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CARB sets prices, allowances for 2013 cap-and-trade auctions

Less than one month after holding what it deemed a successful first go-round at auctioning greenhouse gas emissions allowances as part of its cap-and-trade program, California’s Air Resources Board announced this week the number of allowances to be auctioned in 2013 and the prices they’ll be set at.

The state’s cap-and-trade program was set in motion with the passage of Assembly Bill 32, known as the Global Warming Solutions Act, in 2006. The bill aims to lower greenhouse gas emissions in the state to 1990 levels by 2020. The state has adopted a number of laws and regulations since then to implement parts of AB 32. CARB passed the cap-and-trade regulation in late 2010, requiring that companies take carbon-reducing measures or face larger bills when it comes time to buy a required number of carbon allowances, based on the companies’ expected carbon production.

The expectation, and hope, is that the cost of buying more credits will create a market in which companies are motivated to improve operations enough to give them the option of selling off allowances in excess of what they need to others that don’t have enough.

A portion of the allowances will be made available for purchase from the state at quarterly auctions, while a secondary carbon trading market will handle much of the rest.

The cap-and-trade regulation stipulates that the prices set for each year’s allowances at auction are to be the prices for the previous calendar year increased by 5 percent plus the measured 12-month rate of inflation. The rate of inflation used to calculate the 2013 Auction Reserve Price was 2.16 percent, using the Consumer Price Index for All Urban Consumers as the mode of measure. The 2012 Auction Reserve Price was $10, making for a 2013 Auction Reserve Price of $10.71 per allowance.

CARB held its first auction of greenhouse gas allowance, which included the auction of 2013 vintage allowances and an advance auction of 2015 vintage allowances, on Nov. 14.

Following the first-ever auction, CARB Chairman Mary Nichols called the auction a success and “an important milestone for California as a leader in the global clean-tech market.”

Made available for the Nov. 14 auction were 23,126,110 metric tons of 2013 allowances — all of which sold for $10.09 each — and 39,450,000 metric tons of allowances available for 2015, settling at a price of $10 each. Only 5,576,000 metric tons of the available 2015 allowances were sold.

As announced Dec. 3, CARB plans to make nearly 57 million 2013 Vintage allowances available through the 2013 auctions, as well as more than 38 million 2016 Vintage allowances. Auctions scheduled for 2013 are planned for Feb. 19, May 16, Aug. 16 and Nov. 19.

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