California Sells Out Of Pollution Permits

Last Wednesday, November 14, California sold out of the first pollution permits issued as part of its fight against greenhouse gases.

The permit sales last week opened the largest carbon marketplace in the nation and the second-biggest in the world after the European Union. The plan is for California to hold four auctions every year.

On Monday, November 19, state regulators celebrated the results of this first-ever auction of California greenhouse gas emission permits, declaring the nation’s first effort to put a price on carbon pollution a resounding success.

What’s all this about?

The auction last Wednesday was the first phase of California’s cap-and-trade program, the state’s landmark global warming law known as AB 32, put in place by then-Governor Arnold Schwarzenegger: in 2006, Schwarzenegger signed an act to reduce the state’s greenhouse-gas emissions to 1990 levels by 2020.

The Mercury News reported that all of the 23.1 million permits offered at the auction to cover 2013 emissions were purchased, raising $233 million, in spite of fears that the market would be under-subscribed.

The money will be funneled to residential customers of the state’s utilities to offset higher electricity rates that are expected to result from the shift to clean energy. Under a proposal released Friday, California residents would twice a year get a “climate dividend” worth about $30.  A successful first test of this program!

As the Wall Street Journal explains:

Businesses are required to either cut emissions to cap levels annually, or buy pollution permits called “allowances” from other companies for each extra ton of emissions discharged annually.

The cap and number of allowances will decline over time in an effort to reduce greenhouse gas emissions year-by-year.

The final price for 2013 allowances was just nine cents above the $10 minimum price set by regulators.

However, not everyone approves of cap-and-trade.

No surprise here: petroleum refiners, manufacturing companies and other industries have spoken out strongly against the program, calling it an illegal tax that will hurt California’s economic recovery.

The California Chamber of Commerce last week filed a lawsuit seeking to invalidate the cap-and-trade auction, arguing that the Air Resources Board exceeded the authority granted under AB 32.

But they may well be outnumbered. As Rob Day of Black Coral Capital in Boston explains:

“The price of carbon matters, but the price is going to change over time. It’s more important to me to see that there was an appetite for these credits,” Day said. “This is a robust market. It’s real. It’s not going away. California is pricing carbon, and companies are saying, ‘I need to start paying attention to my carbon footprint.’ “

Good for California!

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Photo Credit: thinkstock


Carrie Anne Brown

thanks for sharing :)

Mary L.
Mary L5 years ago

I hope it succeds beyond everyone's wildest dreams.

Monica D.
Monica D5 years ago

Good news. The world needs to switch to appropriate renewable energy.

Nimue Pendragon

Arnie did something good :)

Hartson Doak
Hartson Doak5 years ago

Every time industry is made to do the right thing for the customers or the environment, they claim it'll hurt business. The clean water act did not put any one out of work. The clean water act created jobs and cleaner rivers. The fisheries are coming back to these rivers and lakes. The Clean Air Act did the same thing. But the GOP (Greedy Old Politicians) gutted this act. Carbon taxes will bring back the Clean Air. It'll, again, make industry do the right thing.

pam w.
pam w5 years ago

Margaret....did you read the entire plan? The basis is a diminishing number of permits to enable businesses to find solutions while steadily reducing pollution.

Margaret Brooks
Margaret Brooks5 years ago

This is a conservative system. Corporations will, I believe, find a way to pay for pollution into the future. Regulation is needed, not cap and trade. Paying for dangerous chemicals, etc. in the air does not keep my children safe.

Stella Gamboni
Stella Gamboni5 years ago

It's an encouraging initial reaction to a bold first step.

pam w.
pam w5 years ago

Californians are trying many options....give us credit for creativity and for effort!