To quickly access the page content, please click on the links below.
News Update
- California ARB considering alternative oil and gas extraction allocations. Based off 2021 data, California Air Resources Board (CARB) found that California-produced crude had a carbon intensity (CI) of 16.4 gCO2e/MJ compared to crude imported into the state with a CI of 11.4 gCO2e/MJ. A study run by UCSB concluded that this was primarily due to the use of thermal enhanced oil recovery (EOR) which nets more recovered oil than non-thermal production by injecting steam produced from fossil gas combustion. Thermal EOR’s output benchmark of 0.0811 compared to non-thermal EOR’s of 0.0076, and majority of the ~80 million allowances for oil and gas extraction being allocated to thermal EOR has led Carb to consider alternative approaches to allocations for oil and gas extraction. CARB discussed modifying the oil and gas benchmarks to just one benchmark and taking comments on that now. CARB did not disclose any numbers on potential new benchmark.
- CARB presents sharper GHG reduction scenarios. CARB presented allowance budget scenarios requiring 48% or 55% reductions in greenhouse gas (GHG) emissions by 2030, alternative to the current mandate of 40% from 1990 levels. The potential targets could cut the final 2030 allowance budgets to 173 million (48%) or 149 million (55%) and remove 115 to 390 million allowances cumulatively.
- Andes deploy first microbial carbon methodology. California tech firm Andes announced its methodology for microorganisms to remove CO2 based on Verra’s methodology for improved agriculture land management (VM0042) and input from the US Department of Agriculture experts. Andes’ methodology uses microorganisms to capture CO2 from the atmosphere and mineralize it in soil thereby storing it effectively for thousands of years.
- EVs make 24% of new California car sales in Q2. Electric vehicles accounted for 24% of the 496,000 new cars sold in California in Q2 2023. According to the California Energy Commission, EVs also made up 24% of the 918,000 new light-duty vehicles in the first half of 2023. California continues to aim for 100% of light-duty vehicles to be ZEVs by 2035 but still expects to share the road conventional-fuel vehicles in the coming years.
- Colorado considering new ZEV rule in October. Colorado regulators will consider setting new emission standards to transition away from combustion engine vehicles. The new ZEV rule would require 82% of light-duty vehicles sold in Colorado to be zero-emissions by 2032. The rule would start with cars with model year 2027 starting at 35% and increasing by 9% each year after. The proposed rule based on California’s existing mandate will go before Colorado’s Air Pollution Control Division in a hearing set for October 18th to 20th.
Workshop Update
Figure 1. CCA Pricing Chart (CARB Workshop Timeline - July 7th to August 1st, 2023):
|
|
|
In the Cap-and-Trade workshop held on July 27th, 2023, California Air Resources Board (CARB) presented considerations for allowance budget scenarios that would require 48% or 55% reductions in greenhouse gas (GHG) emissions by 2030 or maintaining the current 40% reduction from 1990 levels.
A 48% reduction would result in a final 2030 allowance budget of 173 million tons and a 55% reduction would result in a budget of 149 million tons, compared to the current 40% target resulting in a 200 million ton budget. Rajinder Sahota noted that the 48% target in the Scoping Plan was heavily reliant on carbon capture and sequestration (CCS) and direct air capture (DAC) technologies and could anticipate renewable hydrogen volumes climbing 426 times greater than the current levels by 2030.
CARB also stated that approximately 115 million to 390 million allowances would cumulatively need to be removed from the budget to meet the target set by each scenario. Staff also mentioned they are considering removing allowances from the cost-containment and auction and allocation pools to help accelerate reductions. This would adjust annual budgets for 2025-2030 and set a decline path using a constant annual percent change between 2024 and 2030.
Potential pools to retire California Allowances:
|
Potential 2021-2030 Allowance Budgets:
|
|
|
|
Potential Budget Scenarios:
|
|
Offsets Update
- ARB has issued an overall 899,049 carbon offsets in July 2023.
