Four Important Things To Know About California’s First Ever Carbon Auction

by Emily Reyna, via Environmental Defense Fund

While millions of Americans recover from the Sandy-Nor’easter extreme weather event combo, and even as President Obama’s remarks about action against a “warming planet” linger, all eyes will be on California this coming Wednesday. This is when the next big event in the climate change conversation will take place.

Between 10am and 1pm pacific time on November 14th, California will conduct the state’s first ever cap-and-trade auction for climate change pollution.  This landmark event will kick off the second largest carbon market in the world, the European Union being the first. Entities covered in the program include utilities, oil refineries, oil producers, and large manufactures, though other individuals and organizations can also participate to buy carbon allowances if they meet the state’s rigorous requirements.  A practice run was held back in August, and all systems are ready to go. More information about the nuts and bolts of the auction can be read here.

In anticipation of this historic occasion, here are four things to keep in mind:

1.  This is the best designed cap-and-trade program in the world
California has the good fortune of learning from predecessor cap-and-trade programs like the European Union Emissions Trading Platform, the Regional Greenhouse Gas Initiative, and the Acid Rain Program, just to name a few. Key elements of California’s program include giving free allowances to industry in the beginning years to help with transition; letting entities bank allowances for future use; and establishing an allowance reserve in case prices exceed a certain value. All help keep carbon prices more stable and make for a well-functioning market.

2.  A price will be established for carbon, but that will vary as the program evolves
The California program will include auctions four times a year through 2020 – 32 more times after November 2012.  As such, the number of participants, the settlement price and other results of the first auction may not necessarily predict the activity of future auctions. Over time, the market will change and both prices and participation will fluctuate as the cap reduces and businesses decide how best to participate.

3. Money from the auctions will be used to invest in California’s clean energy future
Proceeds from the auction must be invested in ways that further the goals of the law – the Global Warming Solutions Act of 2006 (AB 32).  Though these investments are scheduled to start in the next fiscal year, a specific investment plan is still underway and is being guided by two bills passed at the end of California’s legislative session. Likely project categories include renewable energy, energy efficiency, advanced vehicles, and natural resource conservation. In addition, 25% of proceeds must be used in ways that benefit disadvantaged communities. These investments will boost clean tech in California, improve air quality, and create jobs.

4. California’s leadership will serve as a launch pad for other programs
California is the ninth largest economy on the planet, and the world is watching. No state or country can stop climate change alone, but California’s environmental policies have a history of success and replication, including clean car, clean fuel and energy efficiency standards that have saved consumers across the US hundreds of billions of dollars in avoided energy purchases.  If the past is any indicator, California’s rich history of leading the nation on responses to critical environmental problems, while delivering wide ranging benefits, means the US is on the brink of something special.

A public notice of the auction results will be released on Monday, November 19, 2012 and will be posted to both the Air Resources Board and auction website.

Emily Reyna is Senior Manager of Strategic Partnerships and Alliances for the Climate & Air Program at the Environmental Defense Fund. This piece was originally published at EDF and was reprinted with permission.

8 Responses to Four Important Things To Know About California’s First Ever Carbon Auction

  1. BillD says:

    While not all is well in California, it’s amazing how California leads the nation on so many issues. Is California really part of the same country as Texas and Oklahoma?

  2. Mike Roddy says:

    Excellent points, Emily, thanks. They are so well thought out that Obama will ignore them, since he can’t fit them into the “all of the above” strategy.

    This does not mean that you should not have laid them out. Sooner or later either he or his successor will have to address everything you raised, and we need to get it on the record. In the meantime, maybe this attempt at realistic dialogue can raise the bar, and lead to some first steps around the edges.

  3. Jay Alt says:

    There is enormous concern in Europe, the EU carbon market is dead in the water. They gave away so many initial credits that their carbon price low. Such a minor incentive is proving insufficient to push markets to invest in renewable energy. They’re stuck with co$tly government incentives, which are being trimmed.

    How does California address that problem? Hmm. It turns out the linked EDF paper discussed it. CA is using historical records of fuel usage, not industry-guesstimates.

    Note to all: promote the EDF type graphs with emissions reductions and GDP growth together on the same page.

    Critics endlessly argue this can’t happen. We need plots showing it
    for every country, each manufacturing sector, every year, .
    Show it to them over and over again, shove it in their faces.


  4. Mulga Mumblebrain says:

    Time to secede, and build a bloody great big wall to keep the varmints out!

  5. Mulga Mumblebrain says:

    Actually, I suspect that by the time action is forced on the political stooges by mass panic, it will be too late for any reasonable measures, and, instead, there will be disastrous attempts at geo-engineering, to keep in touch with our ‘moral values’ as the owners of the planet, permitted by God Almighty to ‘subdue the Earth’.

  6. Mulga Mumblebrain says:

    GDP growth is like the happy malignant tumour looking with satisfaction at his burgeoning size. My!- I have grown! In the end the host succumbs. The insistence on endless growth, chanted ritualistically like some mantra, without a single dissenting voice or even the possibility that a contrary position is even thinkable, is one of the plainest signs of late capitalist moral insanity. What’s even more tragi-comic is that all the growth is not dragging anyone out of poverty-just the opposite. All the ‘wealth’ produced by making the planet uninhabitable for our and most other higher species is being accumulated by a tiny stratum of insatiably greedy parasites at the top of the economic pyramid. And they, tragi-comically, use a little loose change to ensure that the ecological race to destruction remains unhindered. Homo ‘sapiens’?In your nightmares.

  7. Lorna says:

    You said it all. I agree.

  8. Merrelyn Emery says:

    There were problems with the EU’s original design as there are with all prototypes but there is an evolutionary process underway and continuing negotiations as nations talk about its expansion into an international system potentially covering billions (ABC24 speech by Minister for Climate Change) ME