Tackling carbon offset oversupply in California could be bullish for CCA prices

But only if regulator makes necessary reforms

Earlier this year I highlighted that California’s carbon price is weighed down by an oversupply of privately held emission allowances. The only thing making obligated emitters think twice about cashing them in early is the decreasing emissions cap and the increase in the carbon floor price.

California’s ETS is currently undergoing a review to ensure that it is fit for purpose, i.e. meeting the state’s 2030 emissions reduction goal of 40% below 1990 levels. The fear is that the oversupply of carbon allowances reduces the incentive to decarbonise the state’s power, industry and transportation sectors.

One particular area of concern keeps coming up - carbon offsets.