The Californian Carbon Market, Forestry and REDD

As we stated in a previous post California, the world’s 8th largest economy, has approved an extensive cap-and-trade carbon trading scheme to cut greenhouse gas emissions. Analysts have predicted that the market will grow from US $1.7 billion in 2012 to nearly $10 billion in 2016 with prices rising from $10 per tCO2 in 2012 to $18 per tCO2 in 2016.

Under the California cap and trade scheme, compliance businesses may meet up to 8% of their compliance obligation with carbon offsets and it is predicted that that businesses will make full use of carbon offsets as a cost-effective solution to achieve compliance carbon targets.

"The world is watching what California is doing," said Louis Blumberg, director of the California Climate Change Team at the Nature Conservancy environmental group.  Canadian provinces Ontario, Quebec and British Columbia are working to join California in 2012.  Nationally, the latest US midterm elections have implications for the broader environmental markets, however, as  environmental strategist Andrew Winston has said: “Economic logic always wins out and sustainable businesses will be more profitable.”

The implications for Citola and the forest carbon markets are very interesting as California’s cap and trade market is a compliance carbon market that will likely rely extensively on forest carbon offsets where only domestic US forestry, ODS (destruction of Ozone Depleting Substances) and international REDD projects can deliver the volume required. Analysts have predicted that REDD is likely to supply 25% of the market with US domestic forestry and REDD having the potential to capture a 50% share of the California offset market through 2017 and a higher market share thereafter.

Citola is currently developing a large-scale REDD program and is greatly encouraged by the emerging Californian markets.