Jerry Brown: Parts of California will become 'unlivable' if climate change goes unchecked
The state’s quarterly auction of carbon emission credits perked up a bit this month after two flat sessions earlier in the year – but it may be a very brief respite.
The Air Resources Board announced results of the Nov. 15 cap-and-trade auction on Tuesday, revealing that of the more than 87 million metric tons of current and future emission allowances offered, more that 90 percent were sold.
However, allowances offered by the state’s “compliance entities,” mostly utilities, and the Canadian province of Quebec took precedence, so their allotments were sold out while just 28.6 million of the 45.3 million tons in state-owned allowances up for sale moved.
It will bring the state less than two-thirds of the roughly $600 million that each quarterly auction had been expected to generate for Gov. Jerry Brown and the Legislature to spend on programs to reduce carbon emissions.
That’s an improvement over the near-zero results of May and August auctions, but may be short-lived, according to carbon market analysts.
They had expected the November auction to perk up a bit because the $12.73 per ton floor price is scheduled to automatically increase in January, thus creating some incentive to buy in the final 2016 auction.
However, they also warn that the state still has a massive glut of emission allowances floating around, so the 2017 auctions are likely to flatten out again – unless the Legislature reauthorizes cap and trade, now due to expire in 2020.
The glut of allowances, coupled with the legal and political uncertainty over the program’s future, have all dampened the appetite of business executives and market speculators.
Brown et al. have assumed auctions would net the state about $2.4 billion a year, and they did produce several billion dollars before hitting the skids this year.
The recent dearth has put the brakes on ambitious plans to spend auction proceeds, including Brown’s high-priority but financially shaky bullet train project, which receives a quarter of the funds. Brown also offered some of the money in his plan to shore up improvements in highways and other transportation.
Brown wanted to include reauthorization in legislation setting new carbon emission standards for 2030 and beyond, but could not assemble a two-thirds legislative vote.
He will try again next year, when the Legislature will have more Democrats. If that fails, he may place the issue on the 2018 ballot as he exits his second governorship.
With auctions faltering, Brown and the Air Resources Board also have threatened to impose draconian direct controls on industrial carbon emissions, hoping that it would melt business opposition to cap and trade.
The issue is also intertwined with oil industry efforts to reduce the state’s “low-carbon fuel” mandate, with some suggesting a tradeoff between reauthorization of cap and trade and softening the fuel standard.
As if that weren’t complex enough, a state appellate court will soon issue its ruling on a business-backed lawsuit challenging cap and trade as an illegal tax – perhaps just in time for the next auction in February.