US: First mine methane capture credits sold to American company

A Canadian company who received the first mine methane capture credits completed a sale of its 80,766 offsets to an American company for under $9.00/tCO2e on Tuesday, according to a company spokeswoman.

Biothermica Coal Carbon, an offset developer, was issued 80,766 offsets on 25 February (see EDCM 25 February 2015). The credits were among the first credits issued from the protocol. Verdeo McElroy, an offset developer, was also issued credits at the same issuance date.

Guy Drouin, the company president, said the deal was agreed in mid-2014 and completed after the issuance of credits. He declined to reveal the company who purchased the credits, but he added it was an American company. He said the credits were sold as California carbon offsets with a three-year invalidation period (CCO8).

“We didn’t want to take the market risk,” he said. “We decided to fix the price some time in 2014.”

Vitol was the listing entity on the project with the Air Resources Board, the cap-and-trade regulator. The company, which operates as a fuel supplier in California, emitted more than 231,654tCO2e from fuel sales in 2013.

According to a press release, Biothermica sold the 80,766 credits for Canadian $860,000, or roughly US $672,934. The price quoted would value the individual offsets at $8.33/tCO2e, or roughly $1.37/tCO2e under the current spot market for California carbon offsets. Drouin said the price was closer to $8.59/tCO2e.

The spot CCO8 contract was valued between $9.70-10.00/tCO2e on Tuesday. A CCO8 with a June delivery was valued at $9.50-9.95/tCO2e, according to brokers.

A trader from a trading house said the lower price could be explained by a deal completed prior to issuance and when prices were lower. Offsets sold before issuance can be cheaper because they carry more risk for the buyer.

Fuel suppliers, who joined the programme in January, are seen as the biggest buyers of offset credits, because the sector has a large enough compliance obligation to make it financially attractive. Fuel suppliers can also mitigate the risk associated with the credits.

Offset credits can be used by companies to cover up to 8% of their compliance obligation. The credits, however, can be invalidated for up to eight years after being issued unless a second verification is done or the seller insures the offsets, creating a so-called golden CCO. Dan X. McGraw