Category Archives: Climate

California and Mexico: Valuable Teammates in the Fight against Climate Change

For nearly a decade, California’s landmark climate change law, AB 32, has been widely recognized for its efforts to curb greenhouse gas (GHG) emissions and build a low-carbon future.

While climate action in Washington, D.C. continues to be stymied, our neighbor to the south is a key player and emerging leader on the global climate stage and is willing and able to join California in the fight.

Mexico has been a leader in advancing UN global climate change talks and recently passed its own historic climate change law.

These actions have garnered much attention from the international community, including Governor Jerry Brown.

In fact, his administration has indicated it is reaching out to Mexico on climate change, and just this week we’ve learned that Mexico’s President, Enrique Peña Nieto, is planning a visit to the Golden State.

The opportunities here can’t be overstated. As Governor Brown pointed out in his 2014 State of the State Address, if we want to move the needle on cutting carbon pollution, California can’t do it alone.

The collaboration between California and Mexico could be a powerful force to move global action on climate change forward, while creating mutual benefits. And, the partnership is both a natural and practical one.  California and Mexico have deep cultural, political, and economic ties that bind their histories, and climate change represents an opportunity for leaders on both sides of the border to work together to shape our collective future.
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Also posted in Linkage | Comments closed

Art and Sustainability: The Next Big Thing

"Today is about making our community more beautiful,” exclaimed State Assemblyman Raul Bocanegra (D-Pacoima), at a recent EDF-sponsored community art show and mural launch complete with live DJ’s, an interactive urban planning workshop, local artists, and youth activists.

I know what you might be thinking. “Say what? EDF and art?”

This is one of the new routes we’re taking in our commitment to “finding the ways that work.”

We looked to accomplish two things with this project: to help spark imagination and civic pride by bringing local artists and youth together to create a vision for a more sustainable city, and to make a concerted effort to meet the community where they are on the environmental issues they care about. The results were both inspiring and enlightening.

Our first launch event, in Fresno, CA, featured local muralist Mauro Carrera and local nonprofit partner organizations Valley LEAP, Arte Americas, and Fresno Building Healthy Communities.

The vivid imagery of the Fresno mural was spectacular: an 8’ x 16’ mobile fresco honoring the agricultural heritage of California’s Central Valley and its hardworking migrant workers, while integrating and embracing a new vision of more clean energy, fresh water, bike access, clean air, and green space.

The mural will be rotated throughout the year around several local community organizations and used for future youth conferences and monthly art walks in downtown Fresno.

The next day we moved the party to Los Angeles’ San Fernando Valley, partnering with Pacoima Beautiful and local artist Kristy Sandoval for a 15’ x 30’ mural painted outside the city’s Community Center, which houses numerous non-profit youth organizations. This project featured a call to “keep Pacoima beautiful,” and a bold vision to capture some of the vast solar potential in sunny San Fernando Valley (a recent EDF study found that capturing just 5% of the rooftop solar power in the area could create thousands of jobs and reduce carbon emissions by over 200,000 metric tons per year).

The mural will expand in the future along the Community Center’s outdoor wall to include images calling to mind water conservation and urban greening, and will occupy an anchor spot on the regular Pacoima mural walking tour.

So why sustainability through art?

EDF’s Keith Gaby nailed it last month with a blog that set a refreshing tone for the environmental movement:

The reality is that environmentalists often have a difficult time reaching the people with whom we most need to build trust in order to accomplish our goals: Americans who don't feel a natural kinship with the traditional environmental movement. We need to accept that other people's priorities — economic or cultural — are valid and important.

Effective environmental policy needs to recognize and prioritize the local and regional needs of communities; part of doing this means communicating policies and values that meet folks where they live, literally. Public art (such as murals) is a special way to facilitate a conversation that anyone can access, a conversation that comes from the community, for the community.

In the weeks and months leading up to the mural launches, EDF staff and partners participated in local workshops with community members to discuss climate change, clean energy, and resiliency. Our partners led the conversation and the artists took in feedback about the collective vision, incorporating it into each mural’s design. The end result was something enduring and beautiful, a bold vision for a sustainable future and a rousing call to action to help us get there.

Stay tuned to EDF to learn more about the official mural launch parties – including two mini “web-isodes” – and more of our ideas on how we plan to jump on the “next big thing” in sustainability.

Also posted in Clean Energy | Comments closed

Does the future of the Amazon rainforest lie in California?

(This post first appeared on EDF Voices)

By Derek Walker and Steve Schwartzman.

Over the past year, California’s new carbon market has held five auctions, generating $530 million for projects that reduce climate pollution in the state. This is just the start, however, as we believe the program has potential to achieve substantial environmental benefits half a world away in the Amazon rainforest.

