October 5, 2014 by Rahul Rana
CaliforniaCarbon.info, October 6, 2014: An econometric forecast of California carbon allowances (CCA) prices through 2020, produced by analysts at CaliforniaCarbon.info, suggests that the market will be oversupplied through 2020 and that prices for the primary instrument of compliance in California’s pioneering emissions trading program will remain close to the defined floor.
The econometric model uses a two-pronged approach to forecast sectoral emissions and CCA prices: a macro-economic model assesses the impact of various Gross State Product scenarios; and a bottom-up micro-economic model considers possible industrial growth rates at the level of the individual sector. The model finds that even if the Allowance Price Containment Reserve is not triggered (which is the most probable scenario based on the forecast price range in the baseline analyses), the annual supply of CCAs will exceed demand until the end of 2018, while the accumulated surplus will continue to keep the market long at the end of 2020 by well over 100 million tons.
The model also predicts that the Golden State’s emissions will be in the region of 360 million tons by 2020, with most of the emissions coming from the transportation fuels sector, even as emissions from this sector decrease over time. The model also considers the impacts of complementary policies and other demand mitigating factors such as the usage of offsets and carbon leakages. The final price forecasted considering all factors influencing demand and supply is around $16.50 in 2020.
CaliforniaCarbon.info has recently released an interactive and multi-functional web-based tool, the PricePad v1.0. PricePad presents the econometric model in an interactive and user-friendly interface, and allows the user to customise new scenarios by changing the various individual parameters used in the forecast. PricePad also provides users with access to the model spreadsheet, from which users can alter the assumptions and numerical parameters. The service is accessible to Premium Plus subscribers, although all other users are invited to sample the product for free for a limited time period.
CaliforniaCarbon.info will be hosting a webinar on Monday, October 13, during which the workings of the econometric model, and the finer points of the PricePad, will be presented to attendees. Attendance is free for Premium and Premium PLUS subscribers, and available to other users for a small fee. For more details on the webinar, follow this link: http://californiacarbon.info/events?event_id_1=174
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