1 million California carbon allowances trade
One million California carbon allowances exchanged hands over the course of a very busy week of trading.
The high volume in trading is likely a result of the current low price of California carbon allowances.
California carbon allowances for delivery in 2013 saw their price dip to $12.10, while future allowances to be delivered in 2016 saw slightly higher prices of $12.60 each.
The fact that 2016 allowances are trading in such high volumes, after this past August auction saw the 2016 California carbon allowances sell out for the first time, signals the confidence that regulated businesses have in the future of the market.
This week, the California Air Resources Board also announced that it will be issuing 600,000 carbon offset credits for use in the state compliance market.
Businesses can buy carbon offsets, which represent one metric ton of carbon dioxide emission reductions, to account for up to 8% of their annual emissions.
Should these companies take full advantage of carbon offsets, there is a potential demand for over 200 million carbon offsets by 2020.
However, the ARB has only approved a few project types to generate compliance-grade offsets – Forestry, Ozone Depleting Substances, and Agriculture Methane Capture.
As a result, there is a predicted shortfall in the supply of carbon offsets, by as much as 67% according to one American Carbon Registry study.
Although this first round of carbon offsets were produced from ODS projects, market analysts predict that Forest carbon projects will need to supply the majority of carbon offsets, since woodlands store millions of tons of carbon.
Forest carbon projects allow landowners to create revenue by preserving the property in its natural state instead of relying on traditional timbering to cover general maintenance costs.