We are working with community partners, scientific and business leaders, and California policy makers to craft a rule that permits credits from REDD (Reducing Emissions from Deforestation and forest Degradation) to be used in California’s carbon market, rewarding indigenous and forest-dwelling communities with incentives for ecosystem protection.

From left to right: Lubenay, Juan Carlos Jintiach, Derek Walker and Megaron Txucarramae (a leader of Brazil’s indigenous Kayapo tribe).

Using California’s new carbon market to reward rainforest protection would be a powerful signal to Brazil, Mexico, and other tropical countries—and to the world—that leaving forests standing is more profitable than cutting them down.

With the right rules in place, California could create an international gold standard for REDD credits that could be adopted by emerging carbon markets in China, Mexico and beyond.

The right technology

There’s a misperception about how hard it is to measure whether forests are being destroyed or protected. Current technology makes it possible, right now. Satellite and airplane-based sensors are already capable of recording what’s going on with high accuracy. This technology enables us to measure emissions reductions across whole states or countries, the best way to ensure that the reductions are real.

The right partners

We need to help pull together the best policy experts, scientists, and environmental organizations to help California government officials write model rules for REDD that can create a race-to-the-top for forest protection around the world. We need to show that trailblazing states – like Acre in Brazil and Chiapas in Mexico – are ready to be partners with California and can deliver the rigorous level of enforcement and program implementation that California requires.

The right time

There’s real urgency to linking California’s carbon market with REDD. Even though Brazil, home to the world’s largest tracts of tropical forests, has cut deforestation by about 75% from its 1996-2005 levels and consequently become the world leader in reducing greenhouse gas emissions, that progress is fragile. Over the past year, agribusiness has been pushing back hard against law enforcement and the creation of protected reserves, and deforestation increased nearly 30%. If we want Brazil to continue reducing its deforestation towards zero, we must provide economic incentives to protect the Amazon, and California can be an important catalyst in doing that.

Also posted in Global Warming Solutions Act: AB 32, Offsets | 1 Response, comments now closed

Community Fuels: Changing the Face – and Impact – of the Fuel Industry

EDF’s Innovators Series profiles companies and people across California with bold solutions to reduce carbon pollution and help the state meet the goals of AB 32.  Each addition to the series will profile a different solution, focused on the development of new technologies and ideas.

If one were to look around the room at a biodiesel or petroleum industry conference, they would quickly realize that the majority of attendees are male.  This is something that hasn’t escaped the notice of Lisa Mortenson, CEO of Community Fuels, who jokes that her gender makes her stick out at such events. Unique as it is that Community Fuels has a female leader, this is just one way that the company is changing the face of the alternative fuel industry.

Community Fuels is helping to make biodiesel a viable solution in California, by combining exciting research, quality production, and strong business practices. Biodiesel, a renewable alternative to traditional diesel, is made from raw materials (feedstocks) such as vegetable oils and animal fats, rather than fossil fuels. By virtue of its lower emissions profile when compared to standard diesel, biodiesel is helping California achieve its AB 32 and Low Carbon Fuel Standard greenhouse gas emissions reduction goals – and, in turn, the biodiesel industry is benefitting from those policies. “Groundbreaking California policies like AB 32 and the Low Carbon Fuel Standard drive Community Fuels’ growth,” says Mortenson. “Without strong policy support, companies like Community Fuels wouldn’t have the confidence to develop and build new businesses to displace a portion of fossil fuels with clean, renewable fuels like biodiesel.”

Who: Community Fuels, founded in 2005 and in production since 2008, has 25 full-time employees.

What: Community Fuels produces some of the highest quality and innovative biomass-based diesel fuels available. Their plant is operating at 10 million gallons per year of biomass-based diesel fuel with further expansion underway. Fuel is sold in bulk to the petroleum industry for blending with traditional diesel.

Where: Community Fuels operates a bio-refinery, laboratory and clean fuel terminal at the Port of Stockton, California.

Why: Community Fuels is dedicated to producing high-quality biodiesel for blending that lowers harmful GHG emissions, grows the state’s economy, and reduces dependence on foreign oil.

Long before Governor Brown’s plea for Californians to reduce their gasoline consumption, the founders of Community Fuels recognized the damaging pollution caused by traditional fuel and that biodiesel was an efficient alternative fuel that had the potential to scale and greatly reduce harmful emissions. The founders looked not only at California’s strong policies as a reason to open up shop within the State, but also at public sentiment — where they saw growing support of renewable, clean fuel. Mortenson is one of the co-founders and has served as CEO since the company was formed in 2005.

