Despite facing legal challenges to conduct emissions auctions, California’s cap-and-trade program to auction greenhouse gas (GHG) emissions raised nearly $280 million earlier this month, selling out its entire carbon allowance allotments of 14.5 million.
It was the third auction conducted in the past three quarters by the California Air Resources Board (CARB). The May 16 event exceeded the first two auctions comfortably, according to CARB, and comes more than two years after the program — the centerpiece of the 2006 climate change law (AB 32) — had been set back by a San Francisco Superior Court ruling (see Daily GPI, July 4, 2011; March 25, 2011).
Other lawsuits have remained dormant, but the Pacific Legal Foundation (PLF) earlier this spring also filed a lawsuit against CARB, arguing that its board did not have the authority to generate state revenues from emission auctions. Filed on behalf of what state businesses, trade associations and individuals, the lawsuit claims that the auction process is an unconstitutional state tax because it was not authorized by a two-thirds vote of state lawmakers. A similar lawsuit was filed last year by the California Chamber of Commerce.
CARB has been undeterred. It held auctions in November and again in February. The May settlement price was a vintage allowance of $14, compared to the $10.71 auction reserve, or floor price.
All of the major gas-fired power plant operators and refineries participated with other industrial operators in the state. There are about 600 facilities that are required to comply with the cap-and-trade regulations for GHG emissions allowances.
This month’s action also dealt with vintage 2016 allowances. The 2016 vintage allowances had a clearing price at the floor ($10.71) with more than 7.5 million total 2016 allowances sold. There were 1.78 bids for each allowance, with more than 90% (14.5 million) of the allowances sold with a maximum price of $50.01 and a mean price of $16.67 in terms of the 2013 vintage allowances, CARB reported.
Representatives for some of the producers said the latest results would appear to indicate that the auctions are working. The increase in price since February would indicate that participants are not worried about the PLF lawsuit, one attorney said.
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