California's fledgling cap-and-trade carbon market is becoming more familiar to the companies that have to participate in it – and that's showing up in the price they're paying for the right to pollute.
Carbon emission allowances sold for $13.62 a ton this week during the state's second-ever carbon auction, the California Air Resources Board reported Friday.
The price at Tuesday's auction was considerably higher than the first state-run sale last November, when carbon sold for barely above the $10 legal minimum.
The cap-and-trade market is the centerpiece of AB 32, California's effort to curtail greenhouse gases and global warming.
Experts say the companies that have to buy emissions allowances are becoming more comfortable with the process, resulting in more aggressive bidding.
The latest results "demonstrate that this is a strong, viable carbon market," said Derek Walker, associate vice president at the Environmental Defense Fund, in a prepared statement.
The cap-and-trade system puts a ceiling on the annual carbon emissions by hundreds of industrial polluters; the ceiling declines slightly each year. Companies get most of their emissions allowances for free, but they have to buy some of them at auction.
Those companies that are polluting too much can either scale back their emissions or buy allowances, either from the state or on the open market. State officials say this market approach to environmental regulation gives companies flexibility and will breed innovation.
Still, big business lobbyists call the program a heavy cost burden. The California Chamber of Commerce is suing the state, arguing that all the carbon credits should be distributed for free.
In the latest auction, all 12.9 million credits – each good for emitting a ton of carbon this year – sold out.
The auction for credits that can be used to emit carbon in 2016 was less robust – just 4.4 million credits sold, at the minimum price of $10.71 a ton.
In all, the auction raised $223 million. The Legislature has declared that the proceeds must be spent on environmental purposes, with a focus on improving air quality.
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