News Column

Carbon Auction Price Goes Up

May 22, 2013
carbon footprint

California's heavy industries spent $280 million on greenhouse gas permits in the state's latest carbon auction -- a sign to environmentalists that the controversial program is hitting its stride.

The California Air Resources Board, reporting on the results of its third carbon auction, said credits that allow polluters to emit greenhouse gases this year sold for $14 a ton. That's the highest price for any of the auctions.

Allowances for use in 2016 sold for the minimum $10.71 a ton. The auction was held last Thursday.

The auctions are an essential piece of the California cap- and-trade market, which is designed to reduce carbon emissions.

More than 400 big industrial polluters are required to cap their carbon emissions at certain levels. They are given most of their emissions for free.

If they exceed the cap, they have to buy credits, either from the state or from other market participants.

Business groups have complained about cost. The California Chamber of Commerce and Pacific Legal Foundation are suing to eliminate the auctions, saying they amount to an unconstitutional tax.

But the Environmental Defense Fund's Tim O'Connor said the latest results show "cap and trade is working." O'Connor, director of EDF's California climate and energy initiative, said carbon prices have remained reasonable -- but are creating financial incentives to reduce emissions.

In the latest auction, about $117 million of the proceeds will go to the state. A total of about $256 million in auction proceeds have flowed to the state from the three auctions.

The rest goes to utilities, which have special status. Unlike other polluters, utilities get all their carbon credits for free, although they're required to sell them in the auctions. They use the proceeds to buy the credits they need for their emissions purposes.

Gov. Jerry Brown has proposed loaning $500 million in state auction proceeds to the general fund. But some lawmakers have objected to that, saying the money is supposed to go to climate-change programs.

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Source: Copyright Sacramento Bee (CA) 2013