Greenhouse gas auction indicates state’s cap and trade back on track
Its fate uncertain just a few months ago, California’s cap-and-trade system for reining in greenhouse gas emissions appears to have pulled out of its slump.
Results released Tuesday from the latest quarterly auction of cap-andtrade allowances — essentially, permits that allow a business to emit greenhouse gases — showed that all the allowances sold, with a closing price slightly higher than the previous auction’s.
The price for emitting a metric ton of greenhouse gases in California now stands at $15.06, up from $14.75 in the August auction. In the most recent auction, held Nov. 14, 79.5 million allowances were purchased for the program’s current compliance period, while buyers also snapped up 9.7 million allowances that can be used in future years.
The cap-and-trade system, a centerpiece of California’s fight against global warming, had been plagued by legal uncertainty about whether it was authorized to continue after 2020. As a result, businesses had scaled back their buying of allowances, waiting to see whether the state government would reauthorize the program.
That happened in July, when Gov. Jerry Brown signed legislation to continue the program. Both auctions held since then have sold all of the allowances offered, with closing prices for current allowances at least $1 above the floor price.
Although California started the cap-andtrade system on its own, the Canadian province of Quebec now participates in it, and Ontario has agreed to join. This month, Brown said he would explore creating a common greenhouse gas market with the European Union, which has its own cap-and-trade system.
Under cap and trade, the government sets a declining annual limit on greenhouse gas emissions, shrinking the amount of allowed emissions each year. Businesses that produce large amounts of greenhouse gases must obtain an allowance for each metric ton they emit, buying them at the state’s quarterly auctions or purchasing them from each other. The amount of allowances available in any given year is equal to the emission limit, or cap, for that year.