New Compliance Association Unites California Offset Project Developers

Stemming from the Navigating the American Carbon World conference in 2012, the newly formed Compliance Offset Developers Association (CODA) seeks to unite project developers and to support an effective cap-and-trade program in California. CODA provides a platform for sharing technical knowledge and ideas as they pertain to the Air Resources Board.

1 July 2013 | The latest cap-and-trade development to come out of California is reflective of the Golden State’s reputation as the prevailing leader in domestic climate policy. The newly-minted Compliance Offset Developers Association (CODA) is an alliance of six project developers – A-GAS RemTec, Camco, Coolgas, Inc, Diversified Pure Chem, Environmental Credit Corp, and Terrapass – working together with regulators and other offset stakeholders to support an effective statewide offset market. 

At the 10^th anniversary of the Navigating the American Carbon World conference, North America’s largest carbon event, a number of players in California’s offset market recognized the benefits of exchanging ideas and technical know-how related to the Air Resources Board (ARB). Acknowledging ARB’s impact, their own strength in numbers, and a growing need to respond to future technical processes on a collaborative basis, project developers set out to create a forum for technical discussion and knowledge-sharing regarding ARB protocols and the generation of compliance offsets. 

As reported by CODA, policies regulating offsets, transparency, and the timely review of project documents are critical aspects for project developers in generating and issuing offsets. An anticipated 200 million offsets will be required by California’s cap-and-trade program by 2020, further highlighting the need for increased capacity through collective efforts such as CODA, according to the group’s members. 

Intended to function from a procedural and technical perspective rather than from a political stance, CODA aims to connect project developers to better understand the rules and regulations of the offset market. According to Derek Six, CEO of Environmental Credit Corp, “the project developers involved in CODA face a wide variety of common issues.” The association was formed out of a “desire to see a marketplace that is effective, practical, and efficient,” adds Six. 

While CODA is currently only open to project developers that have at least three registered projects under ozone-depleting substances, forestry, or livestock protocols, there may be potential for including project developers involved in other project types in the future. 

In reference to prospective protocols such as rice cultivation, coal mine methane, and REDD+, Charles Purshouse, CODA’s elected chairperson, stated, “If approved, we would welcome members developing those projects.” However, for the time being, the “focus is on the drawing board,” as lobbying for REDD+ and other potential protocols “doesn’t fall under the group’s remit,” adds Purshouse. 

CODA holds bi-weekly meetings and discussions to formulate strategy. Companies interested in joining CODA can email nick@terrapass.com. 

UPDATE 2-California carbon permits sell for record high price

Tue May 21, 2013 4:22pm EDT

(Adds details on market, quotes from consultant and broker)

By Rory Carroll
SAN FRANCISCO May 21 (Reuters) - California's largest greenhouse gas-emitting businesses paid $14 per metric tonne (1.1 tons) for the right to release carbon this year, a record-high price that narrowly beat market expectations, the state said on Tuesday.
The state sold all of the more than 14.5 million allowances it offered to cover carbon emissions in 2013 at its third permit auction on May 16.
Allowances that cover emissions in 2016, which were also for sale, saw lighter demand, with buyers snapping up 7.5 million of the more than 9.5 million permits that were offered.
Those allowances cleared at the program's auction floor price of $10.71 per tonne.
"The auction results show increased maturity from program participants and from the market and confirm the good health of the carbon market in California," said Emilie Mazzacurati, managing director of climate consultancy Four Twenty Seven.
Following the release of the results, California carbon allowances in the secondary market were trading at $14.50 a tonne in large volumes on the IntercontinentalExchange, one carbon broker said on Tuesday.
Had allowances cleared the auction at a price higher than $14 a tonne, market speculators would have been more inclined to buy allowances, he said.
"The market looks pretty flat," he said. "I don't see the results as having a dramatic impact either way."

REVENUE RAISED
The state's three auctions have so far raised $256 million for the state and $556 million for its largest utility companies, which are required to use the money to protect ratepayers from higher energy costs.
The state is currently drafting a spending plan for the revenue it takes in from the program, which is required by law to be spent on efforts to drive down the state's emissions of heat-trapping greenhouse gas emissions.
Last week, California Governor Jerry Brown announced that he would lend the $500 million the state expects to raise during the program's early years to help balance the state's budget under the condition that the money be paid back eventually with interest.

LAWSUITS
California's quarterly allowance auctions are not without controversy.
The auctions are currently the subject of two lawsuits, one by the California Chamber of Commerce, California's largest business group, and one by the Pacific Legal Foundation, a conservative legal group that filed the suit on behalf of a handful of affected California businesses and residents.
Both lawsuits argue that the California Air Resources Board, the program's regulator, is violating state law by raising revenue by selling permits. (Reporting By Rory Carroll; Editing by Peter Galloway, Bernard Orr)

Taking Stock of Climate Change Efforts: As European Carbon Market Falters, CA Expands Cap and Trade to Canada

Unlike many environmental problems, which can be addressed at a local or regional scale, climate change is inherently global in nature: greenhouse gas (“GHG”) emissions from any source join with historic and contemporary GHG emissions from other sources globally to contribute to the total store of GHGs in the atmosphere.  The global nature of the issue is a key reason why, from the onset of climate change efforts, policymakers and environmentalists have attempted to address GHG emissions at an international scale.

Failure of Kyoto Protocol Leaves Void in International Climate Change Efforts
The primary effort to address climate change at an international scale is the Kyoto Protocol, adopted in 1997 in connection with the United Nations Framework Convention on Climate Change.  Unfortunately, through the first “commitment period” (which ended in 2012), the Kyoto Protocol has not achieved expectations, as the two largest GHG emitting countries—China and the United States—never signed the Protocol.  The sense that the Kyoto Protocol will ultimately fail as a climate program was compounded by the inability of negotiators at the 2009 Copenhagen Summit to agree on a framework for climate change mitigation for the period following the end of the first commitment period in 2012.  Since Copenhagen, climate policymakers have looked for a regional model to lead the way to a new international climate framework.

