2020 WCI Offsets Market Review & Outlook: Supply and Demand Dynamics After AB 398

Dublin, Oct. 21, 2020 (GLOBE NEWSWIRE) — The “WCI Offsets Market Review & Outlook: Supply and Demand Dynamics After AB 398” report has been added to ResearchAndMarkets.com’s offering.

The offset program has proved one of the more contentious aspects of the WCI Cap-and-Trade market opening in California and Quebec. Compliance offsets have been used as a cost-containment measure for regulated entities, and as a means to drive to scale new environmental technologies. This report offers rich insight, telling data visualisations, and insider opinion regarding the dynamics in both supply and demand of the market’s history from 2013-2020. This report is also one of the first publicly available studies to comprehend and analyze the upcoming impact of AB398. The ruling will drastically alter the whole structure of the offsets market, potentially leaving out-of-state suppliers with an unsold excess of credits, and compliance entities with a shortage of in-state credits. This report will guide you through the extent of this change and highlight the lucrative opportunities emerging in this new market setting.

Usage trends

Offsets have always received a disproportionate amount of market attention, especially since they can only be surrendered as 8% of compliance. And so at a 20% price discount, they have offered the entities around a 1.5% saving in compliance cost. Not that the 8% limit has been utilized, in Compliance Period 1 (CP1) total offset usage was at 4.4%, this increased to 6.4% for CP2.

This offset saving can be worth more than $20 million for the largest emitters like Tesoro, but may be less than ten thousand dollars for the smallest firms. This lack of saving incentive for smaller firms is the primary reason why 48 firms, representing 53.6% of the program’s emissions, used their maximum quota of offsets, and why 186 far smaller firms, representing 44.87% of emissions, used no offsets whatsoever. Invalidation risk is often touted as the reason for the underuse of offsets, but this seems an over-estimated risk, as only a few thousand ODS offsets have ever been invalidate, and 12% of all historic offsets remain in ARB’s buffer system.

Supply Trends

80% of all offsets generated so far have been from forestry projects, ODS makes up most of the remainder with 12%, whilst Mine Methane and Livestock projects share 4% each. Earlier in the program’s life offset generation in California led the way, in more recent years huge forestry projects in Alaska as developed by Finite Carbon have swamped offset supply. The other available protocols, such as urban forestry, have seen no projects, and are generally not deemed viable in the current price region. Registries are developing protocols around soil improvement that could swell supply again, though nothing has been approved by ARB yet.

Assembly Bill 398, passed in 2017, shook up the post-2020 offsets future, it stipulated that the new offset limit for 2021-2025 would be 4%, and then raised to 6% for 2026-2030. At a 20% current price discount to allowances, this would drop the maximum saving to just 0.8% of compliance, and then 1.2% for the second half of this decade. ARB’s highly contentious response to further align to AB 398 was to rule that 50% of all offsets had to have Direct Environmental Benefits (DEBs) to the state of California. In plain English, at least half of all firm’s offset surrender had to be generated in California, notably Quebec firms are free to surrender any balance of offsets. It was this divisive ruling that spawned this report.

Key Topics Covered:

1 Introduction: Context for offsets in California

2 Offset Supply Dynamics

3 Offset Usage Dynamics

4 Scenario Analysis

5 Survey Results

A Selection of Companies Mentioned Include:

  • 3 Phases Renewables, Inc.
  • Aera Energy, LLC
  • AES Alamitos, LLC
  • Air Liquide Large Industries U.S., LP
  • Air Products and Chemicals, Inc.
  • Bear Mountain Limited
  • Berry Petroleum Company
  • BNSF Railway Company
  • Bonneville Power Administration
  • BP Products North America, Inc.
  • BreitBurn Operating, LP
  • Bridge Energy, LLC
  • Chevron Power Holdings, Inc.
  • Chevron U.S.A., Inc.
  • Citigroup Energy, Inc.
  • Clean Energy
  • CMO, Inc.
  • Covanta Stanislaus, Inc.
  • CP Kelco US, Inc.
  • Double C Limited
  • DTE Energy Trading, Inc.
  • Dynegy Moss Landing, LLC
  • Ferrellgas, LP
  • Flint Hills Resources, LP
  • Flyers Energy, LLC
  • Foster Poultry Farms
  • Frito-Lay, Inc.
  • Genentech, Inc.
  • GenOn California South, LP
  • Georgia-Pacific Gypsum, LLC
  • Kern Front Limited
  • Kern Oil & Refining Company
  • KES Kingsburg, LP
  • Kiva Energy, Inc.
  • Land O’ Lakes, Inc.
  • Lansing Trade Group, LLC
  • Musket Corporation
  • Naftex Operating Company
  • New NGC, Inc.
  • New-Indy Ontario, LLC
  • New-Indy Oxnard, LLC
  • NextEra Energy Marketing, LLC
  • Paramount Petroleum
  • Pasadena Water & Power
  • PBF Energy Western Region, LLC
  • Petro Diamond, Inc.
  • Phillips 66 Company
  • Pilot Travel Centers, LLC
  • Pio Pico Energy Center, LLC
  • Pixley Cogen Partners, LLC
  • Shell Energy North America (US), LP
  • Shiralian Enterprises
  • Shultz Steel Company
  • Valero Marketing and Supply Company
  • Valley Electric Association, Inc.
  • Vista Metals Corporation
  • Vitol, Inc.
  • Vitro Flat Glass, LLC
  • Walnut Creek Energy, LLC

For more information about this report visit https://www.researchandmarkets.com/r/5ugsv0

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