Weekly Posts

First CCA Auction of the Year Clears at Record Price

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California’s first allowance auction of 2024 cleared at a record $41.76/tonne on February 14, the highest sale price to date, eclipsing the previous record of $38.73.

The auction offered 51.2 million 2024 vintage permits, while an additional 7.2 million forward vintage permits were sold at $41/tonne.

The strong auction result reflects continued speculation that the ongoing program review may lead to a marked tightening of supply as California works to set its carbon market in line with the state’s 2045 net zero target.

Trading had been light in the run-up to the sale, with few participants willing to transact before the result was known, though secondary market prices had set records in January.

Spec trader positioning in California’s market heavily favors net length, compared to the European market, where investment funds hold a record net short position.

Bullish sentiment may also be generated by ongoing efforts to link Washington state’s new cap-and-trade program to California’s. Last week, legislators in Washington’s upper house passed a bill to link its market to its southern counterpart, and experts have encouraged California to hasten the process.

Washington state permits are currently trading at around $38/tonne.

Meanwhile, RGGI states are preparing to hold their first auction of the year on March 13. The sale will offer 15.9 million RGAs, with a further 8.4 million available if the Cost Containment Reserve (CCR) threshold price of $15.92/short ton is exceeded.

After reaching new records in January, RGA prices have settled back and are trading at around $17/short ton for the December 2024 futures contract. However, market participants expect the sale to clear at or around the recent record highs and trigger the release of CCR supply.

Carbon Market Roundup

The S&P Global Carbon Credit Index is priced at $44.47, down 4.4% from the week prior. EUAs are down 8.7% at €52.22. UKAs were relatively flat, up 0.3% at £35.11. CCAs saw a boost from the auction results, with prices nearing $44.00. As the day went on, sellers pushed prices down slightly to $43.23, ending 0.3% higher than last week. RGGI traded in a fairly narrow range, up 0.3% at $17.05. N-GEOs are up 1.3% at $1.52, while GEOs are up 10.5% at $0.84.