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Future doubts subside as traders hedge on positive auction results

May 22, 2017 by Ronjoy Bezbarua

California’s carbon market saw positive growth last week as doubts over the program’s longevity show signs of settling. Senator Wieckowski’s proposed SB 775 triggered significant market movement when proposed earlier this month. The response from market proponents has been strong, however, even luring support from long time opponents the California Chamber of Commerce (CCC). With discussions around the less invasive AB 378 as well as ARB’s own extension package, SB 775’s most onus legacy could be the diffusion of some of it’s elements into alternative extension bills.

In pricing news, the CCA market took a fall on the week’s first day of trading. The dip likely a function of the following day’s auction. Prices climbed through the week however, the Dec 17 benchmark closing at USD 14.04, USD 0.03 the better than the previous week’s close. In what has historically been a relative quiet trading week, post auction and pre results, 8,167,000 tons changed hands last week, just over a million shy of the previous week’s total traded volume. The extent of V17 contracts were traded on Wednesday, hinting a more positive auction results than some may have expected.

Next month’s front contract, Jun 17, was the contract with the greatest contribution of overall volume, clearing 3,239,000 tons. The Sep 18 contract also saw good volume with 2,575,000 tons clearing while the Dec 17 contract for a change saw its contribution decline with 1,083,000 tons pass the exchange.

The surge in open interest creation continued. This is hardly surprising around auction season with participants looking to set positions with fresh allowances gained. As compared to the week before, there was a net change of 7,387,000 contracts. The largest contributor to this change was the Jun 17 contract which saw a net change of 3,165,000 contracts. 2,575,000 contracts were opened for Sep 18 contract and the Dec 17 contract also saw a high net change of 1,062,000 contracts. The current front and Dec 18 also saw positive net changes of 85,000 and 500,000 contracts respectively.

Similar pricing trends were observed with soon-to-be partners, Ontario. Prices rose steadily throughout the week following Monday’s pricing hangover. The OCA settled at CAD 19.28 on Friday.

Billy Hamshaw (billy@californiacarbon.info)

Ronjoy Bezbarua (ronjoy.bezbarua@californiacarbon.info)

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