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Posted: Nov 20, 2013
California emissions scheme over supplied by more than expected
(Nanowerk News) On 4th November the California Air Resources Board (CARB) finally released CO2 emissions data for the entities covered by the California Emissions Trading Scheme relating to 2012. According to CARB who report emissions without any adjustments, emissions from covered entities rose by 2% between 2011 and 2012. The raw data however is misleading as it includes several aspects of double-counting. After adjusting for these our analysis shows like-for-like emissions of CO2 actually remained flat at 350.9m tons across both years.
This conclusion means that the scheme is likely to run a greater surplus over the early years than many have expected. According to BNEF calculations emissions in the California scheme will come in 7% below the expected cap in 2015 (the first year of the scheme’s broad coverage which includes fuel sales to small emitters) and will not 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 2026.
Double-counting in the raw data arises because of the way in which emissions are reported for natural gas suppliers and gas burned in power generation. BNEF’s calculations separate the emissions to allocate them directly to each covered entity accounting for each unit of emission only once.
“Flat or falling emissions shows 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 help the situation 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 have remained broadly constant from 2011 to 2012 those at a sector level have 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 cover the loss of the San Onofre Nuclear Generating Station (SONGS) with gas fired generation. This was offset by lower emissions from transport fuels which declined by 4.1% and emissions from power imported into the State which fell by 9%. 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.
Source: Bloomberg New Energy Finance
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