For many people across the country, August is the last opportunity to enjoy the final bits of summer relaxation before fall sets in and the weather turns colder. While many people are away on vacation, the California Air Resources Board (CARB) and Ministry of Sustainable Development, Environment and the Fight against Climate Change (MDDELCC) of Quebec have been hard at work.
During the first week of this month, the two regulatory bodies held a practice joint auction for interested stakeholders to prepare for California and Quebec to officially join their quarterly auctions in November. A week and a half later, this past Monday, CARB held a California-only auction, the results of which were released today. Next week, MDDLECC will hold a Quebec-only auction, and finish out a very busy month for these linked cap-and-trade programs.
Amidst this flurry of activity, the results of California’s eighth quarterly auction, released today, show that the carbon market remains steady and strong. For the eighth time in a row, all current 2014 vintage allowances offered for sale were purchased. Current allowances sold at the same price as the last auction, $11.50, and 3.15 million more bids were placed than could be filled, reflecting healthy competition for credits. More 2014 vintage allowances were offered in this auction than in both of the previous auctions this year. This uptick in volume was due to the fact that a greater number of utility-owned allowances were turned over to CARB to be sold in this auction as compared to the previous two. 71 entities registered for this auction, which is similar to registration in previous auctions. This implies that there is sustained interest in the market and suggests that covered entities are actively planning how they will comply with the regulation.
In the advanced auction for 2017 vintage allowances, 70 percent of allowances offered for sale were purchased, up from 44 percent in the previous auction. While it was not expected for the advanced auction to sell out, this level of demand for 2017 credits, which can only be used for compliance three years from now, is promising for the future of the program.
This is especially encouraging given the recent push from oil companies to delay the inclusion of transportation fuels in the program. As over 70 leading economists confirm, a delay would be a huge disruption to a robust carbon market, one that has existed for almost two years under the assumption that the addition of fuels to the cap would proceed as planned. In addition, delaying regulation of greenhouse gas pollution from the transportation sector, responsible for close to 40 percent of the state’s carbon pollution, means more pollution in the air and in the lungs of Californians, higher long term gas prices, and lighter wallets. Today’s auction results demonstrate that the program is strong and intact as companies continue moving forward with their cap-and-trade compliance strategies.
This auction raised $98.7 million to be placed in the state’s Greenhouse Gas Reduction Fund from the sale of current and future vintage state-owned allowances. This money must be used for projects that further reduce greenhouse gas pollution in California and at least a quarter of these funds are required to be spent on projects that benefit disadvantaged communities.
Just last week, the California Environmental Protection Agency released a major update to the environmental health screening tool, called the CalEnviroScreen 2.0, that pinpoints communities with the greatest cumulative exposure to pollution and will be used to identify the disadvantaged communities to receive these cap-and-trade investments. Now using census track data instead of zip codes, the tool gives more detailed data for many parts of the state and more accurately represents the mix of communities at various income and risk levels that live within the same area. This tool will help ensure that the cap-and-trade funds will be directed in those communities that are most impacted by our state’s biggest polluters.
With joint auctions and the start of the second compliance period on the horizon, the Golden State’s carbon market is flourishing and helping push the state forward towards meeting our 2020 greenhouse gas reduction goal. More importantly, with this latest auction, Californians are one step closer forward to a clean energy future, bright with a thriving economy and healthier communities.