European Trading System in Disarray
With the Kyoto Protocol faltering, hopes have been pinned on the European Union’s climate change program—the Emissions Trading Scheme (“ETS”).  These hopes are rapidly fading.  In the past few months, the ETS has experience significant growing pains, with the price of carbon allowances having dropped from about € 25 per ton in 2008 to below € 3 per ton in April.  Although reductions in GHG emissions in the EU are still on pace to meet the target of the Europe 2020 Strategy (20% lower than 1990 emissions), most analysts believe that carbon prices at this level are too low to spur investment.  The severe drop in carbon allowance prices has led many, including The Economist, to question whether the ETS has any future.

California Expanding its Cap and Trade Program to Canadian Province of Quebec
In the midst of Europe’s difficulties, California has moved forward to link its cap and trade system with that of the Canadian Province of Quebec.
On April 19, 2013, the California Air Resources Board (“CARB”) approved a plan to formally link with Quebec beginning on January 1, 2014.  Linkage will create a relatively seamless cap and trade market, with compliance instruments—carbon allowances and offset credits—being interchangeable in the two systems.  California and Quebec will also hold joint auctions of carbon allowances.
The linkage of the California and Quebec cap and trade systems is a modest first step towards a robust North American cap and trade system.  Although Quebec is Canada’s largest province by size and has a population of about eight million people (second only to Ontario among provinces), its economy is not nearly as large as that of California: Quebec has a GDP of about $300 billion compared to California’s GDP of about $1.9 trillion.  About 80 entities (referred to as “establishments” in Quebec’s program) are subject to Quebec’s cap and trade regulations.  In comparison, California’s cap and trade program covers about 350 entities representing 600 facilities.  Also, Quebec’s allowable GHG emissions are substantially lower than those of California: Quebec’s cap starts at about 23.2 million tons of GHG emissions (CO₂e) in 2013 and ends at about 54.7 million tons in 2020, while California’s cap starts at about 162 million tons of GHG emissions (CO₂e) in 2013 and ends at about 334 million tons in 2020.  (Note that the increase reflects the addition of transportation fuels and natural gas in 2015; over time, the cap will go down — become more stringent —for all covered sectors.)

Testing the New Model
CARB recognizes that a key aspect of linkage with Quebec is that it may establish a new template for climate change efforts globally.  As stated by CARB in its response to comments: “[T]he experience gained now in demonstrating that two separate governments, in two separate countries, with two separate economies, can effectively partner to put a price on carbon and reduce greenhouse gas emissions is invaluable to accelerating national and international efforts to address climate change.”
However, California’s cap and trade program is less than a year old and already several lawsuits have been filed challenging various aspects of the program.  So the jury is still out as to whether California’s program will succeed.  Moreover, the addition of Quebec will make the cap and trade program more complicated (and mistake prone) without offering a meaningful test run that could be expected of a larger, more complex regional program.
Nonetheless, given the problems with the Kyoto Protocol and the ETS, the need for a successful model is certainly there, and California and Quebec may be the start of such a model.  In the interim, California and Quebec will undoubtedly have to iron out a number of issues (ranging from the integrity of offsets to the logistics of operating a linked market in two languages).
In the event that the California-Quebec market sets the tone for a revamped European system or a new Kyoto, monitoring the developments of the North American effort will be a key task for businesses and governments (not only within California and Quebec, but in other states and provinces as well), as they may be incorporated into the system at some point in the future.

Gov. Brown wants to grab $500 million in cap-and-trade proceeds for general fund

 

Molly Peterson | May 15th, 2013, 10:22am

David McNew/Getty Images

California's carbon-credit market has raised $500 million in revenue, which Governor Brown wants to borrow to balance general fund expenses.

Gov. Jerry Brown plans to borrow $500 million from a program to fight climate change, as part of his effort to balance the budget - a move that has stirred up clean air advocates.

California has begun auctioning off carbon emission permits as part of its cap-and-trade program. They're basically licenses to pollute that businesses can buy to offset their emissions. The money -- $500 million collected so far -- goes into the Greenhouse Gas Reduction Fund.

Brown wants to use that money to cover the state's general fund expenses, and pay it back later, with interest. He argues that it's okay to borrow the money because greenhouse gas reduction programs are just getting off the ground.

The Sierra Club, the Greenlining Institute and other environmental groups say the permit fees can only be spent on programs that reduce greenhouse gases.

They argue that some of the money the governor wants to borrow was going to fund clean air programs in low-income and minority neighborhoods near refineries and other sources of pollution.

The governor did sign a law last year meant to protect carbon fees from being diverted for general fund use. But SB 535 doesn't stop him from borrowing the money.

California Considering 25 Projects for Carbon Offset Credits

 

By Lynn Doan - Mar 8, 2013 6:27 PM ET

             

California, the second-largest carbon-polluting state in the U.S. behind Texas, will decide whether to award its first carbon offset credits for 25 projects designed to cut greenhouse-gas emissions.
The candidates for offset credits include a project to improve forest management practices to avoid emissions related to timber harvesting and several to destroy biogas at farms, according to a list posted on the state Air Resources Board’s website. All of the projects must be reviewed by a certified “offset verifier” and then by the air board itself before being deemed eligible.
Should all of the projects be approved, they’ll generate as many as 3 million offset credits to be used under California’s carbon cap-and-trade program, the only system of its kind in the U.S. and the second-largest in the world, behind the European Union’s program. The state defeated a lawsuit in January that claimed the offsets, which companies can use to cover as much as 8 percent of their emissions, aren’t new efforts to cut carbon and would occur without investments.
The projects listed by the air board today will be held to “rigorous verification standards,” Mary D. Nichols, the agency’s chairman, said in a statement posted on its website. “We have determined that every single California offset credit allowed into the program represents a real ton of greenhouse gas reductions.”

Contracts Rising

Contracts based on California offset credits, each allowing the release of one metric ton of carbon, have risen 25 cents, or 2.1 percent, in the past month, according to data compiled by environmental broker Evolution Markets based in White Plains, New York. “Golden” offsets, which come with a seller guarantee to replace any invalidated credits, were unchanged at $12 a ton today, according to Evolution.
The projects would be awarded “early action” credits, which the state agreed to consider to generate an initial supply of offsets for the market. To be eligible, they must cut emissions in the U.S. between 2005 and 2014 and be listed in a preexisting registry designed to meet the state’s early action criteria, among other things.
Emissions-reduction projects that begin in 2015 and beyond must meet a different set of state standards.

