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US: California regulator praises low speculative trading

26 Feb 2014 00:55:13 | edcm

California cap-and-trade regulator chairwoman said the scarce speculative trading in the state’s carbon market, which traders say is depressing liquidity, is an “encouraging sign” rather than a defect.

“This is not a market that is attracting speculators. We have kept that at a level that is manageable,” ARB chairwoman Mary Nichols said at the Climate Leadership Conference in San Diego, California.

Few speculators have been active in the California carbon market due to low volatility and consensus that the scheme is oversupplied through the first two compliance periods. The large majority of the California carbon allowances (CCAs) auctioned by ARB have been purchased by compliance entities, which can also speculate about the price of California carbon allowances.

In the most recent auction, held on 19 February, companies with no compliance obligations picked up about 15% of the CCAs, the highest amount since the programme’s inception.

Nichols also labelled “encouraging” the latest auction outturn close to the floor price. The auction for Vintage 2014 allowances cleared at $11.48/tonne of CO2 equivalent, a $0.14/tCO2e premium over the $11.34/tCO2e floor ( see EDCM 24 February 2014 ).

“[The result] shows that companies who need allowances are able to get them,” Nichols said. Dan X. McGraw

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