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US: California issues 433,000 carbon offsets

12 Feb 2014 22:58:59 | edcm

The Air Resources Board (ARB) issued over 433,000 ARB offset credits (ARBOCs) to new and revised projects on Wednesday, bringing the total approved amount to almost 5.4m.

All of the credits can be invalidated up to eight year by ARB, which regulates the state’s cap-and-trade programme.

The majority of the issuance, or 339,000 credits, came from new projects − two livestock digesters and two ozone depleting substances (ODS). Projects under the ODS protocol capture and destroy greenhouse gas (GHG) emissions, primarily from the refrigerant sector. Livestock digesters are installed at swine or cattle farms and destroy methane and other GHG emissions.

The largest share of the newly-issued offsets, or almost 328,000 ARBOCs, came from the ODS protocol, which has minted more than 3.64m of the 5.37 approved offsets so far.

An additional 94,000 credits were issued for projects previously approved.

Market participants said carbon offsets are seeing little demand on the market as their discount to California carbon allowances (CCAs) is too low and amid concerns about invalidation ( see EDCM 20 November 2013 ). Unlike the other emission trading systems, buyers assume the invalidation risk of offsets in California unless a company buys a so-called “Golden CCO,” which is insured by the offset developer against invalidation risk.

Offset developers, however, said the market could grow this year as compliance entities look for cheaper ways to comply and carbon credit offsets three (CCO3), or offsets which can be invalidated up to three years from the issuance date, start to circulate. The invalidation risk of offsets can be reduced to three years from eight if the project is verified by a second verification company within the first three years.

Market participants said demand could rise for offsets if CCA prices rise and the market expands to include more compliance entities with a large appetite for risk. Developers note there is not enough current supply to meet the 8% limit for compliance entities. Offsets are currently trading in the $8-10/tCO2e range, brokers said. Dan X. McGraw

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