Carbon Allowances

Under the cap-and-trade program, California established a pool of carbon allowances, each permitting the release of one metric ton of carbon. That pool is designed to shrink through 2020 to cut statewide emissions by roughly 15 percent. Companies over their emissions limits can buy allowances from those below the cap, as well as a limited number of offset credits, to meet their compliance obligations.
Futures based on 2013 California carbon allowances, which also allow for the release of one metric ton of carbon each, climbed 5 cents to settle at $14.55 a ton today, according to Atlanta-based IntercontinentalExchange Inc. (ICE)
California’s cap-and-trade system will eventually regulate 85 percent of greenhouse-gas emissions released in the state and cover all industries, including power generation, oil refining and transportation. A similar program in the U.S. Northeast, known as the Regional Greenhouse Gas Initiative, regulates emissions from power plants only.

Europe Glut

In Europe, an oversupply of offset credits has added to pressure on European Union carbon futures, already trading 49 percent below a year ago because of a glut of allowances due to the recession.
Kathrin Goretzki, an analyst at Unicredit Bank AG in Munich, estimated Jan. 29 that the EU market may have been oversupplied by much as 1.6 billion metric tons of permits by the end of 2012.
The United Nations Clean Development Mechanism has approved 6,619 offset projects in developing countries, more than half of which are in China, according to the UN’s website. More than 2,000 of these projects have supplied 1.26 billion tons of “Certified Emission Reduction” offsets for emissions-trading systems participating in the Kyoto Protocol, UN data compiled by Bloomberg show.
California’s air resources board may take “several weeks” to issue its first offset credits, according to the agency’s statement.
To contact the reporter on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net

Brown wants California's carbon market to link with Quebec's

Brown wants California's carbon market to link with Quebec's

By Dale Kasler
dkasler@sacbee.com

By Dale Kasler The Sacramento Bee

Last modified: 2013-04-10T15:06:43Z

Published: Wednesday, Apr. 10, 2013 - 12:00 am | Page 6B

 

Starting next January, California's cap-and-trade carbon market probably won't be operating on its own anymore.

Gov. Jerry Brown on Monday gave state regulators the green light to link California's carbon market with a similar market in the Canadian province of Quebec. The California Air Resources Board is expected to vote April 19 on whether to link with Quebec.

If the two become linked, California companies could buy carbon credits from Quebec and vice versa. "The allowances will be completely fungible," said David Clegern, spokesman for the Air Resources Board.

In addition, "this obviously is a way to have an impact (on climate change) beyond what happens in California," he said.

California regulators had hoped that their carbon market would be part of a Western states consortium. But while California's market debuted last fall, no other state has committed to running a market yet; Quebec is the only Canadian province to join in.

The market is the centerpiece of AB 32, the state's 7-year-old global warming law.

Several hundred big industrial polluters are required to reduce their carbon emissions below a certain level – the "cap." If they don't, they have to buy emissions allowances to compensate.
The total cap shrinks slightly each year, which is supposed to result in a gradual reduction in emissions.

Read more here: http://www.sacbee.com/2013/04/10/5329469/brown-wants-californias-carbon.html#storylink=cpy

California's carbon market may succeed where others have failed

California's carbon market may succeed where others have failed

by Brendon Bosworth

Most weekdays, a long line of rail cars delivers thick slabs of steel to a factory about 40 miles east of Los Angeles. Deep in the bowels of California Steel Industries, the slabs are toasted until they glow white-hot and then rolled into thin sheets used to make shipping containers, metal roofing and car wheels.

The plant churns out more than 2 million tons of flat rolled steel each year, using enormous amounts of natural gas and electricity and releasing over 190,000 metric tons of climate-altering carbon dioxide annually. Now, California Steel and many other businesses have to pay for their carbon emissions under California's new cap-and-trade law, the first of its kind in the nation.

Last November, the company participated in the state's first auction of carbon allowances, purchasing an undisclosed number, each worth one metric ton of carbon dioxide and selling for $10.09. The online auction went fairly smoothly, says Brett Guge, executive vice president of finance and administration at the company. But for Guge, the long-term challenge is finding ways to meet California's ambitious greenhouse-gas reduction targets (down to 1990 levels by 2020) while remaining profitable.

The Golden State forged ahead with the carbon dioxide cap-and-trade program despite the U.S. Senate's 2010 failure to pass a national program. Given the state's history of implementing environmental regulations that later become national policy, a successful cap-and-trade system could serve as a federal model. If cap-and-trade in California "fails, or is perceived to have failed, then that could be the nail in the coffin for cap-and-trade consideration as a policy instrument in Washington," says Robert Stavins, a Harvard professor who studies climate policy.

While its overall impact on U.S. emissions won't be major, the California experiment makes several improvements to existing cap-and-trade strategies. It covers more sources of pollution than the five-year-old Regional Greenhouse Gas Initiative in the Northeastern U.S., which applies only to power plants. The European Union started the world's largest carbon cap-and-trade program in 2005, but it had a significant flaw: the initial stage of the program gave away too many free credits, resulting in some power companies raking in windfall profits by raising electricity prices even though they didn't have to pay for their allowances. It also contributed to low prices for carbon allowances, which provides scant incentive to cut emissions.

Mary Nichols, head of the California Air Resources Board, the agency steering the state program, is confident that California's effort will be different. The program covers 360 businesses, which represent about 600 facilities that each release more than 25,000 metric tons yearly -- enough to put a big dent in California's total carbon output. The EU's difficulty, Nichols notes, was that authorities didn't have an accurate measure of the total quantity of emissions initially. California, though, has had a greenhouse-gas reporting requirement in place since 2008.

"We knew (what polluters) were actually putting into the atmosphere," says Nichols. "That gave us the assurance that if we started a (cap-and-trade) program … we would be able to implement it in a way that would not cause the kinds of problems that occurred in Europe."

Fraud could be another obstacle, but experts agree the state is equipped to keep that to a minimum. The Air Resources Board uses third-party verifiers to check reported emissions, and has a system to track allowances and prove their authenticity. Companies that fail to supply enough credits to cover their emissions are fined by having to purchase four times the number of outstanding allowances. While not flawless, the program is unlikely to suffer from market manipulation and fraud, according to an analysis by the University of California, Los Angeles.

But even if the cap-and-trade system works as intended, its economic impacts are a big unknown. Because of its many regulations, high electricity rates and taxes, California is already a costly place to do business.

