California nets $640M for greenhouse gas fund in latest cap and trade auction
California completed its greenhouse gas emissions cap and trade auction, selling out all available allowances, and raising an estimated $640 million for its greenhouse gas fund.
The full allotment of both the 63.8 million current 2017 vintage allowances and 9.7 million advance 2020 vintage allowances were sold.
- The 2017 vintage allowances cleared at $14.75, and the 2020 vintage allowances cleared at $14.55. Both vintages above a reserve price of $13.57.
California’s GHG cap and trade auction was the first since Gov. Jerry Brown (D) signed into law legislation that put the auction on a sounder legal footing. The auction was being contested by some Republican opponents who claimed it represented an illegal tax because the original enabling legislation was not passed by a super majority. The recently enacted law passed with the required majority and extended the program to 2030.
“As we had anticipated, auction demand was the strongest in years,” Chris Busch, an analyst at Energy Innovation, said a statement. All of the 2017 vintage allowances, which can be used until 2020, sold at $14.75, the highest settlement price in the system’s history, Busch said.
The results were a significant shift from the May auction in which current allowances sold at the minimum price and many future allowances were not sold.
Power plants, oil refineries, and other industrial facilities and distributors of natural gas and transportation fuels must comply with the state’s annual carbon-emissions caps either by installing pollution controls or by purchasing allowances. Each allowance equals one ton of greenhouse gases.
Despite the strong results, Busch said the recently concluded auction also has a downside. He said there is an oversupply of allowances that encourages speculation and the banking of allowances that could be used later, potentially forestalling the necessary ramping up of emission reductions needed to meet California’s 40% reduction by 2030 goal, Busch said.
- Los Angeles Times California sees strong results from cap-and-trade auction after program extension
- Bloomberg BNA California auction raises $640M for greenhouse gas fund
- AP via Washington Post California pollution permits sell at highest price ever
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