Industry News

CARB LCFS Credit Trading Hit New Highs in November

2015-12-09 10:27:17 EST
***CARB: LCFS Credit Trading Hit New Highs in November
A lot of new records got set last month for credit trading under California's Low Carbon Fuel Standard, according to data released last night by the California Air Resources Board.  
First, the average price of LCFS credits traded in November jumped 43.3% from October and reached the highest average ever recorded by CARB, at $86/credit. At the November price average, LCFS credit values are more than triple the price of a year ago. And the price surge is unlikely to stop there since the latest OPIS data indicates that through the first week of December, LCFS credits traded up to $115/credit as revamped CARB rules loom next year. 
Second -- and third -- the number of credit transfers over November also heated up to a new record high as did the total metric-ton volume of LCFS credits traded during the month. CARB counted 97 LCFS credit transfers over the month, up 169% and more than the previous two months combined. The volume of LCFS credits represented in those November trades shot up by even more, up 237% month to month at 435,000 metric tons. 
The volume jump comes after a dip in October actually sent the monthly LCFS metric tons transferred to a 7-month low, according to CARB.
Market sources and some CARB officials acknowledged late last summer that the agency's re-adoption of the program to comply with court decisions was a factor in driving up credit prices. Some participants also anticipate credits will turn more costly going forward. As California's carbon intensity (CI) limits ratchet down under the program, the growing need for credits may come up against a reduced ability to generate them, since credits are pegged against the CI of 
baseline fuels each year. 
November credit prices accumulated by CARB contain "transfers that were proposed and completed as well as those that were proposed and still pending buyer's confirmation in the LCFS Reporting Tool and Credit Bank & Transfer System," noted the agency. Prior to July 2014, CARB's monthly accounting included only fully completed and confirmed deals done by the end of the month.  
"CARB prices reflect contract and spot transactions reported to CARB by regulated parties which are then compiled using a weighted average technique and posted each month," CARB added. "The published weighted average price does not include any transfers reported with zero price."
Since initiating the program, CARB calculates that through November this year, participants transferred a total of 4.813 million metric tons of LCFS credits. 
--Spencer Kelly,
Copyright, Oil Price Information Service