Guge is worried there won't be a feasible way to reduce the carbon dioxide output of his company's gas-powered furnaces, which account for 75 percent of the plant's total releases. Without reductions, his company will have to pay for more allowances as the cap tightens, but it's reluctant to pass those increased costs on to customers because that might put it at a competitive disadvantage.

Proponents of cap-and-trade hope the system will drive innovations, with new companies popping up to provide emissions-curbing breakthroughs. In late January, the Sacramento-based firm Clean Tech Advocates launched to do just that. It works to help clean tech developers get state funding, generated from the carbon credit auctions, for their projects, and its consultants help companies reduce emissions. Founder Patrick Leathers says that, over time, the auctions will bring in "billions of dollars," which will boost the state's clean tech industry and result in carbon-cutting solutions for companies dealing with cap-and-trade. Environmentalists -- and businesses -- are hoping he's right.

Carbon Markey with Quebec

carbon market with Quebec

• Stikeman Elliott LLP
• Canada, USA   
• April 17 2013

 

Last week, California Governor Jerry Brown approved the link of the state’s carbon market with Quebec. The next step is for California’s Air Resources Board to consider changes to its cap-and-trade program that will allow it to link with Quebec. The Board is scheduled to meet on April 19th. A spokesman has stated that the Board intends to continue to work on all necessary additional steps to ensure California’s efforts to link with Quebec are successful.

If approved by the Board, California and Quebec intend to implement the link between their carbon markets on January 1, 2014. Once linked, they will hold joint auctions of carbon emission allowances which can be used for compliance in either jurisdiction. In the interim, the two jurisdictions will test their auction platforms and trading systems for compatibility.

Both governments are hopeful that linking the carbon markets will improve liquidity for carbon allowances by increasing the pool of permits and companies trading them, as well as encourage expanded investments in low-carbon technologies.

New Lawsuit Opposes California's Cap-and-Trade Carbon Market

April 16, 2013, 1:19 pm • Posted by Laird Harrison

California's quest to reduce global warming hit another obstacle on Tuesday. A conservative legal group filed suit to block California's new cap-and-trade carbon market.

(Craig Miller/Climate Watch)

The Pacific Legal Foundation alleged that the market's charge for carbon emissions violates California law because it constitutes a tax, and taxes in California require approval by a two-third majority in both houses of the state Legislature.

“California’s cap and trade regulation was developed and is being implemented in full accord with all state laws," Dave Clegern of the California Air Resources Board (abbreviated as both CARB and ARB) said in an email response to the lawsuit. "ARB will continue moving forward with this important program to fight climate change and develop a clean energy future for California.”

The cap-and-trade market is the centerpiece of California's effort to reduce emissions of gases that cause global warming. It launched Nov. 14.

Cap and trade functions like a stock exchange for greenhouse gas emissions . Businesses, including oil refiners and manufacturers, have to buy permits for each ton of carbon they emit and can then resell these permits.

The California Chamber of Commerce has also sued to block the cap-and-trade program.
Both lawsuits challenge the way the law behind the program is being implemented.
They say ARB had no authority to auction off carbon allowances, raising billions of dollars for the state.

“PLF’s lawsuit holds CARB’s feet to the fire because CARB cannot be allowed to siphon billions of dollars from California taxpayers in violation of the California Constitution,” said Ted Hadzi-Antich, a lawyer for the foundation, in a press release. “CARB must obey the law, just as the rest of us are required to do.”

Based in Sacramento, the Pacific Legal Foundation frequently challenges government regulations. For example, it sought to remove wildlife from endangered species lists.

California carbon market launches, permits priced below expectations

(Reuters) - California's largest greenhouse gas emitting businesses paid $10.09 per metric tonne (1.1 ton) for the right to release carbon, raising almost $300 million for the cash-strapped state and its energy companies in its first-ever carbon permit auction,

The permit price was below market expectations despite strong demand from utility companies, manufacturers and oil refineries participating in the auction, market sources said.

Ahead of the California Air Resources Board announcement on Monday, traders, brokers and analysts had predicted a clearing price in the range of $11.75 to $12.50 a tonne.

"The clearing price was below expectations but total participation was higher than most expected from vintage 2013," said Jeff King, managing director of environmental markets at Scotiabank.
All of the 23.1 million permits offered at the auction to cover 2013 emissions were bought, raising $233 million. The money will be given to the state's utility companies, which must use it to protect ratepayers.

The California carbon auction is a key component of the state's cap-and-trade program, the first of its kind in the country. State officials hope it will serve as a model for other states and the federal government.

The program is part of a broader effort to reduce Californian emissions to 1990 levels by 2020 -- about a 15 percent reduction, compared to business-as-usual forecasts.

The permit sale was held on November 14 and announced Monday. It is a crucial step ahead of the cap-and-trade program's official start on January 1, 2013.

"By putting a price on carbon, we can break our unhealthy dependence on fossil fuels and move at full speed toward a clean energy future," Mary Nichols, chairwoman of the board, said in a statement.
"That means new jobs, cleaner water and air -- and a working model for other states, and the nation, to use as we gear up to fight climate change and make our economy more competitive and resilient."

LAWSUIT LOOMS
Compliance entities -- companies directly affected by the state's carbon caps -- bought around 97 percent of the allowances. Financial institutions bought the remaining 3 percent, the board said.
The state also auctioned 39.5 million permits that cover 2015 emissions but only sold about 5.6 million allowances.

Demand for those permits was weaker than expected, and those allowances cleared at $10.00/t, the lowest price allowed under the program's rules.

The $55 million raised by the sale of those allowances will be deposited into the state's newly minted Air Pollution Control Fund.

The money from the permit auction must be used to fund clean energy projects and energy efficiency programs, although details on how exactly the money should be spent needs to be hammered out by the state legislature.

Nichols said she wasn't surprised that not all of the 2015 allowances were sold given the large number of permits offered.

On the eve of last week's auction, the state's largest business group, the California Chamber of Commerce, filed a lawsuit challenging the state's right to sell allowances and keep the profits.
Although the state is giving 90 percent of the program's allowances away for free to covered businesses at the outset of the program, the group said all of the permits should be handed out freely, which would negate the need for the state's quarterly permit auctions.

Nichols told reporters on a conference call the lawsuit had "no impact" on the auction.
During its first two-year phase, the cap-and-trade program will cover 350 businesses representing 600 facilities, including power plants, cement-making facilities and oil refineries.

