Author Archives: Katie Hsia-Kiung

Strength in Numbers: Linked California-Quebec Market Benefits Environment and Economy

KHK pictureBigger is not always better, but a recent cap-and-trade auction in Quebec gave us one example of why it may be the case for a combined California and Quebec carbon market.

The linkage of Quebec and California’s markets has been watched by many around the world, and the start of joint auctions in November 2014 is the final step in full linkage. Last month, however, both jurisdictions were busy conducting their last solo auctions. While the results of the California-only auction were as anticipated, the Quebec-only auction yielded both expected and less expected results.

What was not a surprise was that not all (83%) allowances offered for sale were purchased. Unlike in the California program, Quebec entities do not have to surrender any allowances this coming November. With their first deadline not until November 2015, Quebec entities have been understandably slow to enter and be active in the market. Another positive and not so surprising takeaway from Quebec’s last auction is high demand for 2017 allowances, a strong sign that Quebec companies are confident in this market’s future health.

More surprising to observers in Quebec’s recent auction, however, was that a higher percentage of 2017 vintage allowances sold than 2014 vintage allowances. Current 2014 vintage allowances can be used for compliance at any time, while 2017 vintage allowances can only be used starting in 2017. This longer useful life should make 2014 allowances more valuable and thus in higher demand, but this did not appear to be the case in the recent auction. Read More »

Posted in Auction revenue, Cap and trade, Cap-and-trade auction results, Climate, Global Warming Solutions Act: AB 32, Linkage| 2 Responses, comments now closed

Results Stay Steady in California’s Last Solo Auction Despite Calls for Fuels Delay

KHK pictureFor 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. Read More »

Posted in Auction revenue, Cap and trade, Cap-and-trade auction results, General, Global Warming Solutions Act: AB 32, Linkage, Transportation| 1 Response, comments now closed

Practice Makes Perfect for California and Quebec Joint Auctions

KHK pictureOver many decades, the United States and Canada have developed what is now the largest trade relationship in the world. This achievement is measured by the goods and money that cross their shared border, and does not even account for the trade of ideas and exchange of information currently underway between the two countries. The linkage of the California and Quebec carbon markets is yet another demonstration of the mutually beneficial relationship that these neighboring countries have cultivated. The two jurisdictions are taking the final steps in what started off as a virtual marketplace of ideas and best practices and has since grown into a real market for tradable carbon credits.

Last Thursday, the California Air Resources Board (CARB) and Ministry of Sustainable Development, Environment and the Fight against Climate Change (MDDELCC) of Quebec held a practice joint auction for the linked California and Quebec cap-and-trade programs. This trial was run as though it were a real quarterly auction, requiring participants to establish a Compliance Instrument TrackingSystem Service (CITSS) account if they did not already have one, submit an application to participate, and await approval from the auction administrator. CARB and MDDLECC published an auction notice and ran webinars for auction participants in the days leading up to the practice auction. The auction administrator and independent market monitor for both jurisdictions also monitored the auction while the bidding window was open and the appropriate help desks were available to take questions, just as they would have for a real auction. As such, interested parties were able to become familiar with the actual processes and materials required to participate, as well as test out and provide feedback on the updated features of the auction platform, which was refined to support bidding from both jurisdictions. The careful completion of this important exercise demonstrates CARB and MDDELCC’s dedication to thoroughness in their implementation of the cap-and-trade regulation. Read More »

Posted in Cap and trade, General, Global Warming Solutions Act: AB 32, Litigation| 1 Response, comments now closed

New Report Doesn’t CARE about Getting the Facts Right

With billions of dollars in profits, oil companies can pay a lot of consultants to write a lot of really impressive-looking reports.  But look past the fancy cover page and you will often find these documents are nothing more than spin. Case in point: the recent report from Californians for Affordable and Reliable Energy (CARE) and the Valley Industry and Commerce Association (VICA).

For those looking for the real facts about California’s world-leading climate change law, let us correct the record:

1.       Californians spend LESS on energy than people in 45 states.

 The CARE report uses the usual scare tactics about the price of energy. But the truth is that on average, Californians spend less on their energy bills than residents of 45 other states (see graph below) and almost $60 less than the national average per month. This is due to in-large-part to California’s energy efficiency measures, which have led Californians to use almost 45% less electricity per capita than the U.S. average.