Community Fuels is the first, and currently only, producer in the nation to earn both BQ-9000 producer and laboratory certifications – industry-recognized third party accreditations of quality control procedures for fuel production and analytical laboratory capabilities.  This has contributed to Community Fuels’ reputation for quality and integrity, which has assisted the company in selling the majority of its biodiesel in bulk to petroleum companies and refiners who demand high quality products suitable for commercial-scale distribution and use.

Lisa-please work

Lisa Mortenson, CEO of Community Fuels

The petroleum companies typically blend the fuel with petroleum diesel, using 5% or less biodiesel. Mortenson believes that this low-percentage blend is attractive to petroleum companies and consumers because it requires no change to existing infrastructure – the marketability of this end product, according to Mortenson, “results in a large sale volume,  substantial amounts of displaced foreign oil and wide-scale greenhouse gas emissions reductions”.  The combination of these attributes means the biodiesel produced by Community Fuels spurs indirect job growth (by increasing the need for workers across the supply chain), helps to grow California’s economy, and goes a long way towards shaping a cleaner environment.

Community Fuels is constantly researching new feedstocks including unusual materials such as meadow foam seed oil, and has partnered with other companies like Solazyme to process algae oil.  Mortenson reports that every feedstock it uses is carefully vetted to ensure quality, scalability to a wide market, and compliance with a range of regulatory and sustainability standards.  Community Fuels also commits to using feedstocks that are co-products of other industries such as soybeans, canola, animal fats, recycled oils, and the co-products from ethanol plants.

Pano 1It is clear that Community Fuels is dedicated to creating a cleaner environment and a healthier state economy.  A series of grants received from federal and state agencies are both recognition of Community Fuels’ valuable work and a way for the company to continue its contributions to California.  EDF looks forward to seeing Community Fuels further its efforts to expand, innovate, and lead the alternative fuel industry as part of California’s clean energy economy.

 

Please note that EDF has a standing corporate donation policy and we accept no funding from companies or organizations featured in this series.  Furthermore, the EDF California Innovators Series is in no way an official endorsement of the people or organizations featured, or their business models and practices. 

 

Also posted in California Innovators Series, Clean Energy, Global Warming Solutions Act: AB 32, Jobs | Comments closed

Some Records Are Not Meant to Be Broken

Source: Drought Monitor

By Tim O’Connor and Katie Hsia-Kiung

2013 was a record-breaking year in many respects. Peyton Manning broke the record for the most touchdowns and passing yards thrown in a single NFL season. At age 19, Ryan Campbell became the youngest person to circumnavigate the world, and at age 80, Yuichiro Miura was the oldest to climb Mount Everest.

While many of the records broken last year demonstrated remarkable human stamina, determination, and grit, there were other “accomplishments” that shouldn’t be received so warmly.

Sacramento, for example, experienced the driest year since they began measuring rainfall in 1878.  Conditions are so dry that some cities in the Central Valley are already imposing water rationing orders and more are expected to follow. According to the U.S. Drought Monitoring System, approximately 85% of the state is suffering from severe drought, and the snow pack is so meager in some places, there is simply no snow to measure.

Across California, temperatures on Christmas Day set new heat records, reaching 15 degrees above average in some areas.  These unseasonably high temperatures followed a record-breaking cold snap just a few weeks earlier, begging the question of whether Santa left sweaters or T-shirts under the tree.

These extreme weather records are not just unique to California. This past December, New York City, Philadelphia, and Atlantic City all broke previous high temperature records– which has now been followed by extreme cold and snow storms across the eastern half of the U.S.

One question on the minds of many is what is causing this extreme weather, and whether man-made climate change is the culprit.  The response lies in science. That is, while it is difficult to attribute individual weather events to climate change, the continued rise in record-breaking events is just what has been predicted and statistically too significant to ignore.

Ironically, unlike records from sports or other human feats, it takes drive and determination to avoid breaking climate change records. Scientific experts across the world agree that after over a century of increasing fossil fuel combustion, the planet is on a path towards more frequent extreme weather events, and we must cut climate pollution to stop this from happening.  This will require investment in low-carbon solutions like clean energy, clean fuels, and efficiency.

Similar to how taking steroids out of baseball brought the sport back to its rightful state, cutting climate pollution through efforts like California’s Global Warming Law, AB 32, will bring the atmosphere back towards greater stability.  Though the state can’t solve climate change alone, AB 32 is a huge step in the right direction, one which is leading other jurisdictions to take action.

