California compliance entities saw emissions drop by 3.3% in 2013, with a bulk of the reductions coming from power imported into the state, roughly meeting the expectations of market participants prior to the release.
According to data from the California regulator, the first compliance entities accounted for 145m tCO2e of the 348m tCO2e total covered emissions, a decline of just over 3% from the 150m tCO2e reported in 2012. Overall covered emissions, which includes some entities not currently regulated, dropped by 2% in 2013.
Quebec, which officially linked with California’s cap-and-trade programme in January, posted 19.4mtCO2e in 2013. Quebec does not have public data for 2012 emissions. Quebec and California’s total emissions are 164.4mtCO2e for 2013, or roughly 19m below the 184m Vintage 2013 allowances in circulation, according to ARB data.
Market participants said California carbon allowances were not active after the release of the data, because traders had expected emissions to decline slightly in 2013 despite a prolonged drought that cut into the state’s hydroelectric generation.
“This is in line with what most people expected and presumably priced into the market,” a trader from a utility said.
Imported power dropped 5.3m tCO2e to settle at 35.7m tCO2e in 2013, a decline of 13% from 41m tCO2e in 2012. The declines came as imported power dropped by 6TWh in 2013, according to data from the California Energy Almanac.
Southern California Edison, Pacific Gas and Electric, Powerex and Sempra Generation all saw significant declines in imported power emissions, according to ARB’s data. Those entities combined to decrease emissions by 6.8m tCO2e while the Los Angeles Department of Water and Power and San Diego Gas and Electric saw slight increases in imported power.
A power trader attributed the declines in imported power to generation sold as specified, which typically has a lower emissions rate, and power outages at out-of-state plants.
In-state power emissions dropped to 33m tCO2e, a 2.7% decline from 33.9m tCO2e.
No default on compliance obligations
All companies regulated under the cap-and-trade programme met their first partial compliance deadline on Monday, an ARB spokesman confirmed Tuesday.
Compliance entities were required to surrender 30% of their 2013 emissions on Monday. Those emissions could be covered by Vintage 2013 allowances or valid offsets, but companies could not use Vintage 2014, 2015 or 2016 allowances per ARB rules.
Based on Tuesday’s data, more than 43.5m allowances and offsets had to be surrendered Monday.
Most traders did not think compliance entities would struggle to meet that deadline because of the oversupply of allowances in the current market and the number of credits allocated for free to utilities and industrial companies ( see EDCM 3 November 2014 ).
The spokesman said more detailed statistics would be released in the coming weeks about the first compliance period. According to ARB data, more than 90m Vintage 2013 allowances, or roughly 50% of all Vintage 2013 in circulation, were sitting in compliance accounts as of 2 October.
“This is another milestone demonstrating an economy-wide cap-and-trade programme can be successfully implemented as part of California’s comprehensive strategy for climate change mitigation,” the ARB spokesman said.
It is unclear how many allowances were used during the first compliance period. Only 28,000 offsets had been retired as of 2 October.
The next compliance period will be 2 November 2015. Compliance entities will have to surrender allowances or offsets to cover 70% of their 2013 emissions and all of their 2014 emissions on that date. Dan X. McGraw