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Clearing price in ARB November auction expected to fall: Survey

November 15, 2013 by CaliforniaCarbon.info

CaliforniaCarbon.info, 15 November 2013: If historical trends and a recent survey of mart participants are anything to go by, the clearing price of California Carbon Allowances in the November auction is expected to be lower than the that seen in the previous auction. The ARB will offer over 16.6 million CCAs of 2013 vintage and 9.56 million CCAs of 2016 vintage on 19 November 2013 during the fifth auction under the state’s cap-and-trade scheme.

Auction Trends

The ARB will offer over 16.6 million emission allowances of 2013 vintage and over 9.56 million allowances of 2016 vintage. The ARB has so far sold over 64.4 million 2013 vintage allowances at an average price of $12.56 per allowance over the four auctions held so far. The board has also auctioned 38.24 million 2016 vintage allowances at an average price of $10.84 per allowance. During the first auction 39.45 million allowances of 2015 vintage were offered against with only 5.576 million allowances were auctioned. The board has so far raised $1.064 billion in revenue from the four auctions.

Price Reaction in Secondary Market

Following the previous auction on 16 August 2013, the prices of CCAs listed on the InterContinental Exchange dropped noticeably. The decline in prices was much more prominent for the 2013 vintage allowances compared to the 2016 vintage allowances.

Price Expectation for November Auction

The average price of 2013 vintage allowances with delivery dates on December 2013 was $11.96 during the first 10 trading sessions in November. This is about 2% lower than the clearing price of $12.22 realised in the August auction. The price of CCAs at the ICE during the first 10 trading sessions in August ranged between $13.45 and $13.80.

The clearing price of 2016 vintage allowances during the August auction was very close to the price of 2016 vintage allowances with delivery dates on December 2013 during the first 10 trading sessions in August. During the first 10 trading sessions of November, the price range of CCAs with delivery dates in December 2013 was $11.30 to $11.60.

According to a survey conducted by CaliforniaCarbon.info last month, more than a third of the respondents expect the November clearing price to be at or around $12 to $12.20. While a quarter of the respondents expect that the clearing price would be close to the $10.71 floor price. So, more than half of the respondents do not expect the clearing price to the touch the highs of $14 seen during the February and May auctions for the 2013 vintage allowances.

Legal Boost to Auctions

The California Air Resources Board secured yet another major legal backing for the state’s cap-and-trade scheme. The Sacramento Superior County Court ruled that the board is well within its regulatory rights to conduct auctions of the emission allowances.

The court ruled on a petition filed by the Pacific Legal Foundation (PLF) on behalf of a number of compliance entities. The PLF has stated that it does not agree with the decision and will appeal against it in the California Court of Appeal.

For more information about this article, mail to: contact@californiacarbon.info

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