The results of California's fifth carbon auction were released today, marking an important environmental milestone for the state – one year since the debut of its cap-and-trade system.
While international climate discussions drag on in Warsaw, Poland, today's milestone is further demonstration of the importance of California’s continued leadership on climate action, putting the world’s first economy-wide cap on emissions, and using a market mechanism to put a price on carbon. Today's results cap off a successful year. As our one year report in January will show- the auctions have run smoothly, allowance prices have remained stable and reasonable, and compliance entities are participating. In addition, allowances are selling, official offsets have been issued, Quebec linkage will begin in under 2 months and legal uncertainty has been lifted. Congrats California, the positive momentum of your smart climate policies continues on both strong legal and policy footing.
Overview of fifth auction results
For the second auction in a row, all current and future allowances sold, demonstrating continued viability of the market and bringing total state auction proceeds to more than $530 million. That money must be invested in projects that reduce climate pollution, and at least 25%, or over $130 million to date, will provide clean energy opportunities to disadvantaged communities.
This week 16,614,526 current (V13) allowances sold at $11.48 and 9,560,000 future (V16) allowances sold at $11.10. For V13 allowances, there were almost 2 times more credits bid on than were sold which demonstrates strong demand in the market. As was expected by analysts, the fifth auction showed a lower settlement price than in previous auctions. This is normal for end of year auctions as many of the covered entities have likely already purchased the allowances they need to cover their 2013 emissions targets. Still, the complete sale of allowances indicates participants are confident the market is here to stay and are serious about preparing for future compliance obligations.
Keeping our eyes on the prize of reducing emissions
We are steadfast in ensuring that this first year is just the beginning; California's cap-and-trade program and emission reduction goals remains robust, with life beyond 2020.
As documented by the CalEPA, the impact of climate change is already affecting the state in the form of more frequent and intense wildfires, shrinking glaciers and snowpack, and hotter temperatures. In fact, 2013 is predicted to be the driest year ever recorded in California. With this data, we can't afford not to reduce our emissions to avoid the worst impacts of climate change.
As expected, cap-and-trade is a working solution. It is incentivizing the state's dirtiest polluters to find innovative , low-cost solutions to reduce emissions and is garnering interest at home and around the world. In the spirit of the season, we are thankful that this first year of auctions has been remarkably successful; that the economy is recovering and that the state is on track to meet its 2020 emission reduction goals.