California market demands 200 million carbon offsets

California remains on track to launch its carbon market in January 2013 and plans to hold its first allowance auction this November.

According to the state’s AB32 climate law, companies regulated under the new carbon cap will be allowed to purchase offsets to account for up to 8% of their emission reductions. This will create a demand for over 200 million carbon offsets through 2020.

To date there has been concern about the supply of offset credits, since the California Air Resources Board (ARB) has only approved four project types, including forestry and agriculture, so far.

Foresters in Brazil and Mexico were hopeful that international offsets would be accepted to help meet demand, but ARB chair Mary Nichols insisted that although a small number of credits may be approved for use in 2015 the large majority of offsets will stem from projects in the US.

Quebec is working towards joining California’s market in time for the 2013 launch and expects to release its own market regulations in early summer. However Canadian officials have already been discussing market linkage with the ARB and American carbon offsets will be eligible for use in the Quebec market.