available carbon credits will fall well short of demand.
(6/21/13)