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California carbon market emissions fell in 2016

9 Nov 2017, 7.14 pm GMT

California carbon market emissions fell in 2016

San Francisco, 7 November (Argus) — Greenhouse gas emissions covered by California's cap-and-trade market fell by nearly 5pc last year, adding to an already oversupplied market.

Cap-and-trade program emissions fell by over 16mn metric tonnes in 2016, or 4.8pc, according to data released yesterday by the Air Resources Board (ARB).

"The data show our climate programs are delivering real GHG reductions," the ARB said.

A 19pc decrease in emissions from in-state electricity accounted for the most of the overall decline. A wet year in California boosted hydroelectric power production and lowered demand for natural gas-fired generation. A 32pc increase in grid-scale solar, combined with an 11pc growth in wind production, contributed to the growth of zero emission resources powering the grid.

The drop in electricity sector GHGs helped offset higher emissions in other sectors. Cement plants, refineries and transportation fuels all recorded percentage increases in the single-digits.

The new data indicates that cap-and-trade emissions are dropping at a rate faster than anticipated. The program's GHG cap declines by approximately 3pc/yr. That could signal trouble ahead for the market, said Chris Busch research director at the clean energy think tank Energy Innovation.

"Steeper emissions reductions under the current cap create more space for banking of unused allowances for use at a later date, and the oversupply amount is large enough to weigh on cap-and-trade's effectiveness through the early 2020s," he said.

Busch estimates the market surplus will reach roughly 200mn t by the end of 2020.

California's partner in the carbon market, Quebec, moved in the opposite direction last year. The GHG emissions covered by its cap-and-trade program rose by 1.2pc in 2016. Increases in transportation-related emissions were largely responsible.

The numbers could also signal the state could meet its target of reducing economy-wide emissions to 1990 levels by 2020 ahead of schedule. But the numbers released yesterday capture only about 80pc of statewide GHG emissions. ARB plans to release its inventory of statewide GHG emissions for 2016 in the second quarter of next year.

The 2020 target is equivalent to 431mn t. Statewide emissions stood at 440mn t in 2015.

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