The state ran a test of its controversial greenhouse-gas market Thursday, even as it wrestles with ongoing complaints that the price of carbon could prove too costly for businesses.
A three-hour practice auction, in which tons of fake greenhouse gases were sold online, was declared a success by the California Air Resources Board. The mock auction was a run-up to the first real sale, set for November.
"It was very smooth," said agency spokesman David Clegern.
The real auction in November will kick off the state's "cap and trade" market, which is designed to control the volume of greenhouse gases emitted by 400 manufacturers and others.
California will give away 90 percent of the allowances but will auction the rest. In future years, the total number of allowances will decline, reducing total carbon emissions.
The market is the centerpiece of AB 32, the state's global warming law. Companies that can slash their carbon output will be able to sell their unused emissions allowances. Heavy polluters, on the other hand, will have to buy more credits.
Despite the market approach, some business groups have labeled cap and trade a job killer.
They note the state's auction is expected to raise $1 billion in the first year alone, increasing the cost of doing business in California.
In response, the Air Resources Board said earlier this month it's studying whether to give more of the allowances away for free.
Major colleges and universities that have to participate in the market, including UC Davis, might also get a break. Last week the ARB said it's looking into ways to help them after the University of California system said it would have to spend millions to comply with the law.
"We're looking at how we can get them some form of mitigation assistance," Clegern said.
Separately, two Democratic legislators have touted a recent Legislative Analyst's Office report that said California can give away all the credits for free without undermining the goal of reducing carbon emissions.
But the ARB still believes auctioning some of the credits is an essential piece of the program. "Putting a price on carbon is critical," Clegern said.
The practice auction drew bids from around 150 participants, he said.
Some bids were "completely screwy," he said, including those made by participants testing the boundaries of the market. For instance, some bids exceeded the "holding limits" designed to prevent someone from cornering the market on credits.
The ARB didn't release information on market prices or sales volumes. "They're such fictional numbers, we're not going to put them out there," Clegern said.
The absence of data was frustrating to some.
"There's nothing actually to watch," said Jon Costantino, executive director of the Association of Carbon Market Participants.