FOR IMMEDIATE RELEASE CONTACT Noemi Glickman Bloomberg New Energy Finance [email protected] CALIFORNIA EMISSIONS SCHEME OVERSUPPLIED BY MORE THAN EXPECTED Analysis by Bloomberg New Energy Finance shows that emissions in the California cap-and-trade scheme are lower than top-line estimates suggest New York, 19 November 2013 – On 4 November, the California Air Resources Board (CARB) released CO2 emissions data for the entities covered by the California Cap-and-Trade Program relating to 2012. The raw data released by CARB show that total emissions reported under California’s mandatory reporting rules rose by 2% between 2011 and 2012. Estimates by Bloomberg New Energy Finance, adjusted for elements of double-counting in CARB’s raw data, are that like-for-like emissions of CO2 actually remained flat at 350.9m metric tons over the two years. Strikingly, the levels stayed flat despite turmoil in the state’s power sector, which saw emissions surge by 35%. This conclusion means that the California programme is likely to run a greater surplus over the early years than many have expected. According to BNEF calculations, emissions in the California system last year came in 7% below the effective cap in 2015 (the first year of the scheme’s ‘broad scope’ coverage, including fuel sales to small emitters); relative to the cap, emissions are not expected go into deficit on an annual basis until 2020. On a cumulative basis and excluding any link to Quebec, the scheme will be “long” until 2027. Double counting in the raw data arises for several reasons, the most important of which is how emissions are reported for natural gas suppliers and for gas burned in power generation and other uses. CARB acknowledges this issue; its spreadsheet of 2012 emissions data contains several important adjustments to the raw data, including rectification of the double counting associated with natural gas utility sales to other covered entities. In the case of 2011, however, CARB’s dataset does not tackle this issue. BNEF’s calculations include an adjustment to address double counting in the 2011 data to make possible like-for-like, inter-year comparisons. The BNEF calculations also include changes to CARB’s adjusted 2012 data – namely, up-to-date treatment of emissions associated with out-of-state power and modifications to reflect expected changes to the scope of the scheme – such that CARB’s adjusted tally of ‘covered emissions’ in 2012 (353.8Mt) differs slightly from BNEF’s tally (350.9Mt). “Flat or falling emissions show that the Californian carbon market will remain in a state of substantial oversupply throughout the decade,” said William Nelson, senior analyst at Bloomberg New Energy Finance. “A link with Quebec will trim this oversupply, as the Quebec scheme will be in deficit much earlier, but its smaller size means the California scheme will still be in surplus for many years.” Although emissions remained broadly constant from 2011 to 2012, those at a sector level changed considerably. According to BNEF analysis of the data released, emissions from the power sector increased by 35% between 2011 and 2012 – mostly as a result of the need to use more gas-fired generation to make up for a significant drop in hydro-electricic output and to cover the loss of the San Onofre Nuclear Generating Station (SONGS). This power sector increase was offset by a 4.1% fall in emissions from transport fuels and a 9% decline in emissions from power imported into the state. Imported power had lower emissions due to greater imports of power from gas-fired generating stations and reduced imports from the six coal-fired facilities supplying California with electricity in neighboring states. The figures presented in the Note form part of Bloomberg New Energy Finance’s regular analysis of the California Cap-and-Trade Program. This is available to clients on a subscription basis. For more information on this service contact us at [email protected] or on +1 212 617 4050. 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