Banks and other financial institutions are also allowed to participate in the auction, although there are limits to the number of permits any one entity can hold.

Trade of CCA futures contracts, which have been traded on the IntercontinentalExchange since August 2011, were quiet in the run-up to the auction results.

Prior to the announcement, CCAs for 2013 emissions were bid at $10.25 with an asking price of $14, a wider than usual spread, with no trades seen, one trader said.

Ahead of the auction results announcement, traders and brokers said they expected the secondary market price for allowances to quickly align with the auction clearing price.
(Reporting By Rory Carroll; Editing by Bob Burgdorfer and David Gregorio)

UPDATE 2-California's carbon permit auction beats expectations

Feb 22 (Reuters) - California's largest greenhouse gas-emitting businesses paid $13.62 per metric tonne (1.1 tons) for the right to release carbon, narrowly beating market expectations in the state's second carbon permit auction.

At the state-run auction, California managed to sell all of the nearly 13 million carbon permits it offered to cover emissions for this year and less than half of the roughly 9.6 million permits it offered to cover 2016 emissions, the California Air Resources Board (ARB) said on Friday.
Allowances to cover 2016 emissions cleared the auction at the lowest allowable price under the program's rules, $10.71 per tonne amid weak demand, the ARB said.

The quarterly allowance auctions are a critical component of the state's cap-and-trade program, the first of its kind in the United States. It uses market mechanisms to reward companies that figure out ways to reduce pollution below levels set by the government, and serves as the backbone of California's effort to cut emissions back to 1990 levels by 2020.

California hopes its climate change program will serve as a model for other states and the federal government.

Environmentalists and market participants hailed the auction results as a success.
"Today's results represent another successful chapter in California's story of cutting pollution and moving towards a clean energy economy," said Derek Walker, an associate vice president at the Environmental Defense Fund.

"The results also demonstrate that this is a strong, viable carbon market," he said.
Jeff King, managing director of environmental markets for Scotiabank, also hailed the results, noting that the clearing price was more closely correlated with the secondary market price for allowances than it was at the program's inaugural auction in November.

STRONG DEMAND
King said that strong demand for the 2013 vintage allowances was a sign that the new market is developing well.

"The 2.47 times subscription rate is a bullish indicator for future auctions," he said.
At the first auction, demand only barely outstripped supply.

Emilie Mazzacurati, managing director of climate consulting and research firm Four Twenty Seven, said she expects participation to grow again at the next auction, which is scheduled for May 16.
"I think a number of compliance entities that had waited out the first auction have now jumped on the bandwagon and that the financial sector is taking more of an interest in the market."

Banks and other financial institutions upped their participation at this auction, purchasing almost 12 percent of the current year allowances offered, up from about 3 percent in November.

REVENUE
The sale of permits raised about $84 million for the state, an ARB spokesman said, money that will deposited into a new state-run greenhouse gas reduction account.

That money will be added to the nearly $54 million it raised from the sale of allowances at the November auction.

California regulators are currently weighing how to allocate those funds and are holding a series of forums around the state to receive input from the public on how it should be spent.
The next public workshops are scheduled to take place in Sacramento on Monday and in Los Angeles on Wednesday.

California Governor Jerry Brown is expected to release his plan for spending the revenue to the legislature in May, the ARB spokesman said.

But not everyone agrees that California should be raising money from the sale of carbon allowances.
In November, the California Chamber of Commerce sued the ARB, claiming it lacked the legal right to raise revenue through the auctions.

The state's largest business group said the carbon permits should be handed out to businesses freely.
Last week, the National Association of Manufacturers, the nation's largest manufacturing trade group, said it would join the lawsuit on the side of the California Chamber of Commerce.

Environmental organizations including the EDF and the Natural Resources Defense Council have intervened in the suit on the side of the state, saying the auctions are necessary to price carbon correctly and raise revenue to support clean energy.

A hearing in Superior Court in Sacramento County is scheduled for May 31.

California's second carbon auction gets higher price

By Dale Kasler
dkasler@sacbee.com

By Dale Kasler The Sacramento Bee

Last modified: 2013-02-25T16:54:32Z

Published: Saturday, Feb. 23, 2013 - 12:00 am | Page 6B

Last Modified: Monday, Feb. 25, 2013 - 8:54 am

Copyright 2013 The Sacramento Bee. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

California's fledgling cap-and-trade carbon market is becoming more familiar to the companies that have to participate in it – and that's showing up in the price they're paying for the right to pollute.
Carbon emission allowances sold for $13.62 a ton this week during the state's second-ever carbon auction, the California Air Resources Board reported Friday.

The price at Tuesday's auction was considerably higher than the first state-run sale last November, when carbon sold for barely above the $10 legal minimum.

The cap-and-trade market is the centerpiece of AB 32, California's effort to curtail greenhouse gases and global warming.

Experts say the companies that have to buy emissions allowances are becoming more comfortable with the process, resulting in more aggressive bidding.

The latest results "demonstrate that this is a strong, viable carbon market," said Derek Walker, associate vice president at the Environmental Defense Fund, in a prepared statement.
The cap-and-trade system puts a ceiling on the annual carbon emissions by hundreds of industrial polluters; the ceiling declines slightly each year. Companies get most of their emissions allowances for free, but they have to buy some of them at auction.

Those companies that are polluting too much can either scale back their emissions or buy allowances, either from the state or on the open market. State officials say this market approach to environmental regulation gives companies flexibility and will breed innovation.

Still, big business lobbyists call the program a heavy cost burden. The California Chamber of Commerce is suing the state, arguing that all the carbon credits should be distributed for free.
In the latest auction, all 12.9 million credits – each good for emitting a ton of carbon this year – sold out.

The auction for credits that can be used to emit carbon in 2016 was less robust – just 4.4 million credits sold, at the minimum price of $10.71 a ton.

In all, the auction raised $223 million. The Legislature has declared that the proceeds must be spent on environmental purposes, with a focus on improving air quality.

© Copyright The Sacramento Bee. All rights reserved.

Read more here: http://www.sacbee.com/2013/02/23/5210552/californias-second-carbon-auction.html#storylink=cpy

What California’s Carbon Market Is Doing Right

The second auction of carbon permits for the world’s second-largest carbon market beat analysts’ expectations--but can it drive real environmental results?

