On the agenda: ARB to announce 2016 floor price

The Air Resources Board (ARB) is expected to announce a $12.73/tCO2e floor price for 2016 this afternoon.

The ARB, the cap-and-trade regulator, increases the floor price by 5% plus the Consumer Price Index (CPI), or inflation, every year. The regulator is required by regulation to release the floor price on the first business day in December.

The current floor price is $12.10/tCO2e, but it is expected to rise $0.63/tCO2e next year to $12.73/tCO2e after CPI rose 0.2% year on year. The $12.73/tCO2e floor price roughly falls in line with expectations of market participants.

Traders had been expecting the floor price to fall between $12.70-12.75/tCO2e because of the sluggish CPI number this year. The inflation rate never rose above 0.2% in any one month in 2015, meaning the projected floor price never rose above $12.73/tCO2e.

The secondary market starts to converge with the anticipated floor price for the next year in the final few months of the year, according to Intercontinental Exchange (ICE) data. The final 2014 auction also settled on the 2015 floor price.

The most recent California auction also settled at $12.73/tCO2e for the Vintage 2015 allowances. dan.mcgraw@icis.com