Our January commentary anticipated the creation of a large volume of new credits. This occurred almost immediately, with approximately 5 million Vintage24 EPCs showing up in the registry by the end of January. While only a small percentage of these newly-minted EPCs have been offered on the secondary market, there has been sufficient supply to push prices down significantly. The market is currently trading in the low $30s.
Leading up to the 2025 compliance deadline, most major emitters already hold sufficient inventory to fulfill their 2025 carbon obligations:
CNRL holds the largest position with over 13 million credits, an inventory that could last approximately 12 years based on its average annual retirements
TC Energy and Cenovus hold close to 5 million and 3 million credits, respectively. At Cenovus’s current marginal true-up obligation, its inventory could potentially last over 20 years
For the most part, oil and gas companies will hold any excess credits pending anticipated changes to the TIER program
There are emitters, such as Capital Power and some small operators, whose recent retirement history compared to their current position in the Alberta Carbon Registry suggests they will need to purchase credits ahead of the June compliance deadline. However, most small emitters have decided to opt out of the TIER program, and are only responsible for their emissions for Q1.
Based on prior years, we expect approximately 3 million new offset credits to be serialized between now and the end of June:
Close to 2 million out of the 3 million offset credits will be from renewable projects. Unlike oil and gas companies, many renewable project developers tend to monetize credits as soon as they are serialized
Given that most participants hold enough credits to meet their 2025 compliance needs, the market’s willingness to absorb these additional credits will be highly dependent on the political outlook for future compliance years. As such, any price movement will be driven by anticipated changes and policy announcements
On February 23rd, Pathways Alliance rebranded as the Oil Sands Alliance to better reflect its mandate to “promote growing the oil sands industry for a stronger Canada.” The rebrand comes as the organization is deep in discussions with both the provincial and federal governments ahead of the April 1st deadline stated in the recent Memorandum of Understanding (MOU). The Alliance’s President, Kendall Dilling, noted "a lot of talk about April 1, from an industry perspective, we’re just heads down, working with urgency” and “nothing magic about April 1 for us” he added. [Link]
This sentiment, along with recent comments from other stakeholders, has led many in the market to speculate that the April 1st deadline may be pushed back.
At ATB Financial, we actively engage with clients to navigate complex carbon markets, offering diverse solutions to meet their unique needs. Our team provides efficient, comprehensive market insights and strategic guidance, helping clients make informed decisions and capitalize on market movements to achieve their environmental and compliance objectives.
Our Strategy
Broad Client Coverage: ATB has a wide range of clients with exposures to the Alberta TIER Market.
Process Management and Documentation: ATB uses a Master Purchase and Sale Agreement for TIER deals, streamlining transactions and minimizing operational and legal effort for each deal.
Price Transparency: ATB's extensive reach enables the provision of competitive pricing and market transparency for our clients.
Trusted Name: Credit and legal risks are minimized when dealing with ATB.
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This report is provided to you for informational purposes only. Nothing contained in this report is, or should be, relied upon as a promise or representation as to future performance. The estimated financial information contained in this report, if any, is based on certain assumptions and the analysis of information available at the time that this information was prepared. There is no representation, warranty or other assurance that any projections contained in this report will be realized. If this publication has any information or data from third party sources, ATB cannot guarantee its accuracy or reliability.
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