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.