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 »

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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 »

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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

 

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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 Carbon Market California: 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, Clean Energy, Climate, Global Warming Solutions Act: AB 32, Linkage| 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.

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

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California’s Latest Cap-and-Trade Auction Shows Staying Power, Sparks International Interest

For those following cap and trade, today is another success for California’s economy and environment. The fourth auction came and went last Friday and the results published by the California Air Resources Board (ARB) are once again decisively positive. With complete sale of current allowances, diverse bidder participation and stable clearing price, the health and staying power of the carbon market is clear.  Let's take a closer look at the results:

Results Summary

Allowance yearAllowances offeredAllowances soldSettlement price
201313,865,422100%$12.22
20169,560,000100%$11.10

Current allowances sold and settlement price: All of the current 2013 allowances offered in this auction were purchased, which indicates that the carbon market remains healthy and competitive. The price per allowance settled at $12.22. This is 13% below May’s clearing price. While this dip was expected by analysts –with one contributing factor being the possible amendment to the cap-and-trade regulation that would increase free allowances to industry and natural gas emitters in the second compliance period — there are a number of reasons why the moderate prices for allowances are good news.

Low prices actually suggest that regulated companies believe they will have lower than expected costs in complying to allow California to meet the carbon cap. And as noted in a separate EDF post, the right way to judge a carbon market is in the cap, not the prices. Another promising reason for lower prices may be the fact that regulated entities like California refineries are investing in energy efficiency projects that cost-effectively reduce both emissions and the companies’ energy bills.

Future allowances sold and settlement price: For the first time in the history of the cap-and-trade regulation, all futures sold at a clearing price of $11.10 over the floor price $10.71. This points to increased certainty in the future strength of the market. As we approach the second compliance period, participants are preparing to meet their compliance obligations. In addition, the market is responding to ARB’s continued commitment to ensuring the longevity of this program by proposing changes like additional cost containment and maintaining stringency on the transportation sector. Another reason for strong demand in the advanced auction can be seen by the fact that over 96% of future allowances were purchased by compliance entities, meaning some of the programs biggest polluters may have started buying credits for their post 2016 obligations.

Qualified Bidders: With each auction, the pool of qualified auction participants continues to diversify. This auction saw 79 qualified bidders. This diversity in participants reflects the great interest in California’s carbon market and demonstrates that there is no single company controlling the market.

Auction proceeds: This auction brought almost $140 million to the state, for a total of almost $400 million to date. California communities should look forward to Governor Brown holding up his commitment to ensure those proceeds are used to advance the goals of AB 32, directing them towards the highest priority, most effective investments for climate pollution reductions, especially in disadvantaged communities which will get at least 25%  or almost $100 million to date.

Sparking International Interest

We’re about nine months into what many have called a “grand experiment,” and far from the doomsday warnings from opponents who argue California’s climate change law will hurt consumers, jobs, and the ability of businesses to expand.

Today, we are seeing a quite different future.

In fact, those sky-is-falling messages continue to be out of sync with economic reality and public opinion in both California and around the world.

A recent PPIC survey shows a record-high majority of Californians say California should act now to reduce greenhouse gas emissions, rather than wait until the economy and job situation improves. And various other jurisdictions are following California’s lead, including other states, provinces and countries. Since California’s first cap and trade auction in November 2012, the state approved linkage with Quebec; Shenzhen, a city on the South China Sea launched the first of seven Chinese regional pilot carbon market systems with California’s top climate change official, California Air Resources Board (CARB) Chair Mary Nichols in attendance at the launch; and the Australia Government Clean Energy Regulator signed a Memorandum of Understanding with California focusing on “information-sharing” to improve our respective market base programs to reduce climate pollution.

The California carbon market continues to march forward with good news. And while a true “global” carbon market may still be a ways off, others around the world are looking to learn from the Golden State.

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