What’s in the Cards for California Cap-and-Trade?

Four Twenty Seven Newsletter – March 18, 2013

Just when things were starting to settle in California, the Governor stalled linkage with Quebec, bringing a fresh round of questions on the market’s planned expansion.

Everything was going well in California. The second auction had gone flawlessly, with strong participation and bullish prices. The secondary market was humming along, with prices in the $14-15 range, and the offset market was seeing its first breakthrough in months as the California Air Resources Board (CARB) announced 25 early action projects were eligible to proceed towards re-verification and eventually crediting.

Then politics made a surprise return. The Air Resources Board was expected to vote on the linkage with Quebec in February, then in March – but the recently released agenda for the Board meeting this week shows no such vote on the agenda. Governor Brown is yet to issue his findings as to whether California should link with its northern counterpart. CARB submitted its arguments in favor of such findings on February 22, which means that, by law, the Governor has until April 8 to make a decision. Meanwhile, market participants are left to wonder whether they should plan for a bigger, tighter market – or not.

Add on to this the come back of key players in U.S. Congress with draft bills proposing to establish a federal tax – how would that impact California? Even if you don’t think Congress is going to pass any of these bills, climate is on the agenda in DC, and the question of how federal action might impact the California market is a very relevant one.