Californians spends less on energy than residents of 45 other states. Source: U.S. Energy Information Administration (EIA)

Californians spends less on energy than residents of 45 other states. Source: U.S. Energy Information Administration (EIA)

 2.       California’s climate law will yield significant environmental AND economic benefits for its citizens.

Not only are the costs of AB 32 policies much smaller than the VICA/CARE report would lead you to believe, California’s climate policies actually yield significant economic and health benefits. Read More »

Posted in Cap and trade, Clean Energy, Climate, Global Warming Solutions Act: AB 32, Jobs, Transportation| 1 Response, comments now closed

California and Quebec: Friends in Low (Carbon) Places

KHK pictureA crucial feature of the U.S. EPA’s groundbreaking new Clean Power Plan for existing power plants is the flexibility with which states can pick and choose the emission reduction measures that work best for them. Instead of prescribing a silver bullet solution across all fifty states, the new rule allows each state to tailor its policies, resulting in the most cost-effective solution to climate change.

According to EPA Administrator Gina McCarthy, this flexibility can mean collaborating with others in joint programs: “If states don’t want to go it alone, they can hang out with other states and join up with a multi-state market based program, or make new ones.”

For states thinking about cross-border collaborations to comply with the new rule, they can find a promising example in California.

In an announcement today, the California Air Resources Board (CARB) and the Ministry of Sustainable Development, Environment and the Fight against Climate Change (MDDLECC) of Quebec revealed that the two markets are taking the final step in linking their markets with the initiation of joint auctions. The first will be held in November, following a practice auction to be held in August. The practice auction will allow the program regulators, as well as auction participants, to get comfortable with the updated joint auction platform.

Not only is the Golden State leading the way in transitioning to a low-carbon economy ahead of EPA’s recently-announced power plant standards, but California is forging ahead to show that working across state lines on climate policies is possible – and can be productive. Read More »

Posted in Cap and trade, Cap-and-trade auction results, Clean Energy, Linkage| Comments closed

Latest Auction Results Show that California’s Cap-and Trade is in Full Swing

KHK pictureThere are certain key fundamentals of swinging a bat that must be mastered before you can hit a home run; proper posture, a strong stance, and good contact with the ball. The last essential step is the follow-through.

In fact, success in nearly everything relies on putting an idea or solution in motion, and then following through to make sure it achieves the goals that it set out to achieve. The same can be said for building a successful cap-and-trade program.

In 2012-2013, California’s cap-and-trade program celebrated a strong launch, during which companies were able to purchase emissions credits through five quarterly auctions and a well-established secondary market. This stretch brought the start of the first compliance period, the first auctions, and the issuance of the first California Air Resources Board-verified offset credits. In 2014, there may not be as many “firsts,” but executing a strong follow-through is as important as a good launch.

Today, the California Air Resources Board (CARB) published the results of the seventh cap-and-trade auction. All current vintage year allowances offered for sale by CARB were purchased, signaling continued confidence in the program. The complete sale of 2014 allowances also demonstrates that some of California’s worst polluters are paying for their emissions.

Bids for 7.8 million more 2014 vintage allowances were placed than could be filled, signifying a competitive current auction. The price for 2014 vintage allowances, which can be used for compliance from now on, was $11.50, which is 16 cents above the minimum floor price of $11.34. Read More »

Posted in Cap and trade, Cap-and-trade auction results, Climate, Global Warming Solutions Act: AB 32| 3 Responses, comments now closed

The Link Between Water and Energy in California – And Why It Matters

KHK pictureTomorrow is World Water Day and this year’s theme is the “energy-water nexus,” the critical, interdependent relationship between water and energy. The generation and delivery of almost all types of energy requires water and, conversely, treating and transporting clean water requires energy. In fact, water-related activities, such as treatment and distribution, account for almost 20 percent of California’s total electricity use. A disruption in access to one of these precious resources can have a detrimental effect on access to the other, creating a vicious cycle that unsettles our way of life.

The Challenges

Unfortunately, California is learning the hard way about the inextricable link between water and energy. The Golden State is having major water shortage problems and despite some much needed rain a few weeks ago, the state still remains in a severe drought. In fact, this past winter in California was one of the driest on record.