Like home runs and touchdowns, droughts and snowstorms will always be a part of the environment we experience, we just don’t need any extra ones. As climate pollution is reduced, and with it the human caused impacts of climate change, we’ll see lot fewer records being broken every year, letting communities – and statisticians everywhere – live a little better.

Also posted in Global Warming Solutions Act: AB 32 | Comments closed

Four Reasons California Cap and Trade had an Extraordinary First Year

Emily Reyna - 300dpi(This post first appeared on EDF Voices)

In California, we’ve just marked the one year birthday of the state’s landmark cap-and-trade program, a market-based approach to reducing the Golden State’s carbon pollution to 1990 levels by 2020. EDF thinks it’s a pretty big deal, and we’re not alone: the program weighed in at number one on Time’s top 10 green stories of 2013.

In lieu of cake and candles to celebrate the program’s first year and future potential, we've published the California Carbon Market Watch: A Comprehensive Analysis of the Golden State’s Cap-and-Trade Program, Year OneThis report is our comprehensive assessment of cap and trade’s inaugural year, and our analyses and interviews with market experts conclude that a strong, healthy, and enduring carbon market has emerged.

We know that California's program is still young and isn’t the world’s first emission trading program, or even the first in the U.S., so why are we so excited about this milestone? Here are the top four reasons we’re celebrating – and why the global community should, too:

1.      It’s a well-designed program off to a promising start. California has held five allowance auctions to date and they’ve all run smoothly. All emissions allowances usable for compliance in 2013 were sold, auction participation has been strong and allowance prices have remained stable and reasonable. In addition to successful quarterly auctions, a healthy secondary market over the first year suggests that regulated companies are purchasing allowances and thereby incorporating the cost of carbon pollution into their strategic planning. This successful start is due to a commitment to building a solid foundation of principles carried out under the highest of market standards.

Genesis343/Deviant Art

2.     With cap and trade in place, the California economy continues to recover. With a price signal now in place for emission reductions, regulated companies can flexibly decide how to reduce their pollution. In addition, clean energy companies and innovators are creating products and services that are transforming California to a clean energy economy. And money raised by the auctions will be invested in this clean energy future, and especially benefit communities hit hardest by climate change. These investments will boost clean tech in California, improve air quality, and create jobs.

3.     The foundation is set for a strong, long-term program. In 2015, California’s cap will more than double in size to cover 85% of the state’s economy and include transportation fuels, thus ensuring carbon pollution reduction from its largest source – transportation. And, there is already discussion in the state capital about the program’s future after meeting its goals by 2020.

With these positive indicators, we’re confident cap and trade is here to stay. The continued success of this program will also show the world that cutting carbon can be done efficiently and affordably, while driving innovation and growing an economy that builds healthier – and more resilient – communities.

4.     The world is watching…and is starting to act.The program is the most comprehensive and ambitious in North America, in both the sheer size of the state’s economy (the 8th largest in the world) and the number of sectors covered. Cap and trade is not only cleaning up California, it’s also serving as a model to build a comprehensive solution to the global climate crisis.

If we want to move the needle on climate change, it will take a global community to make it happen. The state’s carbon market is an important step, and we hope other jurisdictions will follow our lead to create market programs of their own.

In the past year alone, there are promising signs of collaboration beyond California’s borders: the Golden State has formed a series of important partnerships including linkage with Quebec, a non-binding agreement with Oregon, Washington state and British Columbia to establish a regional climate plan, a Memorandum of Understanding (MOU) with China which launched seven of its own pilot trading programs last year, and a MOU with Australia to guide collaboration in addressing climate change.

With California as a shining example of what is possible, I'm confident that others will continue to join the fight. So, happy first birthday California cap and trade. May the years ahead be as bright as the first.

Also posted in Cap and trade, Cap-and-trade auction, Clean Energy, Global Warming Solutions Act: AB 32, Linkage | Comments closed

The Winning Trilogy to California's Climate Approach: Research, Reduce and Adapt

Erica Morehouse photoNirvana, Lord of the Rings movies and a tasty BLT. Great things seem to come in threes – and California’s vigilant efforts to combat climate change are no exception.

With this week’s release of a major climate adaptation plan draft from California's Natural Resources Agency, the state continues to take bold steps to address climate change and cut pollution using a “research, reduce and adapt” approach.

The winning trilogy:

Conduct Thorough Research

As EDF knows, good policy is grounded in science. National and international reports warn us of the dire consequences of climate change, and on the local level, research shows California is particularly vulnerable to its impacts.  The first step in addressing any problem is gathering the facts, which is why reports from the Climate Action Team (CAT) dive into California specific climate impacts and science on mitigation and adaptation.

