Price of carbon credits declines in California

August 30, 2013 0 By Alicia Moore

Carbon credits fall in value

California is currently home to one of the most ambitious cap-and-trade initiatives in the U.S. The state has long been an advocate for renewable energy and has been seeking innovative ways to curb emissions and promote the adoption of clean power among businesses. Many of the state’s largest businesses produce significant amounts of emissions on a yearly basis and California has been working to address this issue in recent years. Thus far, the California cap-and-trade initiative has been relatively successful, but it may soon encounter a somewhat problematic challenge.

Price of credits falls lower than expected

California has held three carbon credit auctions in the past, which have been considered a major success and have produced significant revenue for the state. The state recently held its fourth auction, but the price for its carbon credits fell below their estimated value. This is likely due to the fact that state regulators have been hinting at offering free carbon credits for large companies in 2014. The price for the state’s carbon credits dropped by 12.7% over what they had been worth in the previous auction.

California - Carbon Credits DeclineCalifornia market shows significant promise

Despite the declining value of carbon credits, California’s cap-and-trade market has surpassed $1 billion in value. The price for carbon credits during the state’s most recent auction were still 20% higher than the “floor” value of these credits, which is set at $10.71. While the market has been experiencing some challenges, demand for carbon credits remains high throughout California. The cap-and-trade initiative has also encouraged many businesses to embrace renewable energy in order to mitigate the emissions they produce and limit the money they spend on fossil-fuels and carbon credits.

Companies eager to purchase carbon credits for the future

Demand for future carbon credits is on the rise in California. Companies that are not yet willing to adopt renewable energy have a significant need for these credits if they want to avoid costly fines from the state government. Many of these companies have been purchasing carbon credits for the future. Thus far, approximately 9.5 million credits for 2016 have been purchased at $11.10 per credit.

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