 

 

The California Air Resources Board, which currently runs the world’s second largest carbon market, confirmed Friday that permits to emit greenhouse gases for the rest of 2013 closed at $13.60 a ton, $3.53 up from last year, $2.90 above the minimum price, and $1.30 up from analysts’ peg. These results stand in stark contrast to the world’s largest market, the European Emissions Trading System, where prices plunged to less than $4 a ton this month. In other words, California’s cap and trade system is working: Companies are buying carbon credits at market rates to make sure they aren’t penalized by the state for emissions they produce later.

"Of the $176 million generated from the sale of current vintage allowances, just under $140 million will be returned to the state’s electric utilities for the exclusive benefit of their customers," wrote Alex Jackson of the Natural Resources Defense Council. "For the millions of California households that draw power from one of the state’s three large electric investor-owned utilities--PG&E, Southern California Edison, and SDG&E--that will take the form of a historic climate dividend."

For the millions of California households that draw power from one of the state’s three large electric investor-owned utilities, that will take the form of a historic climate dividend

The good news came amid some embarrassing news that a trading "glitch" in the first auction, last November, led to the utility Southern California Edison erroneously putting in 72% of all bids in the auction.

That said, environmental groups lauded the successful auction last week, which will show up in the pockets of Californians.

A-GAS INTERNATIONAL EXPANDS ITS PRESENCE IN AMERICA

LEADING REFRIGERANTS SUPPLIER A-GAS INTERNATIONAL COMPLETES STRATEGIC ACQUISITION OF KEY INDEPENDENT US REFRIGERANTS SUPPLIER AND DISTRIBUTOR, COOLGAS

Bristol-based A-Gas International (or“the Group”), one of the world’s largest independent suppliers of refrigerants, associated environmental services, and speciality gases and chemicals, has completed the acquisition of Houston, Texas based Coolgas Inc. (“Coolgas”), a leading independent supplier and distributor of refrigerants to the US market. The terms of the transaction were not disclosed.

The transaction represents the fifth strategic acquisition completed by A-Gas so far in 2012, and forms part of the Group’s acquisitive growth strategy which is being executed both in the UK and internationally. The enlarged group will have a turnover of c. £130m and 237 employees.

Founded in 1994 by Jesse Combs, Coolgas has grown over the past 18 years to become one of the leading independent distributors of refrigerants in the US. Coolgas’ “refrigerants made simple” philosophy reflects the focus on customer service that has enabled it to grow first to a regional and then to a national player. Coolgas has recently commissioned a new refrigerant storage and packaging facility in Houston and has distribution centres in California, Utah, Arizona, Indiana, Michigan, Maryland and Georgia ensuring that Coolgas is close to its customers wherever they are located.

In recent years Coolgas has also become an EPA registered reclaimer of refrigerants and a project developer for the generation of carbon offsets on the California Climate Action Reserve exchange. These capabilities enable Coolgas to manage the lifecycle of Ozone Depleting Substances (ODS) and substances with high Global Warming Potential (GWP) to safeguard the environment.

The acquisition builds on A-Gas’acquisition of Ohio based refrigerant reclaimer and halocarbon management specialist RemTec International in July 2012. Coolgas provides a strong strategic fit, bringing a strong brand and complementary footprint that will accelerate refrigerants sales growth. Further the reclaim and carbon credits businesses extend A-Gas’ existing operations in the US Environmental Services market which is already well established in the UK and Europe.

The acquisition of Coolgas follows on from the successful acquisitions not only of RemTec International in July 2012 but also of Australian based Technochem in March 2012 and SA Rural in May 2012, and UK based A-Zone Technologies in April 2012.

Commenting on the acquisition:

John Rutley, Executive Chairman and founder of A-Gas International said:
Jesse Combs and his management team have built a great business in the US refrigerant sector and we are delighted to add it to our rapidly expanding presence in this important market. The fit with our recently acquired business, RemTec, is perfect and allows us to offer a full range of products and services to our customers in the world’s largest refrigerant market.

Jon Masters, Regional Managing Director of A-Gas International said:

The acquisition of Coolgas will significantly strengthen our position as the leading independent global supplier of refrigerants at a time when regulatory changes are providing increasing opportunities for reclamation and recycling of used refrigerants using our market leading technology developed in the UK. We look forward to supporting the Coolgas management team and workforce in continuing to provide outstanding service to its customers.

Jesse Combs, CEO of Coolgas said:

I feel honoured that A-Gas saw Coolgas as a strategic fit and entry point into the US refrigerants’ distribution business. Our team of professionals have a customer service mind-set that I believe sets Coolgas apart from the rest of the industry. I have the upmost confidence that the A-Gas team will support and grow upon our "refrigerants made simple" philosophy for many years to come.

About A-Gas International

A-Gas is an international group of companies with headquarters in Bristol, UK. A-Gas is a market leader in the supply of refrigerants within its core territories in the U.K., South Africa, and Australia, and has state of the art storage, blending, packaging and reclamation facilities in Bristol, Cape Town, and Melbourne. The company also has marketing and distribution centres in Singapore, Thailand, China and Mexico. In the US, A-Gas has a Performance Chemicals business located in Doylestown, Pennsylvania; RemTec International, a refrigerant reclaimer and halocarbon management specialist located in Bowling Green, Ohio; and now Coolgas, headquartered in Houston, Texas. For more information, visit www.agas.com

About Coolgas

Coolgas Inc. was started in 1994 as a distributor of refrigerant gases. Through a continual focus on customer service embodied by its “refrigerants made simple” philosophy it has gained customers across the United States and grown to become one of the leading independent distributors of refrigerants. Coolgas supplies a full product range from essential use CFCs through to the most recent HFC blends. Coolgas also supplies in a wide variety of formats from the smallest auto aftermarket disposable cans through to bulk tankers for industrial customers. Coolgas is an EPA approved refrigerant reclaimer. The Coolgas, Inc. headquarters are located 40 miles north of Houston, Texas. For more information visit www.coolgas.com

California carbon twice as expensive as European

The cost of carbon in California has risen sharply while the equivalent in the European Emissions Trading System has so far gained little from yesterday’s long-awaited reform proposals

London, 26 July 2012 – A reduction in regulatory uncertainty in California, and concern about a nuclear power outage, have helped to push the price of a carbon allowance in the US’ most populous state to more than double that in the much longer-established European Union Emissions Trading System.

