Cap and trade auction a success, say California officials

5:26 PM, Nov 19, 2012   |    comments
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California's first ever auction of greenhouse gas credits produced a lot of action, but a relatively low price for the right to emit a metric ton of carbon emissions.

Which is why Mary Nichols, chair of the state Air Resources Board, calls last week's auction a success.

"There's evidence the market was very competitive," Nichols told reporters in a conference call Monday afternoon.

Officials waited until Monday to release data about just who was buying the carbon credits in last week's private auction, and which companies and investors had signed up for a chance to bid.

That data shows the first credits, which allow carbon emissions above the soon-in-place cap, traded at an average of $13.75 per metric ton -- a relative bargain, considering the minimum price was set at $10 per ton.

The auction of the 2013 carbon credits brought in about $233 million, say officials, while the total raised by selling 2015 emission allowances was $56 million.  The 2013 money is earmarked for utilities to offer rebates -- a "climate dividend" -- to customers, while the 2015 money will be used for state air pollution projects.

"The goal of this auction is not to raise money," said Nichols in contrasting the November 14 confidential bid and buy event to a public auction for, say, a rare painting.  Rather, she said, the goal was to give companies and corporations an additional way to lower their emissions -- in this case, by potentially buying extra polluting power... or... by buying credits that can then be sold for a profit.

All of the available carbon emission credits available for 2013 were purchased last week, while the vast majority of 2015 credits weren't touched.  And while officials had portrayed the universe of potential bidders at around 300, the list unveiled on Monday (PDF) showed only 73 companies and investors that were approved to participate.

Officials declined to give any information on which entities actually bought credits, how many, or for what price.  

"These are private decisions businesses are making," Nichols said when asked about those who have argued the auction should have been more transparent.

State officials did say, though, that 97 percent of the 2013 carbon credits were bought by the companies and entities that actually have to reduce carbon emissions.  In other words, a very small number were purchased by private investment companies more interested in making a profit.

And the data released suggests the average bidder purchased only a few credits; even so, all 23.1 million of the 2013 allowances were bought.

But far fewer of the carbon emission credits eligible for use in 2015 were purchased.  Of the 39.45 million 2015 credit, less than 5.6 million were snapped up.  The average price for those was also lower, at $11.07 per metric ton.

Whether that means companies and investors are skeptical, or simply holding off to see what happens next, is unclear.  Nonetheless, state officials were buoyant on Monday about getting the first of these auctions under their belt -- a closely watched part of California's ambitious effort to roll back greenhouse gas emissions over the next decade.


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