Climate 411

California’s second carbon market auction of the year raises revenue at critical time for climate funds

This blog was co-authored by Sara Olsen, Project Manager, California Political Affairs

Results of the latest Western Climate Initiative auction were released today, showing continued demand for allowances and confidence in the long-term stability of this landmark program. This auction is expected to generate roughly $1.1 billion for the Greenhouse Gas Reduction Fund (GGRF), which is dedicated to funding initiatives aimed at reducing greenhouse gas emissions and building climate resilience.

A new report from the California Air Resources Board (CARB) finds that, in the past 10 years, climate investments like GGRF have reduced California’s emissions by 109.2 million metric tons — the equivalent to taking 80% of the state’s gas cars off the road — by investing in projects like adding zero-emissions transport options, building affordable housing near job centers and more. As California heads into another summer with an increased risk for wildfire and more impacts of climate change are becoming increasingly severe and evident, the importance of this fund is clearer than ever.

May auction results

  • All 51,589,488 current vintage allowances offered for sale were purchased, resulting in the 15th consecutive sold out auction. This is 0.72% or 373,000 more allowances than were offered at the previous auction.
  • The current auction settled at a price of $37.02, $12.98 above the $24.04 price floor and $4.74 below the February 2024 settlement price of $41.76.
  • All of the 7,211,000 future vintage allowances offered for sale were purchased — these allowances can be used for compliance beginning in 2027. This is the same number of future vintage allowances that were offered at the previous advance auction.
  • Future vintage allowances settled at $38.35, $14.31 above the $24.04 floor price and $2.65 below the February settlement price of $41.00.

What factors may be at play with these results?

A number of factors could be at play with today’s results which saw a lower settlement price than California’s most recent auction. The first is general market variability; potential program changes, such as those being considered by CARB, can drive uncertainty among market participants that results in price fluctuations. While prices in the WCI auctions tend to tick upwards, it’s not uncommon for prices to drop once in a while. This happened most recently in the August and November auctions in 2022, where prices dropped from the May 2022 price of $30.85 down to $27, and then down to $26.80 before starting to trend upward again. Last auction’s settlement price of $41.76 was a record price by $3.03, so today’s price puts the WCI market more on trend with where prices were in November and August of last year. Despite slightly lower prices this quarter, there’s still strong demand overall; the auction was completely sold out. The market continues to be stable, and some price fluctuations are to be expected, especially during periods of program adjustment.

Where is the revenue getting invested?

Over the past ten years, California delivered $11 billion from the Greenhouse Gas Reduction Fund (GGRF) to more than half a million projects that cut pollution and mitigate the impacts of climate change. These investments yield meaningful environmental and community benefits, including a 109 million metric ton reduction of greenhouse gas emissions, 1,248 new or expanded transit projects, 29,800 new jobs, and 12,606 affordable housing projects under contract.

The $1.1 billion in revenue for GGRF from this auction comes at a critical moment, as California grapples with a $27.6 billion budget deficit. As the Governor and policymakers explore budget strategies, climate initiatives face the looming threat of funding cuts. In January, Governor Newsom proposed more than $3.1 billion in cuts and more than $5 billion in delays for climate funding. In the May Revision of his 2023-24 Budget Proposal, Governor Newsom proposed over $3 billion in additional cuts to significant climate investments. The proposal also reallocated funding for various climate programs to GGRF, relying on this source to alleviate the effects of the budget deficit.

Cap-and-trade, through emissions reductions and revenue generation, will be pivotal in addressing California’s current budget and climate challenges. The State’s reliance on the Greenhouse Gas Reduction Fund as a lifeline for essential climate initiatives only further underscores the need for these funds to be allocated strategically and exclusively towards climate and environmental justice priorities.

Posted in California, Carbon Markets, Cities and states, Economics, Greenhouse Gas Emissions, Policy / Comments are closed

Advanced methane technologies can strengthen new landfill pollution limits

(This post was co-authored by EDF’s Peter Zalzal)

When organic waste ends up in landfills, it produces methane — a powerful climate pollutant —as it decomposes.

In the U.S., landfills are our third largest source of methane and a major driver of climate change. They also emit large amounts of health-harming and even cancer-causing pollution, such as toxic benzene, that endangers nearby communities. And to make matters even worse, they cause noise and odor problems.

Recent scientific studies indicate that landfills may be an even greater source of pollution than we thought. A study led by scientists at Carbon Mapper and recently published in the journal Science surveyed 20% of open U.S. landfills and found significant point source emissions at the majority (52%) of sites.

Earlier work based on data from the TROPOMI space satellite looked at 73 landfills and found their pollution was, on median, 77% more than what was reported to EPA’s Greenhouse Gas Reporting Program.

Advanced methane monitoring technology has developed rapidly in recent years, creating new opportunities to substantially reduce harmful pollution from landfills. EPA’s recently finalized oil and gas standards allow operators to deploy these technologies, such as aerial flyovers and drones, to find and fix methane leaks.