- 119,663 issued on April 11th
- 752,757 issued on April 25th
- 382,491 of the CCOs issued are listed as DEBs
- 252 mln offsets have been issued since inception by ARB and Quebec.
- 1.5 mln Quebec offsets have been issued in total;
California:
Issuance |
ODS |
Livestock |
U.S. Forest |
Urban Forest |
MMC |
Rice Cultivation |
Total |
June '23 |
25,609,288 |
9,024,650 |
202,582,230 |
- |
11,509,297 |
- |
248,725,465 |
July '23 |
25,696,282 |
- |
202,952,850 |
- |
11,926,103 |
- |
250,420,494 |
Delta |
86,994 |
0 |
368,620 |
- |
416,806 |
- |
872,420 |
Quebec:
Issuance
|
ODS
|
Landfills
|
Covered Manure Storage
|
Active Coal Mines
|
Active Underground Coal Mines
|
Total
|
June '23
|
674,777
|
780,275
|
- |
- |
- |
1,455,052
|
July '23
|
691,705
|
789,976
|
- |
- |
- |
1,481,681
|
Delta
|
-
|
144,018 |
- |
- |
- |
26,629
|
Offsets Pricing
Offsets Pricing as of August 8th, 2023:
- California Carbon Offset (CCO3) - (3 years of Buyer Liability): $17.90
- California Carbon Offset (CCO3 - DEB) - (3 years of Buyer Liability): $27.00
- Golden California Carbon Offset (CCOs) – Spot Delivery: $18.40
- Golden California Carbon Offset (CCOs- DEB) – Spot Delivery: $27.50
ARB Schedule
- 8/16/2023 - August 2023 Joint Auction #36
- 8/23/2023 - August 2023 Joint Auction #36 Summary Results
- 11/15/2023 - November 2023 Joint Auction #37
- 11/22/2023 - November 2023 Joint Auction #37 Summary Results
California Carbon Allowances (CCA)
- Allowance pricing as of August 8th, 2023: $36.17 – Vintage 2023, July 2023 Delivery
- Allowance pricing as of August 8th, 2023: $36.95 Vintage 2023, December 2023 Delivery
- The average daily price in July 2023: $31.53 – Vintage 2023
Market Update
- The average daily price in July 2023 was $33.31, which is a 5.65% increase compared to the average daily price of $31.53 in June 2023.
- Prices stayed steady in early July, opening at $32.15 before rising up by 82 cents after CARB announced the July 27th Prices continued to trend upwards by another 72 cents on July 26th, coinciding with the release of the workshop materials which included potential allowance budget cut scenarios, causing CCA prices to reach an all-time high of $36.52 on July 31st after the workshop. December 2023 allowances are trading 23% higher than where they began the year during this market rally.
- Krane Shares Carbon ETFs (both ETFs) held to 11.8 million shares on August 1st, 2023 compared to 11.8 million carbon allowances on July 1st, 2023, revealing little to no change in the carbon futures holdings. Furthermore, we are still 6.7 million or 36.2% off the all-time high of 18.5 million California allowances seen in February 2022.
- The market expects to continue upward in 2023 as prices have trended higher over the calendar year. The recent discussions of alternative budget scenarios during the CARB workshop spurred prices this month, which surpassed the program’s all time high of $35.20 much sooner than anticipated. With the potential allowance budget scenarios still in consideration, the market may continue to see upward movement through the year as increased program stringency becomes a more likely possibility.
Figure 1. CCA Daily Transactions (Spot Contract - January 2022 to Present)
|
|
2022 Average Daily Price: $28.93 per ton |
2023 Average Daily Price: $30.44 per ton |
2022 Highest Daily Price: $33.50 per ton (January 1st, 2022) |
2023 Highest Daily Price: $36.52 per ton (July 31st, 2023) |
Questions? Contact our team for more information: environmental@aegis-hedging.com
CONFIDENTIAL – UNAUTHORIZED THIRD-PARTY DISTRIBUTION PROHIBITED