The value of a California Carbon Allowance (CCA) for delivery in December 2012 closed at $19.50 per metric ton of CO2 equivalent (EUR16.04/tCO2) on 24 July, the highest closing price of the year so far. The price for European Union Allowances (EUAs) for delivery in December 2012 closed at EUR7.20/tCO2 on the same day.

The much higher price in California may be surprising to Europeans, given perceptions about American reluctance to take action on climate change. Ironically, the California scheme was almost derailed earlier this year by legal action taken by an environmental action group (the Association of Irritated Residents) who insisted that the scheme was not strict enough.

The price of EUAs has remained low despite the European Commission’s release yesterday of its proposal for changes to auctioning volumes in Phase III of the EU ETS, which begins in 2013. These changes, if approved by both Parliament and the Council, would delay some of the auctioning volume originally intended for the early years of Phase III, into the later years. The changes were proposed by the European Commission in response to widespread criticism that the price in the EU ETS is too low to promote the necessary investments in clean energy.

In the long term, Bloomberg New Energy Finance expects prices in both the Californian and EU ETS to rise significantly, since the emission reduction targets in both parts of the world for the period beyond 2020 are likely to continue to strengthen. At the moment the firm’s base case forecast for the spot price of an allowance in 2020 in both markets is the same, at EUR45/tCO2 ($55/tCO2). The fact that the forecasts are the same is purely coincidental and belies significant structural differences in the two markets; the EU ETS has access to the Kyoto market for international credits whereas California does not; and the largest sector in the EU ETS is the power sector while transportation is the largest emitter in the California market.

Matthew Cowie, head of carbon market research at Bloomberg New Energy Finance, commented, “While it appears that Europe has the political will to give the EU ETS more teeth in the long term, the process of fixing the problems continues to suffer delays. A month ago most market participants thought that changes to the Auctioning Regulation could be in place by the end of 2012, but most commentators now expect that this will take well into 2013 to accomplish. This market needs both ambition and structural stability in order to regain its lost importance.”

Michel Di Capua, head of North American research at Bloomberg New Energy Finance, commented, “After several failed attempts to introduce cap-and-trade at the national level, there’s a widespread belief that carbon markets are dead in North America. Not so. We are on the verge of seeing the emergence of a meaningful tradable market that over the long run will transform California’s power, industrial, and transport sectors. The business community should take note; this market will impact some of the country’s largest utilities and some of the world’s biggest oil and gas players, among others.”

Futures contracts for the California market have been trading since 2011. Its underlying spot market is due to begin in 2013. The EU ETS saw the first futures trading in 2003, and the start of spot trading in 2005.

For further information:
Matthew Cowie
Bloomberg New Energy Finance
+44 20 3216 4780
mcowie2@bloomberg.net

 

Carbon Credits Provide Cash Incentives and Environmental Benefits for the Recovery and Destruction of CFCs

Used CFCs found in any condition, or mixed with other refrigerants can be turned into cash with the additional benefit of protecting the environment!    

The California Climate Action Reserve (CAR) has formally released a Destruction of Ozone Depleting Substances (ODS) Protocol, that provides a standardized approach for quantifying and monitoring Green House Gas (GHG) reductions, from projects that destroy ODS with high global warming potential. Specifically, the CAR Protocol version 2.0 provides incentives for the destruction of R-11, R-12, R-13, R-113, R-114 and R-115, with the caveat that these gases were previously used in refrigerant applications, or are from virgin stockpiles. Other CFCs recovered from foam building insulation and from appliance insulation are also eligible. The protocol is available at the following link: http://www.climateactionreserve.org/how/protocols/adopted/ods/current/

“The current market value of these offset credits not only covers all the costs of destruction, but also provides cash incentives to contractors and end users who are willing to recover these refrigerants and send them to an approved recycling facility that is recognized by CAR as a site that can convert these CFCs to verified carbon credits. “

For more information contact RemTec today or visit our website www.remtec.net

From the Carbon-California Desk

09.13.12
Study Highlights California Carbon Offset Supply Shortage

American Carbon Registry releases offset supply analysis for California carbon market, projecting 29% shortage by 2015, 67% shortage by 2020.

A report released today by the American Carbon Registry (ACR) points to a significant shortage of offsets in the California carbon market. Offset demand in a California cap-and-trade market is expected to reach just over 200 million metric tons co2 equivalent (MMTCO2e) by 2020. To date, the regulators in California have only adopted four protocols for compliance use – US ODS, Livestock Methane, Forestry and Urban Forestry.

Based on the four Compliance and Early Action Protocols adopted, the analysis projects a shortage of 29%, or 7.6 MMTCO2e, in the first compliance period (CP1) rising to 67%, or 134 MMTCO2e, in the third compliance period (CP3). As is currently the case in the pre-compliance market, US ODS and Forestry projects are forecasted to provide the majority of supply to the market.

Forecast Cumulative ARB Offset Supply vs. Potential Offset Demand (2012-2020)*

The analysis looked at currently adopted protocols and considered the addition of the following protocols: Coal Mine Methane (CMM), Low-bleed Pneumatic Valves, Rice Management and Fertilizer Management. Despite their inclusion in the ACR study, ARB made statements in June indicating they are no longer considering pneumatics as an eligible project type.

ACR anticipates a majority of the 7.6 MMTCO2e short in CP1 would addressed by the adoption Pneumatics (5 MMTCO2e). Based on ARB's statements, these credits will not be available for compliance use, and credits from CMM and Rice Management protocols will still be insufficient to make up for the shortfall. If pneumatics are in fact "off the table" for California, compliance offset supply appears to remain short in CP1, and CMM early action is the only supply option with enough potential capacity to address this shortfall.

If the three aforementioned protocols were adopted in 2013 by California, the report states it will reduce the 2020 market short from 134 MMTCO2e to 70 MMTCO2e. Discounting for lack of supply from pneumatic projects, this shortfall is more likely to be 96 MMTOCO2e by 2020, and even larger amount of offsets needed to satisfy demand.

Forecast Offset Supply: Current Compliance Protocols + Rice, CMM, Pneumatics, Fertilizer*

The analysis does not model the potential for credits from Reduced Emissions from Deforestation and Forest Degradation (REDD). Under the regulation, California has stated they will allow regulated entities to surrender credits from countries with high rates of deforestation, i.e. specific states within Brazil, Indonesia and Mexico. The credits are generated from protecting forested lands from deforestation, one of the largest sources (20-25%) of greenhouse gas emissions, globally.