The drought has had perceptible effects on California’s energy production, substantially decreasing hydroelectricity levels, compared to 2011. Due to the decrease in hydroelectricity in the state, which usually makes up about 10% of California’s fuel mix, the state has been forced to increasingly rely on dirty, unsustainable fossil fuels, and energy costs have increased. Energy generation from traditional forms of power, such as natural gas, nuclear power, and coal, are not without their own water demands as well. Read More »

Posted in Clean Energy, Climate, Energy Efficiency| Comments closed

Carbon Auction Results Show Stability Amidst Eventful Time for Cap and Trade

KHK pictureIt’s early in 2014, but it’s already been a busy year for cap and trade in California.

On the upside, several major developments have set off a series of conversations around the state’s landmark program, including Governor Brown’s plans for how to invest cap-and-trade auction proceeds to reduce greenhouse gas pollution. Similarly, the California Air Resources Board just released an update to the state’s AB 32 Scoping Plan, laying out the continued need to cut pollution across the Golden State. And, just this past week, Senators Fran Pavley and Ricardo Lara proposed a bill requiring the Air Resources Board to provide recommendations on post-2020 climate pollution reduction targets including for short-lived pollutants. 

On the flip side, new legislation was also proposed to exempt oil companies from the cap-and-trade regulation for the fuels they sell – instituting a carbon tax in its place.  At the same time, the California Chamber of Commerce renewed a year-long challenge to the legitimacy of cap and trade by appealing a prior court judgment that upheld the program.

Yet through all of this activity, one thing has remained certain: California’s landmark AB 32 cap-and-trade program remains a strong, stable and viable example of a successful carbon-cutting program.

Today, results of the cap-and-trade program’s quarterly auction were published and show that, for the sixth straight time, California businesses were able to successfully bid on and acquire allowances to fulfill their compliance obligations. This was the first opportunity to purchase 2014 and 2017 vintage allowances from the state, and every allowance offered for sale was purchased – a clear signal that companies are taking the program seriously.

Although overall demand for 2014 and 2017 credits was reduced compared to prior auctions, there were 6.29 million more bids than could be filled because of high demand. These conditions reflect continued interest in the market, coupled with an expectation of allowance availability in future auctions.

2014 vintage allowances, which can be used for compliance starting this year, sold for $11.48, which is 14 cents above this year’s floor price of $11.34. 2017 vintage allowances cannot be used for compliance until the year 2017, yet a complete sell-out of these allowances in last week’s auction at a price of $11.38 indicates that companies continue to be confident in the program’s strength and longevity. It is clear that companies remain focused on planning their compliance strategies despite recent distractions.

71 companies registered for this auction, representing all regulated sectors of the market, which shows California companies are factoring the cost of carbon into their financial strategies. This all leads up to November 2014, when companies will, for the first time, have to demonstrate they can satisfy a portion of their compliance obligations by holding enough allowances to cover 30% of 2013 emissions. The state raised an additional $130.7 million from this auction, which will be invested in further greenhouse gas reduction projects. At least $32.7 million of this money will go to projects that benefit disadvantaged communities in California – as required under state law.

It’s clear from this auction, and the five successful auctions preceding it, that California has a program that is working. It’s also a program that has support from the majority of Californians. Given the demonstrated staying power and the progress achieved in the first year of the AB 32 cap-and-trade program, it’s no wonder that the market has remained strong despite a flurry of activity surrounding the program.

Current Auction (2014 Vintage Allowances)
Number of allowances offered19,538,695
Percentage purchased100%
Settlement price$11.48

Advance Auction (2017 Vintage Allowances)

Number of allowances offered9,260,000
Percentage purchased100%
Settlement price$11.38

 

Posted in Cap and trade, Cap-and-trade auction results, Global Warming Solutions Act: AB 32| Comments closed

California’s Pioneering Spirit Endures under Cap and Trade

KHK pictureCalifornia’s state motto is “Eureka,” (Greek  for “I found it”) referring to the discovery of California gold in 1848. Shortly thereafter, the Golden State quickly became the land of opportunity, spurring new technologies and catapulting California to the forefront of global innovation.

