The California Air Resources Board today released the results of this week’s auction of carbon pollution allowances in the world’s second-largest carbon market, revealing robust participation from a broad array of participants and signaling growing confidence in California’s landmark program to reduce carbon emissions and achieve the goals of the AB 32 Global Warming Solutions Act.
The auctions are an important element of the market-based component of California’s comprehensive plan to reduce carbon pollution to 1990 levels by 2020 by requiring power plants, refineries and other facilities to acquire – either at auction or by trading amongst each other – a shrinking pool of allowances for every ton of pollution they emit.
Like the first cap-and-trade auction in November, all of the current vintage “allowances” sold out Tuesday, with qualified bids for these pollution permits well exceeding supply by nearly 2.5 to 1 (but unlike last time, we were spared an eleventh-hour lawsuit challenging the legality of the whole process). The price for an allowance available for use this year increased to $13.62, up 25 percent from the initial auction and consistent with recent prices fetched on the secondary market.
(Image credit: Evolution Markets)
Of the $176 million generated from the sale of current vintage allowances, just under $140 million will be returned to the state’s electric utilities for the exclusive benefit of their customers. For the millions of California households that draw power from one of the state’s three large electric investor-owned utilities – PG&E, Southern California Edison, and SDG&E – that will take the form of a historic climate dividend.
Bidders also snapped up nearly half of the pollution allowances for 2016 at the floor price of $10.71. Adding in the non-utility portion of the 2013 batch, establishing a price on carbon pollution in this week’s auction will put over $83 million to work to advance clean energy in California.
All told, more than 90 participants took part in the auction, with just under 90 percent from the regulated sectors (participation in the auction is open to any qualified entity that registers with ARB). The next quarterly auction is scheduled for May 16.
In short: another boost of confidence for reducing carbon pollution and growing clean energy in California.