California & Quebec Carbon Cap and Trade Report - April 2024

To quickly access the page content, please click on the links below. 

• News Update
• Offsets Update
• Offsets Pricing
• California Carbon Allowances (CCA)
• ARB Schedule
• Market Update 
• Figure 1. CCA Daily Transactions (Spot Contract - March 2023 to Present)

News Update

• CARB to hold cap-and-trade workshop on April 23. California Air Resources Board (CARB) will host a workshop later this month to discuss potential amendments to the cap-and-trade program. California regulators will review a number of changes, including adjustments to allowance budget scenarios, the 2030 reduction target, and rules for the market and offset program. CARB has proposed removing nearly 264 M allowances from the cumulative 2025-2030 budgets but has yet to disclose if the removals will be applied to the allowance allocation budgets, auction budgets, or allowance price containment reserve (APCR) in order to support a more stringent reduction target. Regulators will also need to decide how the budgets will be shaped post-2030 and update the state’s offset protocols. The workshop is scheduled for April 23, 2024, and staff will accept written feedback through May 8, 2024.
  
  
• Quebec to implement cap-and-trade program changes by December 2024. Regulators in Quebec expect to publish a draft of proposed changes to the province’s cap-and-trade program later this year, as both California and Quebec plan to increase the stringency of their cap-and-trade programs from 2025 to 2030. Quebec is proposing to remove 17 M carbon allowances from the allowance budget to stimulate emissions reductions and also considering adjusting the offset credit usage limit from 8% down to 4%, placing offsets under the program’s emissions cap, and switching to an offset purchase-retirement system ran by the government funded by cap-and-trade revenue.
  
  
• California Senate advances offset bill. California’s state Senate Judiciary Committee voted 9-1 in favor of SB 1036, a bill that would make it unlawful for anyone to issue, certify, advertise, or sell voluntary carbon offsets if they know the offset projects do not actually reduce or remove the greenhouse gas (GHG) emissions in which they claim. Senator Monique Limon (D), the author of the bill, has urged the committee for support to aid consumers of voluntary offset credits, but offset registries, such as the American Carbon Registry (ACR), claim that the language used in the bill is too vague and could harm the market that the bill intends to help make more transparent. The bill now sits before the Senate Appropriations Committee and is set for hearing on April 22, 2024.
  
  
• California-Quebec linkage with Washington bogged by repeal efforts. California and Quebec have agreed to continue exploring cap-and-trade linkage with the state of Washington, but an initiative to repeal the Washington program has impeded linkage efforts. Repeal initiative 2117 would remove language in the Washington’s Climate Commitment Act that established the cap-and-trade program and would prevent similar programs from being implemented in the state in the future. This poses concern for how a larger linked market would perform, as Ontario had briefly linked with California and Quebec in the past before leaving the market due to the province’s emissions trading program being repealed in a similar fashion.
  
  
• Increased snowpack to benefit California Hydropower. Snowpack in California has averaged higher so far in 2024, indicating that hydropower in the state is in position to remain a significant generator in the near-term and help meet the state’s climate goals. As hydropower decreases, natural gas-fired generation often increases, and in turn increases GHG emissions covered by the cap-and-trade program.

Offsets Update

• CARB issued an overall 955,850 carbon offsets in March 2024
• 474,769 issued on March 12th
• 481,081 issued on March 26th   
• 334,701 of the CCOs issued are listed as DEBs
• 260 million offsets have been issued since inception by CARB and Quebec

California:

Quebec:

ARB Schedule

California Carbon Offsets (CCO)

Offsets Pricing as of April 17^th, 2024:

• California Carbon Offset (CCO3) - (3 years of Buyer Liability): $15.28
• California Carbon Offset (CCO3 - DEB) - (3 years of Buyer Liability): $35.46
  
  
• Golden California Carbon Offset (CCO-G) – Spot Delivery: $15.28
• Golden California Carbon Offset (CCO-G DEB) – Spot Delivery: $35.64

California Carbon Allowances (CCA)   

Offsets Pricing as of April 17^th, 2024:      

• Vintage 2024 – Apr. 2024 Delivery:  $38.43
• Vintage 2024 – Dec. 2024 Delivery:  $40.05
• Vintage 2024 Average Daily Price (Mar. 2024):  $38.80

Market Update

• The average daily price in March 2024 was $38.80, a 5.6% decrease compared to the average daily price of $41.09 in February 2024.
  
  
• Prompt allowances saw an overall decline in pricing over a volatile March session. Allowance prices started to sink in the first week, opening the month at $40.78 on the 1^st, before falling to $40.40 over the weekend. Prices continued downward over the first full week, moving from $40.40 to $39.66, losing an average of $0.19 per day. Prices then dropped by another $0.41 ahead of the most volatile week of the month, starting at $39.25 before plummeting to $35.70, the lowest price seen in nearly 7 months, just two days later, and returning up to $38.21 to close the second week. Prices began to recover in the third week after posting another weekend loss, opening at $37.88 before trending back up to $39.26, while prices in the final week saw another weekend retreat, opening at $38.15 before returning down to $38.25 to close the month.
  
  
• Krane Shares Carbon ETFs (both ETFs) held to 9.1 million shares on April 18th, 2024, compared to 8.8 million carbon allowances on March 18th, 2024, a 3.4% increase in the carbon futures holdings. Furthermore, we are still 9.4 million, or 51%, off the all-time high of 18.5 million California allowances seen in February 2022.

Figure 1. CCA Daily Transactions (Spot Contract - Apr. 2023 to Present)

2023 Average Daily Price: $32.88 per ton	2024 Average Daily Price: $39.95 per ton
2023 Highest Daily Price: $39.38 per ton (Dec. 11th, 2023)	2024 Highest Daily Price: $41.92 per ton (Feb. 5th, 2024)

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