US: New California offset protocols to be approved this spring

27 January 2014 14:20 Source:ICIS

The California Air Resource Board (ARB) reaffirmed its plans to submit the rice cultivation and coal mine methane offset protocols for approval later this year.

At a recent ARB meeting, officials said the two protocols would go before the agency’s board later this spring, and both could be approved in the later half of 2014. Both protocols have faced delays in the past as environmentalists questioned the validity of the greenhouse gas reductions.

The protocols are not expected to have a significant impact on the market initially due to the relatively low amount of activity in the offset market. Traders said compliance entities are more willing to buy allowances than offsets at this time.

However, market participants said the interest could rise as allowances prices rise and the supply of offsets increase.

Reduction in price

Some market participants believe the inclusion of coal mine methane could eventually lower the price of offsets between $4.00-5.00 (€2.96-3.70)/tonne, making it a more attractive market for compliance entities. Carbon offsets have been selling for $8.00-10.00/tonne recently.

Offset developers do not believe coal mine methane should have a significant impact on price of offsets, because the current supply would not be able to meet the hypothetical demand from compliance entities. Entities are allowed to use offsets for up to 8% of their total compliance.

Rice cultivation is not expected to bring a large number of offsets to California market because of the relatively small amount of financially viable projects. Dan X. McGraw

By Dan X. McGraw