WCI market: CCAs see modest losses after sell-off

Published 03:39 on July 18, 2015  /  Last updated at 13:28 on July 28, 2015  /  Americas, US  /  No Comments

California carbon prices steadily lost ground over the week amid healthy supply, but losses were modest at 5 cents and the trend was unlikely to be long-lived, traders said.

California carbon prices steadily lost ground over the week amid healthy supply, but losses were modest at 5 cents and the trend was unlikely to be long-lived, traders said.

Front-year CCAs on ICE shed 5 cents for the week after falling 2 cents Thursday to $12.70 on volume of 1.35 million tonnes. The front-month traded down 4 cents week-over-week to $12.62, with 700,000 tonnes changing hands on the same day.

Brokers attributed the recent uptick in activity to spread-based trading, noting that a smattering of market participants appeared to be selling one leg of their contracts and picking up another.

“It’s not necessarily a giant directional move,” said one trader, referring to the high volumes. “Just a lot of cleaning up.”

The trader also noted this week’s burst in activity was short-lived, as ICE volumes were light again on Friday.

“Anything that seemed kind of supportive just kind of died out today,” he said.

The week also saw a drop-off in trading of V2018 CCAs after a surge of activity last week, although volumes for that vintage did get a boost Thursday in sympathy with the front-year. Prices for Jul-15 delivery of that contract were nudged one cent higher week-on-week to $12.31 while Dec-15 dropped by the same amount to $12.38.

Traders thought some market participants appeared to be performing some housekeeping for that vintage as well.

“A lot of those spreads you saw on ICE [last week] were on vintage 2018,” said Anthony D’Agostino, director of emissions markets for RBC. “People might be positioning on their 2018.”

CALIFORNIA BILLS ADVANCE

Just ahead of a month-long recess, California lawmakers this week advanced three pieces of legislation with important implications for California’s emissions market. Those bills are now well-positioned for full votes before the 2015 session concludes in early September.

The Senate committee on environmental quality voted 5-2 to approve an Assembly bill extending the state’s cap-and-trade program indefinitely beyond 2020, referring the law to an appropriations committee – typically one of the final steps before a full floor vote.

A landmark Senate bill that would reduce California’s greenhouse gas emissions to 40% below 1990 levels by 2030 this week passed the state Assembly committee on natural resources on a vote of 6-3. That committee also voted 6-2 to approve a bill raising the state’s renewable portfolio standard to 50% by 2030. Both bills were referred to the Assembly’s appropriations committee ahead of a full vote.

State lawmakers return from summer recess on Aug 17 and have until Sep 11 to vote on the legislation. If approved, they will be submitted for approval by Governor Jerry Brown, a key driver of the initiatives.

Market participants are hopeful the bills will be passed.

“I’m not good at prediction, but I am optimistic,” said Climate Action Reserve president Gary Gero.

“Parties like California want to be able to go the UN [climate talks in December] and talk about this issue,” he said.

By Robert Mullin – news@carbon-pulse.com

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