First California carbon offsets issued
The first California carbon offsets (CCOs) for use in the state’s mandatory carbon market were issued by the California Air Resources Board (ARB) this week.
A total of 600,000 California carbon offsets were generated from several projects that destroy Ozone Depleting Substances (ODS) that are typicaly found in refrigerants, and can be very harmful if they are allowed to leak into the atmosphere.
The Climate Action Reserve (CAR) listed four Early Action ODS projects with the ARB, while the American Carbon Registry (ACR) successfully registered the first California carbon offset project developed under the state’s own compliance protocol.
Other approved project types include Forestry and Agriculture Methane Capture.
Forestry projects are expected to provide the majority of California carbon offsets, since woodlands store millions of tons of carbon.
Forest carbon projects offer large landowners the opportunity to conserve their property in its natural forested state while still generating revenue.
Businesses that are regulated under the state’s carbon market will be allowed to use California carbon offsets to account for up to 8% of their total annual emissions.
As the market expands to include the transportation sector, the demand for CCOs could exceed 200 million CCOs by the year 2020.
Companies facing the new emissions rules will look to purchase California carbon offsets to keep their compliance costs down.
Carbon offsets are a vital piece of successful carbon markets, since they keep the cost of carbon allowances from becoming unmanageable.
The ARB has been holding quarterly allowance auctions, where regulated businesses bid to purchase enough allowances to cover every ton of carbon dioxide they emit.
So far almost 160 million allowances have been sold at auction, generating over $1 billion in revenue.
California will use these revenues to fund other emission reducing projects in the state, improve air quality in disadvantaged communities, and offset any increases in electric prices.
Typically, CCOs are sold at a discount to allowance prices which will continue to go up every year as the auction price floor rises, and demand increases.
Currently CCOs are being offered in the $9-10 range depending on project type.