By August 23, 2016 Read More →

California carbon permits sale falls short

California carbon permits

The California Air Resources board says the unsold California carbon permits are an indication reductions are occurring beyond their estimates while critics say the program is not working.

Just over one-third California carbon permits sold

By Rory Carroll

SAN FRANCISCO, Aug 23 (Reuters) – According to regulators, just over one-third of California carbon permits the state offered to cover emissions this year were sold, receiving the minimum price at an auction last week.

Carbon market participants said the weak auction results were an indication that the program is oversupplied with permits while adding that passage of legislation on Tuesday to extend the program beyond 2020 should raise future demand.

California’s cap-and-trade program is a key component of a broader effort to reduce the state’s output of heat-trapping greenhouse gases to 1990 levels by the end of the decade.

It has come under fire from critics who have said the program suffers from a glut of permits, reducing the incentive for businesses to cut emissions and curtailing revenue from a program that funds key low-carbon initiatives such as the state’s high speed rail project.

The California Air Resources Board, which regulates the program, has said unsold allowances are an indication that the reductions are occurring beyond the program’s annual targets.

But critics jumped on the results as an indication that the program is not working.

“Today’s failed results are yet another reminder that this government program is inherently troubled and should be abandoned,” Senate Republican Leader Jean Fuller said in an email.

While demand at last week’s auction was stronger than at the previous sale in May, the state for the second consecutive auction failed to sell any of the 2016 permits that raise money for the state’s greenhouse gas reduction fund.

It also managed to sell, at the auction floor price of $12.73 a tonne, just 660,560 of the 10 million permits that cover emissions in 2019. That money will go into the state’s fund.

The vast majority of the allowances the state sold at the August auction were permits consigned to the state by electric utility companies.

Despite the weak auction results, cap-and-trade supporters got a boost on Tuesday when the state Assembly voted 42 to 29 to extend the program beyond 2020. The legislation, which now goes back to the Senate for concurrence, requires the state to slash emissions 40 percent below 1990 levels by 2030.

California Governor Jerry Brown on Tuesday said he plans to sign the legislation if it reaches his desk.

“Yesterday, big oil bought a full-page ad in the capital city’s newspaper of record to halt action on climate. Today, the Assembly Speaker, most Democrats and one brave Republican passed SB 32, rejecting the brazen deception of the oil lobby and their Trump-inspired allies who deny science and fight every reasonable effort to curb global warming,” Brown said.

The cap and trade program has raised $4 billion through its quarterly auctions since launch in 2013.

Last week, Senate President Pro Tempore Kevin de Leon unveiled a plan for $1.2 billion in unspent cap-and-trade revenue that gives priority to improving air quality in low-income communities in Los Angeles and the Central Valley.

(Reporting by Rory Carroll; Editing by Sandra Maler, Steve Orlofsky and Bill Rigby)

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