It’s that time of year again – when the heavy summer sun illuminates the market’s mid-year performance. While the high-level reports are sunny, the current forecast (and pricing) is partly cloudy as California awaits draft regulation revisions. Across the pond, the market is also in a fog as some companies celebrate their offsetting successes while others rain on the good news parade.
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28 June 2011 It’s that time of year again – when the heavy summer sun illuminates the market’s mid-year performance. While the high-level reports are sunny, the current forecast (and pricing) is partly cloudy as California awaits draft regulation revisions. Across the pond, the market is also in a fog as some companies celebrate their offsetting successes while others rain on the good news parade.
Pricing for offsets deemed eligible for compliance in California recently got a second wind – at least for some credit types. Point Carbon’s weekly newsletter (PDF) reports that bids for compliance-grade credits from the destruction of ozone depleting substances (ODS) topped $8/tCO2e last week, but agricultural methane and forestry tonnes from the Climate Action Reserve (CAR) were bid at $7.25-7.5/tCO2e.
Analysts attribute the latter credits’ lower bids to rumors that the ARB will “discount” ag methane credits and require early action forestry credits to adhere to a stricter protocol. While details of the ARB’s offset treatment are expected to surface in a “15 day notice revision” of the draft regulations sometime this week, Ecosystem Marketplace caught up with CAR’s Gary Gero for his insights.
Regarding the ARB’s thoughts on livestock methane credits under CAR, Gero explained that the ARB has grappled with accounting for biogenic CO2 emissions and therefore reducing the volume of credits from agricultural methane projects.
However, Gero says that CAR and others have discussed with ARB the scientific basis for its credits and calculations. “My understanding is that they now believe that we got the accounting correct and there will be no discount for livestock,” he comments, “but we’ll know for certain when the regulation comes out.”
ARB’s expected treatment of some CAR forestry credits relates to the fact that early versions of CAR’s Forest Project Protocol didn’t have a buffer pool in place. Gero explains that for any project to be in the compliance program, early action or otherwise, it will have to contribute to the buffer pool.
“So it’s not a discount of the forest credits based on some calculation changes,” he says, “but it’s really taking a portion of issued credits and having them also contribute to the buffer pool.”
Elsewhere in this issue, prices are frozen at well below the market average (in 2010, $6/tCO2e) on the Climex platform, where VERs utilizing the VCS standard were auctioned at €1.10/tCO2e. For its unique public tender of ~800,000 tCO2e forestry tonnes from its Mozambique-based Sofala Community Carbon Project, project developer Envirotrade chose not to specify a minimum bid and let the chips fall where they may.
On the regulated front, credit prices began to thaw in the EU market, recovering to €13.02/tCO2e on Monday after falling precipitously when already-low prices triggered traders’ stop-loss thresholds.
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