Category Archives: Cap-and-trade auction results

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 »

Also posted in Auction revenue, Cap and trade, 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 »

Also posted in Auction revenue, Cap and trade, General, Global Warming Solutions Act: AB 32, Linkage, 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 »

Also posted in Cap and trade, 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 »

Also posted in Cap and trade, Climate, Global Warming Solutions Act: AB 32| 3 Responses, comments now closed

California and Quebec: A Partnership Par Excellence

rp_erica-morehouse-287x377-228x300.jpgOn Tuesday, the Canadian province of Quebec held its second cap-and-trade allowance auction.

Today, the results are in – and they’re encouraging.

99% of the current vintage year allowances and 84% of the future vintage year allowances offered for sale in this auction were purchased at the floor price of $11.39 CAD.  This is a significant increase from Quebec’s first action, which saw the sale of only 34% and 27% of current and future allowances, respectively.

These results reflect growing interest and demand in this burgeoning carbon market after it officially linked with California’s program at the beginning of 2014.

However, the results of Quebec’s auction are a bit different from the results we saw in California's sixth auction last month. Most notably, California’s auction saw higher demand for allowances, driving the settlement prices for both current and future allowances above those seen in Quebec’s auction.

So, why do these differences exist?  And what do the Quebec auctions actually tell us?  Read More »

Also posted in General, Linkage| 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

 

Also posted in Cap and trade, Global Warming Solutions Act: AB 32| Comments closed
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