California carbon allowance price steady

California carbon allowances to be delivered in 2013 saw prices remain steady from the previous week, closing at $12.10.


Businesses that will be required to purchase California carbon allowances to account for their annual emissions have shown interest in the future vintage 2016 CCAs.


With these companies taking carbon prices into their long term business models, they are eager to acquire enough California carbon allowances to comply with the new regulations.


However, to keep the price of California carbon allowances from becoming unmanageable, the state’s Air Resources Board (ARB) included a provision in their market design to allow businesses to purchase carbon offset credits, which represent 1 ton of carbon dioxide removed from the atmosphere.


The ARB will allow carbon offset credits to be used to account for up to 8% of a regulated business’ annual emissions, creating the potential demand for over 200 million carbon credits by 2020.


However, only a few project types have been approved by the ARB to generate carbon credits.


This week the ARB issued the first 600,000 California carbon offsets that were produced from a project that destroys Ozone Depleting Substances (ODS) that can be very harmful if allowed to leak into the atmosphere.


Forest carbon projects are another ARB-approved project type and will supply a large portion of the carbon offset demand.


Forest carbon projects reward landowners for managing their properties sustainably and keeping them in their natural forested state.


With only a few project types eligible to generate carbon offsets, the American Carbon Registry published a report demonstrating that the carbon offset supply could face a shortfall of 67% by 2020.