While California may no longer be flush with gold, it remains a leader in emerging industries, innovation, and technology.  In 2013, it stayed true to its pioneering spirit with the successful launch of the state’s ambitious cap-and-trade program, which is now attracting international interest.

All metrics indicate that a strong, healthy, and enduring carbon market was established in California during its first year of cap and trade, amidst a recovering economy and continuing job growth . The state has seen five successful auctions of carbon credits and an actively traded secondary market. Through this market mechanism, California has placed a price and a cap on carbon pollution while holding the state’s top polluting companies accountable for spewing harmful emissions.  Carbon credit prices have been both reasonable and stable, evidence of a smooth transition to a capped economy with none of the catastrophic results predicted by the program’s opponents.

To mark the one-year anniversary of cap and trade in California, EDF will be releasing an in-depth analysis of the program’s first year on January 8th. This report examines the state’s progress in implementing the cap-and-trade regulation and includes market performance analysis by industry experts and academics, details on auction outcomes and identification of trading trends on the secondary market. It also covers updates regarding ongoing litigation, proposed regulatory amendments and international collaboration. From the extensive data presented in this report, it is evident that cap and trade in California is off to a successful start.

Though challenges lay ahead, there is no doubt that California will rise to the challenge of accommodating the emerging carbon market. As it did during the Gold Rush, the state will continue to develop new technologies and build infrastructure while serving as a model to the world.

With the close of the first year of cap and trade, it is clear that California has found something more valuable than gold – a viable cap-and-trade program that gives the state a chance to address climate change, one of the biggest challenges of our time, and usher in a new era of opportunity and prosperity.

Posted in Cap and trade, Cap-and-trade auction results, General, Global Warming Solutions Act: AB 32| 1 Response, comments now closed

One Year Later, Carbon Auctions Thriving in California

KHK pictureAt this time last year, an 11th hour lawsuit was brought by the California Chamber of Commerce on the eve of the state’s first carbon auction —and with it a wave of questions aimed to cast doubt on the landmark program. Will the auction actually happen? Will companies participate? Will allowances sell?

What a difference a year makes.

Since the first auction took place in November of 2012, we’ve come to find out the answers to those questions are – yes, yes, and yes. And, despite attempts to create uncertainty and confusion it’s held true for all four auctions to date.

The Golden State’s carbon market received another dose of confidence last week when state courts upheld California's ability to auction carbon allowances and hold polluters accountable for their harmful emissions.  The ruling came just in time for the state’s fifth auction, which will take place tomorrow.

While the court decision is good news for cap and trade, perhaps even better is the progress that participants and other stakeholders have made in their discussions about the market over the past year.  From the 2013 California Carbon Summit to a recent Lawrence Berkeley National Laboratory Report, discussions are turning to the future of the carbon market post-2020 and potential linkages with other emissions trading programs.

A year later, the overwhelming sentiment is that the carbon market is here to stay.

Part of this confidence stems from the auction results themselves. In the last auction, all 2016 vintage allowances offered were purchased, signaling belief in the future of the carbon market, as these allowances cannot be used before 2016.  In addition, California companies have become more comfortable participating in the carbon market. This is reflected in the healthy volumes traded daily on the secondary market and the increased stability of prices over the past few months.

The settlement price for 2013 vintage allowances for tomorrow’s auction is forecasted to be lower than that of the previous one, which doesn’t indicate a weak market but rather the increased understanding that compliance will be less costly than previously expected. However, with a floor price of $10.71, which will continue to increase every year, a strong price signal for clean energy improvements remains.

Furthermore, the latest 2012 emissions data released by the California Air Resources Board show an increase in emissions from 2011 in California. This was expected for several reasons including the closure of the San Onofre Nuclear Generating Station, the shortage of hydropower generation in 2012, and the state’s significant economic recovery  during that time. California’s economy continues to rebound and the cap-and-trade program will play an important role in the landmark achievement of decoupling this economic growth from growth in carbon pollution that threatens our communities and the world.

Creating an entirely new market around the buying and selling of carbon emissions has been a long and rigorous process, but California’s record over the last year proves it is possible. Look out for EDF’s complete analysis of the successful first year of cap and trade in California at the beginning of 2014.

Posted in Auction revenue, Cap and trade, Climate, Global Warming Solutions Act: AB 32| 1 Response, comments now closed