February’s quarterly auction of carbon dioxide emission allowances under California’s cap and trade program was another financial washout for the state.
Results for last week’s auction were posted Wednesday morning, revealing that just 16.5 percent of the 74.8 million metric tons of emission allowances were sold at the floor price of $13.57 per ton.
The state auctions emission allowances to polluters and speculators as part of its program to reduce greenhouse gases. The proceeds are supposed to be spent on public programs to slow climate change.
February’s auction is being closely watched by market analysts because the last three quarterly auctions in 2016 posted sub-par results.
Almost all of February’s proceeds went either to California’s utilities, who sell allowances they receive free from the Air Resources Board, or the Canadian province of Quebec, which offers emission allowances through California. Both are first in line when auction proceeds are apportioned.
The ARB was offering 43.7 million tons of state-owned emission allowances, but sold just 602,340 tons of advance 2020 allowances, which means the state will see only $8.2 million, rather than the nearly $600 million it could have received from a sellout.
The paltry auction revenues will likely stall Gov. Jerry Brown’s 2017-18 budget plan to spend $2.2 billion on a variety of climate-related programs and projects, including $800 million on his bullet train project.
Analysts have cited a glut of emission allowances on the market, and political and legal uncertainty over the cap and trade program for weak auction interest. The current program’s legality is being challenged in a lawsuit and expires in 2020. Brown wants it to be reauthorized by a two-thirds legislative vote to remove the legal cloud.
“Today’s anemic auction results demonstrate that the state’s landmark cap and trade program is in need of reform and the kind of market certainty that only the Legislature and governor can provide via statute,” Senate President Pro Tem Kevin de León said in a statement. “We need a program that both reduces pollution and provides stable funding to clean up climate emissions.”