California carbon allowances trade at $12
California carbon allowances (CCAs) for use in the state’s compliance market closed the week trading at $12.00.
Prices for California carbon allowances have risen since the end of 2013.
The increase was expected since the floor price for California carbon allowances to be sold at quarterly auctions in 2014 was raised to $11.34.
Regulated businesses that must account for their annual emissions are hoping to purchase CCAs now to bank them for use in future years when prices will be even higher.
So far the California Air Resources Board has sold 117 million California carbon allowances at auction, generating total revenue of $1.3 billion.
These revenues will be used to fund emission reduction projects in the state, invest in clean technology, improve air quality, and offset any increases in electric prices.
As the price for allowances continues to climb, regulated companies will look towards the cost saving provided by carbon offset credits.
Carbon offset credits represent emissions reductions that are achieved by developing a project according to one of the few ARB-approved protocols including Forestry, Ozone Depleting Substances, and Agricultural Methane Capture.
Businesses can purchase carbon offset credits to account for up to 8% of their total emissions, creating the potential demand for 200 million credits by 2020.
However, the ARB has registered less than 5 million carbon offset credits to-date.
A study by the American Carbon Registry forecasts a shortfall in the supply of carbon offset credits by as much as 67% in 2020.
Forest carbon credits are expected to provide the majority of supply to the California market.