California cap-and-trade auction rebounds to raise $474M

Source: By Anne C. Mulkern, E&E News reporter • Posted: Thursday, August 27, 2020

Buyers at the auction last week purchased 89% of the “allowances” for use this year. Allowances for use through 2023 sold out. Businesses such as refineries and cement manufacturers purchase the allowances to account for emissions that exceed the statutory carbon cap.

Allowances for immediate use sold at the floor price of $16.68 per carbon ton, and future allowances went for $16.73 per ton.

The August auction followed one in May in which just 37% of allowances for use this year were sold. It also failed to sell 80% of future allowances. Because of the COVID-19 pandemic, many businesses were shuttered or operating at lower capacity, so they were emitting less carbon dioxide.

The auctions are important sources of funding for California’s climate programs, like rebates for electric vehicles, efforts to swap out polluting agricultural equipment and support for clean water. The August auction generated about $474 million for those and other programs. The May auction raised $25 million.

Before the pandemic, the auctions generated more than $2 billion annually.

“There is still a significant amount of uncertainty in the economy, but the second round of [pandemic] closures in California weren’t as far-reaching as the first round,” Katelyn Roedner Sutter, manager of U.S. climate programs for the Environmental Defense Fund, wrote in a blog post. “More people are out on the road and more establishments are open for business.”

The state Legislature has deferred acting on a cap-and-trade expenditure plan until after the August auction.

Roedner Sutter said funding for climate programs shouldn’t depend solely on the auctions.

“Our elected leaders also need to find a more resilient source of funding for these essential programs, other than a mechanism that will actually be most successful if emissions decline and revenue decreases over time,” she wrote.