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US: PG&E files second request for California carbon offsets

20 Mar 2014 17:03:41 | edcm

Pacific Gas & Electric (PG&E), one of the three big investor-owned utilities (IOU), plans to seek carbon offsets to meet its compliance obligation under California’s cap-and-trade programme, it said on Wednesday.

PG&E’s request asks for a minimum of 25,000 offsets that can be delivered over multiple years. As with other IOUs, any potential bidder would have to assume the invalidation risk and have a invalidation period of less than three year because of California Air Resources Board (ARB) regulations for IOUs.

That is because the ARB, the governing body of the state’s cap-and-trade programme, requires IOUs, such as PG&E, to follow a specific set of rules to ensure protection for their electricity consumers. One of those rules requires IOUs to purchase offsets with the seller assuming the risk.

ARB rules require a second company to verify emissions reductions to reduce the standard eight year invalidation period down to three years, turning a CCO8 offset into a so-called CCO3. Buyers also assume the invalidation risk in California unless a contractual agreement has been made prior to the purchase.

PG&E plans to hold an information session on 27 March during the Navigating the American Carbon World conference in San Francisco, California. The winning bids are expected to be picked by 11 June.

Wednesday marks the second time in the past year that PG&E has put a request for offers for carbon offsets. PG&E purchased an undisclosed amount of offsets from ClimeCo, a carbon offset provider, last year.

Market participants said carbon offsets likely would not have a significant impact on the California carbon allowance market, because major compliance entities are not expected to use the full 8% allotment allowed by the ARB.

Compliance entities, including IOUs, have been hesitant to use offsets due to the small discount to California carbon allowance prices, with the latter carrying no invalidation risk. Allowances have been trading in the low-$12.00/tonne of CO2 equivalent (tCO2e) range while offsets are selling between $8.00-10.00/tCO2e.

Southern California Edison, another IOU, is expected to finalize its request for offer for carbon offsets next week ( see EDCM 27 January 2014 ). Dan X. McGraw

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