{"id":268,"date":"2010-12-14T08:00:42","date_gmt":"2010-12-14T13:00:42","guid":{"rendered":"http:\/\/blogs.edf.org\/markets\/?p=268"},"modified":"2010-12-13T11:21:23","modified_gmt":"2010-12-13T16:21:23","slug":"first-steps-for-the-california-carbon-trading-market","status":"publish","type":"post","link":"https:\/\/blogs.edf.org\/markets\/2010\/12\/14\/first-steps-for-the-california-carbon-trading-market\/","title":{"rendered":"First steps for the California carbon trading market"},"content":{"rendered":"

Whoever said cap and trade is dead hasn\u2019t been paying attention to the news<\/a> in California.<\/p>\n

Recently, the first trade of a greenhouse gas emissions permit in the Golden State took place, signaling the beginning of what experts project to be a robust carbon market\u2014and the largest in the U.S. given the absence of a nation-wide policy (note that the Regional Greenhouse Gas Initiative (RGGI)<\/a>, the first mandatory market-based effort in the U.S. with 10 participating Northeastern states, applies to utilities, while California\u2019s program will also apply to industry and in later years, transportation).\u00a0 The trade takes place hot on the heels of the defeat of Proposition 23<\/a> in the November elections.<\/p>\n

Although the compliance market won\u2019t launch until 2012, Barclays Bank and NRG Energy completed the first allowance trade:\u00a0 a forward contract which guarantees the delivery of allowances valid for use in the California market at the start of the program at a locked-in price (around $11-$11.50 according to Point Carbon<\/a>).\u00a0 By helping provide certainty about the future, these types of trades allow firms to make smart business planning decisions, such as which energy technologies to invest in.\u00a0 Experts at Barclays as well as at San Francisco-based CantorCO2 expect that other early trades are soon to follow, as firms look for ways to reduce risk and start transitioning to a clean energy economy.<\/p>\n

Ensuring the integrity of the carbon market\u2026<\/strong><\/h3>\n

State regulators have been able to provide sufficient certainty about how the market will be structured and the timeline for regulatory action to allow for this early launch of the California market.\u00a0 However, it will be important to nail down sooner rather than later the nitty-gritty specifics of how the market will be regulated in order to ensure that trading occurs in an efficient and transparent way (note that the California Air Resources Board (CARB) is currently accepting comments<\/a> on a detailed rule proposal).<\/p>\n

The financial crisis we just lived through should provide ample incentive for us to make sure to get the rules right and for ensuring tough enforcement and strong oversight \u2014 for example, by requiring all carbon trading to be done on registered exchanges, rather than over the counter.\u00a0 On that point, it\u2019s worth noting that the recently passed Dodd-Frank Financial Reform legislation requires the Commodities Futures Trading Commission (CFTC)<\/a> to lead an interagency study on how best to regulate the carbon market<\/a>.\u00a0 (Carl Royal\u2019s 2009 testimony<\/a> from the House Energy & Commerce Committee hearing on the American Clean Energy and Security Act and our own fact sheet<\/a> provide some more arguments).<\/p>\n

The path forward for CA<\/strong><\/h3>\n

California’s cap-and-trade program will cover the power and industrial sectors starting in 2012 and the transportation sector (including cars and fuels) beginning in 2015.\u00a0 Time and time again, California and other regional initiatives, like RGGI, continue to lead the nation on sensible energy and climate policy (and stay tuned for developments in the Western Climate Initiative (WCI)<\/a> as well as New Mexico<\/a>).\u00a0 Time for Washington to catch up.
\n<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Cheers for California’s first carbon trade. Next step: getting the details right for market regulation.<\/p>\n","protected":false},"author":4696,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[200,9031,9306],"tags":[],"coauthors":[],"class_list":["post-268","post","type-post","status-publish","format-standard","hentry","category-california","category-cap-and-trade-watch","category-market-101"],"acf":[],"yoast_head":"\nFirst steps for the California carbon trading market - Market Forces<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/blogs.edf.org\/markets\/2010\/12\/14\/first-steps-for-the-california-carbon-trading-market\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"First steps for the California carbon trading market - Market Forces\" \/>\n<meta property=\"og:description\" content=\"Cheers for California's first carbon trade. 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