Building from this work, EPA now has a vital opportunity to incorporate advanced technologies into new landfill rules.

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Posted in Clean Air Act, Greenhouse Gas Emissions, Innovation, News, Policy / Comments are closed

We urgently need pollution limits for hydrogen facilities

A hydrogen center in Germany. 

The Environmental Protection Agency has now finalized a wide array of standards to protect people and the climate from dangerous pollution. Those standards cover some of the largest polluting sectors in the U.S., including oil and gas production, power plants, and cars and trucks.

But there’s another source of dangerous pollution that still isn’t subject to air pollution limits. With a projected doubling of hydrogen production over the next decade, we need protective standards that will ensure any growth in this industry doesn’t exacerbate public health and environmental harms. Luckily, EPA recently announced that it plans to do just that (see page 539).

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Posted in Greenhouse Gas Emissions, News, Policy / Comments are closed

Electrifying Medium and Heavy-Duty Vehicles: A Critical Step Towards Environmental Justice in North Carolina

As the impacts of climate change reveal themselves to North Carolinians in the form of heat, flooding, wildfires, drought, and increasingly intense and more frequent tropical storms, the case for urgent action to combat climate change is strengthening. Our state has made important strides, setting vehicle electrification goals and power sector emissions reductions directives, but new data from the National Oceanic and Atmospheric Administration shows that levels of greenhouse gasses in our atmosphere continued a steady climb in 2023, nonetheless, underscoring that our efforts to reduce emissions from all sources must be tackled with urgency.

One significant source of emissions — medium and heavy-duty vehicles (MHDV) like trucks and buses — is an area of important focus. We know from a 2022 study that, despite constituting only 6.5% of on-road vehicles in North Carolina, MHDVs are responsible for a staggering 34.5% of greenhouse gas (GHG) emissions within the transportation sector. Adopting clean transportation policies for MHDVs can make a big difference toward reaching the state’s climate goals and could have a positive impact on North Carolina’s economy — netting nearly $118 billion in health, climate and economic savings over a 25-year period.

And now, in a new analysis, we have further knowledge to inform MHDV policies in the state. Beyond the environmental perspective, there is the human impact that we’ve suspected was significant, and now have data to confirm a disproportionate health burden on marginalized North Carolina communities. This new analysis takes a closer look at localized impacts, examining the communities most affected by MHDV emissions, and exploring the potential health benefits of implementing strong policies to reduce pollution from this sector.

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Posted in Cars and Pollution, Cities and states, Policy / Comments are closed

Financing Solutions for Slow Onset Climate Challenges: Drawing on Nature’s Untapped Potential

Protecting and restoring mangrove forests are cost-effective nature-based solutions to buffer coastlines from the impacts of climate change. Photo: Environmental Defense Fund

By Juan Pablo Hoffmaister, Associate Vice President, Global Climate Cooperation and Zach Cohen, Senior Analyst, Global Climate Cooperation 

Climate change isn’t just about sudden disasters. Creeping issues like biodiversity loss, rising sea levels, and desertification are slowly reshaping our world, often relegated to the background in the face of more immediate climate emergencies.  

These long-term challenges are known as slow onset events (SOEs). They place new pressures on communities to adapt through measures such as disaster preparedness, while also leading to losses and damages (L&D) the impacts of climate change which occur despite mitigation and adaptation efforts. 

While the international community has made important progress to address the impacts of SOEs – including launching a new Loss and Damage fund to assist vulnerable countries in preparing for and responding to SOEs – the reality is that financing for slow onset events remains severely lacking. Many countries are struggling to secure the resources needed to address these monumental environmental dilemmas.  

In order to prioritize tomorrow’s issues today, we must rapidly scale up finance to tackle SOEs. The L&D fund will play a key role on this front – it recently held its first board meeting, and as it gears up to provide financing to those in need, it must do so in a way that optimizes public resources to maximize impact and leverages the solutions already provided by nature. 

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How to improve soil modeling to maximize climate and farm benefits

Credit: Zoran Zeremski/iStock

Efforts to curb agricultural greenhouse gas emissions and increase soil carbon storage are picking up steam to help mitigate the impacts of climate change. To have maximum impact, we need ways to reliably quantify their outcomes. 

Direct measurement of the impacts of climate smart agricultural practices are imperative to instill confidence, but they aren’t forward-looking and can’t be done everywhere. Enter the use of process-based models (e.g., DNDC, DayCent) to estimate these changes more rapidly and across broader areas.  

Process-based models are useful tools, but they have limitations, and many researchers and practitioners remain uncertain about how to use them most effectively. Yet, while skepticism in their accuracy remains a challenge, interest in them is skyrocketing, making it even more important that the community work together on their improvement.  

A new report led by Environmental Defense Fund digs into how carbon project developers and companies are using process-based models across projects to explore current challenges, identify knowledge gaps and recommend improvements.  

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Posted in Agriculture, Innovation, News, Science / Read 1 Response