Another component of climate research is looking at the hard numbers. How much carbon pollution are large facilities in California emitting? This data is released annually by the Air Resources Board and the US EPA. As recent numbers show, emissions at most of these facilities have been decreasing since 2008, but the state still has a lot work to do to reduce its overall emissions, especially after the closing of San Onofre Nuclear Generating Station.

Reduce Greenhouse Gas Emissions

Once policy makers are armed with the science and hard data, they must take action. The CAT’s first report led to the passage of AB 32, California's Global Warming Solutions Act, which aims to reduce the state’s greenhouse gas emissions to 1990 levels by 2020. The 2008 Scoping Plan gave a broad overview of how California will use different policies to meet this target, and last month EDF and other stakeholders submitted comments to the 5 year update draft of the Scoping Plan.

This update noted that California is on track to meet its 2020 target, and that the state should focus on setting a new reduction target for 2030 that will set us on the path to reduce greenhouse gas emissions 80% below 1990 levels by 2050. A second draft of this updated Scoping Plan is expected in late January.

Adapt to a Changing Climate

While reducing emissions to avoid catastrophic effects is absolutely critical, climate change is now a reality and some costly and damaging impacts are unavoidable.  That’s why in 2009 California became the first state to develop a comprehensive plan for adapting and living with expected climate impacts including drought, wildfires, rising sea levels and water shortage.

The draft 5-year update of the adaptation plan, released this week, looks at the ways we will need to adapt to things like changing water patterns, more hot days and increased demand on our electricity system.  In addition, the Natural Resources Agency noted the need to better understand impacts on wildlife and habitats, and assess the adequacy of our emergency response systems.

While the science keeps evolving, the need for adaptation to increased impacts keeps growing. And until the global trajectory of carbon pollution reverses, we must continue to push for innovative emission reducing policies.

This trilogy of interlocking strategies — research, reduction and adaptation — provides California with a solid foundation to continue its groundbreaking leadership on climate change.

Also posted in Global Warming Solutions Act: AB 32 | 1 Response, comments now closed

From the ozone to your refrigerator, putting the chill on climate change

oconnor_tim_287x377(This post originally appeared on EDF Voices)

Back in the 1980s, an international alarm was sounded when a growing hole in the Earth’s ozone layer was discovered over the Antarctic. This phenomenon was caused, scientists said, by the presence of Ozone Depleting Substances (ODS) like the gases used in air conditioners, refrigerators and elsewhere.

There were predictions, if the ozone hole were to spread, of massive crop failures, an explosion in skin cancer rates, and mass extinction of species. Concern over the problem became so widespread that it even became the subject of a skit on “Saturday Night Live.”

Ultimately, however, the world community acted: In 1987 theMontreal Protocol was signed  by 46 nations, mandating a global phase out of ODS. Since then, scientists have shown that the production phase out of ODS has helped to shrink the hole in the ozone layer, while at the same time helping slow climate change.

Replacing chemicals that are 10,000 times more potent than CO2 as accelerants of climate change with ones that are a few thousand times stronger is no solution. ODS substitutes still make their way into the atmosphere when refrigerators are recycled and air conditioners leak. Furthermore, as globalization and economic growth makes refrigeration increasingly available in the developing world, the climate change problem associated with growing use of ODS substitutes is getting worse.

Studies have revealed that cooling systems in places like grocery stores and office buildings in Southern California regularly leak 15% to 30% of their refrigerant per year. That means that, worldwide, millions of tons of climate change pollution is being released every year.

NASA Goddard Photo and Video/flickr

There are simple fixes to this leakage problem. In California, for example, equipment inspection and leakage standards have been adopted as part of the state’s global warming law (AB 32). This has resulted in reduced ODS substitute losses into the air and savings for businesses that otherwise would have to buy recharge chemicals. In addition,companies are popping up to help manage refrigeration use, and some equipment operators are demonstrably leaking less.

In June 2013,President Obama and President Xi of China agreed to work together to phase down the consumption and production of hydrofluorocarbons (HFCs), a key ODS substitute gas. This a pact that has the potential to reduce about 90 gigatons of CO2equivalent by 2050 (that’s equal to roughly two years’ worth of current global greenhouse gas emissions).

The U.S.-China pact could point the way toward a national and international policy on ODS substitutes. In the face of the growing urgency over climate change, we need a comprehensive solution to this problem.

Also posted in Global Warming Solutions Act: AB 32, Offsets | Comments closed

California’s Carbon Market Caps off Successful First Year of Auctions

Emily Reyna - 300dpiThe 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.

nov13 results

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.

Also posted in Cap and trade, Cap-and-trade auction, General, Global Warming Solutions Act: AB 32 | Comments 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.

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