June 19, 2019, 11:44 pm
Carbon Update: May 2011

Sabine & Waters, Inc. was pleased to participate in the 9th annual Navigating the American Carbon World conference in Los Angeles on the second week in April. The distinguished list of keynote speakers included California governors Arnold Schwarzenegger and Gray Davis, actor Ed Begley, Jr., and a number of leading California regulators. The conference centered around the emerging carbon markets in North America with a focus on California’s cap-and-trade program.

The California program, slated to become operational on January 1, 2012 is poised to become the driving force in North American carbon compliance market. Of greatest interest to our clients, market analysts presenting at the conference, including Barclays Capital and Thomson Reuters Point Carbon, forecasted a meteoric rise in carbon offset prices by 2020 should the California market open according to the structure released by the California Air Resources Board to date. Offsets that qualify for the California market, that are trading at about $7-8 per ton at the time of this writing are forecast to trade for $70 per ton by 2020 (these include forest carbon offsets generated from eastern forests). This rapid price increase over the next 10 years is primarily driven by the prediction that the supply of offsets in California market will be very short.

Despite this exciting prospect, doubt looms over the California cap-and-trade program. A lawsuit by a local environmental group has temporarily put a halt the program. The group contends that regulators did not fully explore alternatives to cap-and-trade, such as a carbon tax, as required by California law. The decision is expected to be appealed, but it is not clear what implications the litigation may have for the program. The uncertainty surrounding this decision has resulted in a flat, if not slightly declining market for California-ready offsets over the past month or so.

Even with the current lull in the market, and bumps in California’s road to cap-and-trade, the future for carbon looks bright. The carbon market today is poised to provide forest landowners in the Southeast with a legitimate and lucrative alternative income stream. If you would like to learn more, please don’t hesitate to contact us.