UPDATE 2-California carbon permits sell for record high price

Tue May 21, 2013 4:22pm EDT

(Adds details on market, quotes from consultant and broker)

By Rory Carroll
SAN FRANCISCO May 21 (Reuters) - California's largest greenhouse gas-emitting businesses paid $14 per metric tonne (1.1 tons) for the right to release carbon this year, a record-high price that narrowly beat market expectations, the state said on Tuesday.
The state sold all of the more than 14.5 million allowances it offered to cover carbon emissions in 2013 at its third permit auction on May 16.
Allowances that cover emissions in 2016, which were also for sale, saw lighter demand, with buyers snapping up 7.5 million of the more than 9.5 million permits that were offered.
Those allowances cleared at the program's auction floor price of $10.71 per tonne.
"The auction results show increased maturity from program participants and from the market and confirm the good health of the carbon market in California," said Emilie Mazzacurati, managing director of climate consultancy Four Twenty Seven.
Following the release of the results, California carbon allowances in the secondary market were trading at $14.50 a tonne in large volumes on the IntercontinentalExchange, one carbon broker said on Tuesday.
Had allowances cleared the auction at a price higher than $14 a tonne, market speculators would have been more inclined to buy allowances, he said.
"The market looks pretty flat," he said. "I don't see the results as having a dramatic impact either way."

REVENUE RAISED
The state's three auctions have so far raised $256 million for the state and $556 million for its largest utility companies, which are required to use the money to protect ratepayers from higher energy costs.
The state is currently drafting a spending plan for the revenue it takes in from the program, which is required by law to be spent on efforts to drive down the state's emissions of heat-trapping greenhouse gas emissions.
Last week, California Governor Jerry Brown announced that he would lend the $500 million the state expects to raise during the program's early years to help balance the state's budget under the condition that the money be paid back eventually with interest.

LAWSUITS
California's quarterly allowance auctions are not without controversy.
The auctions are currently the subject of two lawsuits, one by the California Chamber of Commerce, California's largest business group, and one by the Pacific Legal Foundation, a conservative legal group that filed the suit on behalf of a handful of affected California businesses and residents.
Both lawsuits argue that the California Air Resources Board, the program's regulator, is violating state law by raising revenue by selling permits. (Reporting By Rory Carroll; Editing by Peter Galloway, Bernard Orr)

New Lawsuit Opposes California's Cap-and-Trade Carbon Market

April 16, 2013, 1:19 pm • Posted by Laird Harrison

California's quest to reduce global warming hit another obstacle on Tuesday. A conservative legal group filed suit to block California's new cap-and-trade carbon market.

(Craig Miller/Climate Watch)

The Pacific Legal Foundation alleged that the market's charge for carbon emissions violates California law because it constitutes a tax, and taxes in California require approval by a two-third majority in both houses of the state Legislature.

“California’s cap and trade regulation was developed and is being implemented in full accord with all state laws," Dave Clegern of the California Air Resources Board (abbreviated as both CARB and ARB) said in an email response to the lawsuit. "ARB will continue moving forward with this important program to fight climate change and develop a clean energy future for California.”

The cap-and-trade market is the centerpiece of California's effort to reduce emissions of gases that cause global warming. It launched Nov. 14.

Cap and trade functions like a stock exchange for greenhouse gas emissions . Businesses, including oil refiners and manufacturers, have to buy permits for each ton of carbon they emit and can then resell these permits.

The California Chamber of Commerce has also sued to block the cap-and-trade program.
Both lawsuits challenge the way the law behind the program is being implemented.
They say ARB had no authority to auction off carbon allowances, raising billions of dollars for the state.

“PLF’s lawsuit holds CARB’s feet to the fire because CARB cannot be allowed to siphon billions of dollars from California taxpayers in violation of the California Constitution,” said Ted Hadzi-Antich, a lawyer for the foundation, in a press release. “CARB must obey the law, just as the rest of us are required to do.”

Based in Sacramento, the Pacific Legal Foundation frequently challenges government regulations. For example, it sought to remove wildlife from endangered species lists.

What California’s Carbon Market Is Doing Right

The second auction of carbon permits for the world’s second-largest carbon market beat analysts’ expectations--but can it drive real environmental results?

 

 

The California Air Resources Board, which currently runs the world’s second largest carbon market, confirmed Friday that permits to emit greenhouse gases for the rest of 2013 closed at $13.60 a ton, $3.53 up from last year, $2.90 above the minimum price, and $1.30 up from analysts’ peg. These results stand in stark contrast to the world’s largest market, the European Emissions Trading System, where prices plunged to less than $4 a ton this month. In other words, California’s cap and trade system is working: Companies are buying carbon credits at market rates to make sure they aren’t penalized by the state for emissions they produce later.

"Of the $176 million generated from the sale of current vintage allowances, just under $140 million will be returned to the state’s electric utilities for the exclusive benefit of their customers," wrote Alex Jackson of the Natural Resources Defense Council. "For the millions of California households that draw power from one of the state’s three large electric investor-owned utilities--PG&E, Southern California Edison, and SDG&E--that will take the form of a historic climate dividend."

For the millions of California households that draw power from one of the state’s three large electric investor-owned utilities, that will take the form of a historic climate dividend

The good news came amid some embarrassing news that a trading "glitch" in the first auction, last November, led to the utility Southern California Edison erroneously putting in 72% of all bids in the auction.

That said, environmental groups lauded the successful auction last week, which will show up in the pockets of Californians.