California carbon hits $17.60

Last week the price for California carbon allowances (CCAs) vaulted as high as $17.60 a piece, the highest price seen since last year.

5,000 CCAs traded over the Intercontinental Exchange at the $17.60 before the market closed with prices at $16.75, still over a $1 increase from the previous week.

The bullish week of trading saw contracts for a total of 155,000 CCAs.

Market analysts believe the boost in price is the result of the continued closure of a California nuclear plant that experienced a leak in its core earlier this year.

Since the nuclear plant supplies around 8% of the state’s electricity without contributing significant emissions, other fossil fuel power plants will be expected to pick up the slack, thereby pushing their emissions closer towards the mandated carbon cap.

With no clear date set for the nuclear plant to resume electricity generation, regulated emitters including major California utilities Pacific Gas & Electric and South California Edison may need to reposition themselves to ensure compliance with the California carbon market guidelines.

These large energy companies may look to purchase additional certified carbon offset credits to meet state reduction targets.

Businesses can meet up to 8% of their compliance obligation by purchasing carbon offset credits, which totals a demand for more than 10 million carbon credits in 2013 alone.