California carbon allowances trading at $14.50
The price for California carbon allowances (CCAs) to be delivered in 2013 remained steady as they closed the week at $14.50 apiece.
California carbon allowances have been trading in the $14-15 range for the past few months.
Over 200,000 California carbon allowances exchanged hands over the week as well.
Pacific Gas & Electric, one of the largest energy utilities in the state, announced that it was temporarily suspending the operation of one of its nuclear plants in response to a leak.
This news comes after Southern California Edison’s decision to permanently shut the San Onofre nuclear plant that provided nearly 8% of the state’s energy supply.
The loss of these nuclear plants, which provide electricity without producing any carbon emissions, will force regulated utilities to ramp up generation at fossil fuel burning facilities, resulting in millions of tons of unexpected carbon emissions.
This in turn will drive demand for California carbon allowances at next month’s CCA auction, where 13.8 million allowances will be put up for sale.
May’s heavily subscribed allowance auction saw 2013 CCAs reach a price of $14 apiece, and generated over $283 million in revenue.
With California carbon allowances going for such a high price, regulated emitters will look to alleviate the cost of complying to the new emission standards by purchasing carbon credits.
Carbon credits are emission reductions that have been developed in accordance with one of the state’s approved project protocols – Forestry, Livestock Methane Capture, and the Destruction of Ozone Depleting Substances.
Companies can buy carbon credits to account for up to 8% of their annual emissions, creating a demand for up to 28 million credits by 2014.
However a study conducted by the American Carbon Registry predicts a significant shortfall in credit supply, by as much as 67% by 2020.