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ARB issues 584k CCOs; 578k offsets manage CCO-3 conversions

September 15, 2016 by Rohan Nongpiur

CaliforniaCarbon.info, September 15, 2016: Recent issuance announcements by cap-and-trade regulators the Air Resources Board (ARB) indicated that seven projects from four different project types received 584k offset credits (CCOs), and that 578k CCO-8s from 4 projects have been converted to CCO-3s. All the CCOs issued this around were awarded to compliance projects, as the deadline for early action issuances recently passed recently on Aug 31. However, the CCO-3 conversions observed this round were entirely associated with projects under early action.

Approximately one-third of the total was assigned to two ozone depleting substances (ODS) projects, while the mine methane project type managed another third, as a Solvay Chemicals project obtained 189k CCOs. The remainder was distributed across 3 Camco livestock projects (108k) and a Green Assets forestry project (84k).

202,728 CCOs awarded to two ODS projects

Two ozone depleting substances (ODS) projects managed a combined 202,728 CCOs. The larger of the two went to Coolgas 2016-1 (CAR1222), as the project gained 145,594 CCOs. Coolgas is a subsidiary of A-GAS Americas. CAR1222 managed a reporting period completion to CCO issuance of 161 days, which makes it the fastest A-GAS project to gain CCO issuances under the ARB compliance. This is inline with the lead times observed for all reporting periods under the ODS ARB protocol, although average lead times for A-GAS ARB projects have been around 345 days. The developer has now gained 1.32 million CCOs from 10 ARB compliance projects, and at the moment has only 2 further projects pending CCO issuances.

Another ODS project – EOS CAR 1074 (CAR1074) also obtained 57,134 CCOs. This takes EOS Climate’s CCO issuance count to 5.3 million from 26 projects (ARB Compliance – 2 million, 20 projects; Early action – 3.3 million, 6 projects, 43 reporting periods). In 2016, EOS have seen 6 projects credit 695k CCOs under ARB compliance, the most by volume of CCOs among any project developer and the second most in terms of projects credited during this year.

Solvay Chemicals obtains 189,455 CCOs

The sole mine methane issuance went to Solvay Chemcials Waste Mine Methane Project (CAR1105), as the project gained 189,455 CCOs for its reporting period spanning the 2015 calendar year. This is the second Solvay Chemicals to gain issuances, since an earlier project under early action – Green River Trona Mine Methane (CAR629), had already managed a combined 498,654 CCOs across six reporting periods at various points this year.

108,437 CCOs issued to three Camco projects

A total of 108,437 CCOs were issued across 3 Camco livestock projects. The Indiana based Fair Oaks Dairy Farm LLC GHD-Designed Digester (CAR1120) obtained 56,790 CCOs; The Dry Creek Dairy Biofactory Project (ACR232) located in Idaho managed 43,254 CCOs; while 8,393 CCOs were awarded to the Virginia based Vanderhyde Dairy (CAR1146). Camco has managed to credit 32 projects and 74 reporting periods so far, the most by any participant in the offset program. 31 reporting periods coming from 23 projects have been listed by Camco under ARB compliance so far, out of which 14 have been credited CCOs, 2 have listed ROCs but pending issuances, and a further 15 awaiting verifier appointments.

Green Assets gains 83,611 CCOs

Forestry’s only issuance of the day saw the Green Assets – Middleton Avoided Conversion Project (CAR1109) gain a total of 83,611 (8,813 buffered) CCOs for a Jan 2015 – August 2015 reporting period. While 78,902 ROCs were credited to this project last April, an additional 4,709 was only allocated to the same reporting period last week.

The other update observed recently was the buffer correction to 1213 from 1053, applied to the 2014 reporting period of the Rips Redwoods (CAR1015) early action forestry project.

578,393 CCO-3 conversions across four projects

578,393 CCO-3 conversions occurred across the early action versions of the three livestock projects and single forestry project that managed issuances in this round. Around half of the total was distributed across Camco’s Fair Oaks Dairy Farm LLC GHD-Designed Digester (CAR478), The Dry Creek Dairy Biofactory Project (CAR402) and the Vanderhyde Dairy (CAR944), as they each managed 153,828, 116,627 and 22,251 CCO-3 conversions respectively. Meanwhile, the remaining half was assigned to the Middleton Avoided Conversion (CAR749) which saw 285,378 CCO-8s convert to CCO-3s. Total CCO-3s issued so far stand at 8.83 million (however 340,257 are buffered and a significant portion retired).

Market observations

It is also important to note that until date, 811k credits have managed to attain a golden status (transfers the liability for replacement onto the seller in the event of invalidation). By the end of this month, this will rise to over a million, given that none of the credits belonging to the ECC ODS Destruction 2012 (ACR170), which obtained Golden CCOs (CCO-0) before last years compliance surrender, have been retired. Give the invalidation liability that may lapse for certain projects for the rest of September and October, this means that at least 1.38 million CCO-0s are available before this years surrender event (and more depending on whether CCO-3 conversions occur to some specific projects).

At 10.33$, the CCO-3 has been recently trading at a premium of 50 cents to the CCO-8, according to broker quotes which we aggregate, while the Golden is trading at an 85 -90 cent premium to the CCO-3. Both these instruments provide a reduced risk profile for entities looking to use it to meet carbon compliance.

The ROC backlog had recently skyrocketed to over 11 million, from 4 million observed in the beginning of August, as large forestry projects gained ROCs and with ARB focusing on early action issuances before the deadline. Today’s issuances reduces this to 10.71 million ROCs remain in line for conversion to CCOs.

The next issuance of CCOs will occur on September 28 , at 12pm PT.

Rohan Nongpiur (rohan@californiacarbon.info)

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