Credits generated from nested REDD projects are expected to be large. However, California has restricted the quantity the market can absorb to 25% (of the 8% limit) each compliance period, or just over 50 MMTCO2e (2013-2020).

ARB can also consider a host of other protocols including Mexican-based ODS, N2O abatement, Organic Waste Digestion, amongst others, which ACR did not include in their analysis.
If you have any questions regarding offsets, or the California carbon market in general, please contact Evolution Markets' US Carbon Markets team at: +1 415.963.9137 or +1 914.323.0265.
(*: source: "Compliance Offset Supply Forecast", September 2012, Winrock International, American Carbon Registry)

CCAs jump 7 pct as nuclear power plant to stay shut

SAN FRANCISCO, June 21 | Thu Jun 21, 2012 6:48pm EDT

SAN FRANCISCO, June 21 (Reuters Point Carbon) - California carbon allowances (CCAs) for delivery in 2013 closed at $16.75 per tonne on Thursday, up $1.10 from one week ago on a

growing belief that the shutdown of a California nuclear power plant will boost carbon emissions due to higher fossil fuel use.

The bustling carbon market saw 155,000 CCA forwards clear on the IntercontinentalExchange (ICE) this week, with 85,000 of the permits trading on Thursday, the busiest single day for the market since April 20.

A deal for 5,000 CCAs at $17.60 per tonne on Thursday marked the highest price for the benchmark contract since November 14.

Profit-taking quickly brought the price back below $17/tonne, market sources said.

A flurry of $20 call options that cleared on ICE Thursday underlined the market's bullish sentiment, as participants paid premiums of between $2 and $2.50 for the right to purchase a total of 160,000 CCAs next year.

"People are protecting themselves against the price going above $22, which is a very bullish play," one market source said.

Traders and brokers agreed that news that there was no timeline for the restart of the San Onofre nuclear power plant was the primary driver of prices this week.

The plant, which generates 8 percent of the electricity used in the state, has been closed since January when a small radiation leak was discovered.

At a meeting in Orange County in southern California this week, federal regulators investigating the leak described the problem with one of the unit's steam generators as "serious and significant."

Southern California Edison, the plant's operator, could not say when San Onofre would begin producing electricity again, although it has said it will not be back online this summer.

The market is responding to the possibility that the plant could be offline during 2013, the program's first compliance year, sources said.

SCE, an investor-owned utility, has one of the largest compliance obligations under California's future carbon trading program.

Initial reports from an ongoing investigation have pinned the blame on the testing and assembly of the generator, which was made by Mitsubishi Heavy Industries.

No trades were reported this week in the market for Regional Greenhouse Gas Initiative (RGGI) allowances.

The benchmark 2012 contract was bid at $1.92 with an asking price of $1.95 in the over-the-counter market, unchanged from one week ago.

California eyes dividends, deficit cuts from cap-and-trade

Feb 9 (Reuters) - Revenue raised by California's greenhouse-gas emissions trading program could be distributed to state residents to offset higher fuel costs or used to reduce the state's projected deficits, a state budget watchdog agency said on Thursday.

"Our analysis indicates that such revenues could be returned directly to Californians - such as in the form of a check - as a dividend that would be intended to offset their increased expenditures on goods and services that ultimately would become more expensive as a result of the cap-and-trade program," the Legislative Analyst's Office said in a report.

The report added that revenue from the program, which goes into effect next year, could also be used as part of a "multiyear approach to reduce the state's projected General Fund deficit."

"The availability of these revenues could allow the state to avoid other actions, such as cutting governmental programs or increasing state revenues, that could slow the state's economy," the report said.

The report comes as California prepares to implement its Global Warming Solutions Act enacted in 2006. Commonly referred to as AB 32, the law established the goal of reducing greenhouse gas emissions in the most populous U.S. state to 1990 levels by 2020.

To meet that target, California will establish a so-called cap-and-trade program that issues allowances to companies that emit carbon dioxide and other greenhouse gases at facilities such as power plants, refineries and factories and that permits the allowances to be traded.

Revenue from the program is expected to vary annually, from less than $1 billion to nearly $14 billion, according to the Legislative Analyst's Office.

Governor Jerry Brown's state budget plan expects the program to generate $1 billion in revenue in the next fiscal year, including $500 million that will be used to fill the state's general fund, which faces a $9.2 billion deficit.

Brown also wants to put cap-and-trade revenue toward other clean-energy, natural resources and other uses, including toward funding a planned statewide high-speed rail network. The Democratic governor put the idea of funding the rail project that way out recently during a television interview, catching lawmakers by surprise.

Legislators from both parties in the Democrat-led legislature have become increasingly concerned about the planned rail network, which is also under attack from Republicans the U.S. Congress and California's Central Valley, where the U.S. government is insisting the network's first line must be built to receive more than $3 billion federal funds.

At issue for California lawmakers are escalating cost projections for the rail project. Its latest estimated cost nears $100 billion, which eclipses its previous estimate of $43 billion as well as the $10 billion in general obligation debt voters approved in 2008 to help build the rail system.

Lawmakers are also concerned that voters are souring on the ambitious rail plan, which is intended to connect California's far-flung metropolitan areas. Nearly two-thirds of voters want lawmakers to put the bond package back on the ballot, and if given another vote on it, 59 percent would reject it, according to findings of Field Poll released in December.

Brown is enthusiastically behind the rail project. He met with U.S. Transportation Secretary Ray LaHood on Thursday and both men affirmed support for it.

After a tour on Wednesday of a Siemens plant in Sacramento, California where the company light-rail car, LaHood said the Obama administration stands behind putting the rail system's first line in the Central Valley to link the cities of Fresno and Bakersfield.

That idea is not going over well in California's legislature, drawing criticism from lawmakers from both parties. While the farming region's flat terrain may be suitable for running high-speed trains, many lawmakers would prefer to start lines in urban areas -- and many would prefer the state not start the project at all given its costs.

Brown's finance department is preparing a report on rail project that will help guide lawmakers in coming months to decide whether California should issue the first set of bonds to finance construction of the project's first leg. (Reporting By Jim Christie; Editing by Bernard Orr)