Category Archives: Auction revenue

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 »

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As California’s Legislative Session Ends, Key Environmental Protections Begin

Source: Flickr/jjkbach

Source: Flickr/jjkbach

Anna Doty contributed to this post.

A quick look back at California’s 2014 legislative agenda, which closed in the early morning hours of August 30th, shows it certainly was one for the record books. California took up major efforts to cut climate pollution and portion out billions in new investments, modernize the electric grid, and take on other not-so-small issues such as phasing out plastic bags. This activity happened while California led the nation in a remarkable economic rebound, continued to deal with an epic drought, and combatted the worst air quality in the U.S.

Among the many environmental issues in the spotlight this year, climate change, air quality, clean energy, water, and waste lead the pack.

Implementing a climate protection framework worthy of acclaim

On climate, lawmakers turned a corner by affirming the state’s commitment to AB 32 and green-lighting a new era of pollution reducing investments from the state’s world-class cap-and-trade regulation. Keeping transportation fuels within cap and trade starting January 2015 remained a main focus, with lawmakers facing and rebuffing numerous attempts by regulated industries and other legislators to undermine and delay the state’s landmark program. Throughout the session, lawmakers remained strong, demonstrating a commitment to the state’s growing clean economy and the need to capture the huge savings in health and fuel costs AB 32 will provide. Read More »

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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 »

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

California’s Cap and Trade a Versatile Tool for Environmental Policies

rp_erica-morehouse-287x377-228x3001.jpgGovernor Brown signed a budget last week that lays out for the first time how to invest the millions from California’s landmark cap-and-trade program ($734 million so far). California has shown another way that cap-and-trade is like the Swiss army knife of environmental policies: a versatile tool known for its usefulness and adaptability.

A Multi-faceted Investment Portfolio

California will invest $850 million over the next year to reduce dangerous climate pollution, a portfolio of investments that will benefit almost every part of California’s economy, going to low-carbon and public transportation, weatherization and energy efficient buildings, water efficiency, waste diversion, and natural resources like urban forests. Substantial investments, at least 25% of the total, will be directed to benefit disadvantaged communities most likely to be impacted first, and worst, by climate change.

Research has shown that the green economy is a solid investment since it already grows faster and is more resilient than traditional economic sectors (the San Joaquin Valley saw a 133% growth in employment in seven “green economy” sectors between 1995 and 2010). The budget also creates long-term guidelines for investing in the green economy as the stream of revenue grows in coming years.

Where the Revenue Comes From

California already limits, or “caps,” total carbon pollution from industries like cement manufacturers and food processors, as well as utility companies. Next year, the cap will expand to include transportation fuels and natural gas providers– two of the biggest polluting sectors in the state. The dollars California is investing are generated by holding these polluters accountable for their impact on the environment. Read More »

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

A “Virtuous Cycle” of Low-Carbon Investments Especially for California's Most Disadvantaged Communities

Erica Morehouse photoCalifornians will see a “virtuous cycle” of low-carbon investments begin as cap-and-trade auction proceeds finally head out the door starting this summer.  This is the news from the Brown administration this week detailing how they propose to start investing dollars from 2014 carbon auctions while beginning to repay the $500 million borrowed last year.

We are especially excited to see that California's most disadvantaged communities — the ones that have suffered environmental burdens for years and will be hit hardest by climate change in the future — will see more than the mandated 25% of auction proceeds invested for their benefit.  Consistent with an investment plan released last year, there will be three major categories: sustainable communities and low-carbon transportation, energy efficiency and clean energy, and natural resources and waste diversion.   Clean transportation and sustainable communities will receive the largest chunk ($350 million) of the proposed $850 million investment.  This means we will see investments in solutions such as clean trucks and buses, electric vehicle rebates, zero-emission freight demonstration projects, and enhanced connectivity and modernization for public transit in disadvantaged communities.

Investments like these will create big wins for California’s most at-risk communities.

Consider this: Diesel trucks and buses are the single-largest source of toxic diesel pollution in the state, causing cancer, heart attacks, breathing emergencies, lost days at work, and even premature death.  Similarly, alternative personal vehicles like those with electric batteries can provide benefits to communities.  A recent study by ICF and an earlier study from UC Berkeley both showed significant benefits from investments in clean transportation and other low-carbon investments which include job creation, increased gross state product, and increases in personal incomes, not to mention indirect health care savings.

Why do we call this a “virtuous cycle” of investment?

The economic benefits are not simply the direct benefits you may think of first, such as job growth in areas like manufacturing and selling clean trucks, buses, and vehicles.  Research also shows that when you save $1 on energy costs — which would more than likely go to an international oil conglomerate — the benefit to the economy is $16.

How does this work?  Instead of sending those dollars overseas, you're most likely spending them in your community, on local products and services.

Today, Governor Brown committed to the first of many critical cap-and-trade investments in disadvantaged communities and cleaner options for Californians. With this new virtuous cycle of investment, we expect these and subsequent investments to pay dividends to the health of our citizens, our environment, and our economy for years to come.

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