California carbon allowances trade in record volume
California carbon allowances (CCAs) traded in record volumes following the release of summary statistics from the August carbon auction.
Although demand for allowances in the near term was down, as evidenced by the $12.22 settlement price for California carbon allowances to be delivered in 2013, future CCAs for delivery in 2016 were in high demand over the week.
Over 4 million vintage 2016 allowances traded after the results of the auction showed that all 9.5 million 2016 CCAs were sold.
The single day record for volume of allowances was broken when nearly 3 million CCAs exchanged hands.
As the price for allowances continues to climb, businesses facing new emission regulations will look to take advantage of the cost savings of carbon offset credits.
The California carbon market will allow these companies to purchase carbon offset credits to account for up to 8% of their annual emissions, creating the potential demand for over 200 million credits by 2020.
With only four project types approved to supply carbon offset credits to the California market, a significant shortfall is expected, by perhaps as much as 67% in the final compliance period which runs from 2018-2020.
The first 200,000 carbon offset credits eligible for use in the California market were recently issued by the American Carbon Registry.
Forest carbon projects are expected to supply a majority of offset credits since millions of tons of carbon are stored in woodlands across the country.