California holds mock carbon allowance auction

California took another step towards launching its carbon market as it held a mock allowance auction this Thursday, August 30.

The mock California carbon allowance (CCA) auction was held by the state’s Air Resources Board (ARB) in order to test the bidding platform and to allow regulated businesses to become familiar with the process.

About 150 businesses took part in the auction that was held from 10:00 AM through 1:00 PM PST.

Conducted entirely on-line, the bidding was structured in a sealed, single round format that keeps each individual entity’s bid amount confidential.

Two separate practice auctions were held: one for 20 million 2013 CCAs and another for 40 million 2015 CCAs.

The first live auction that is scheduled for Wednesday, November 14 will have a floor price of $10 for each allowance, however CCAs have been trading above $16 for the past several weeks, hitting a peak price of $20 in July.

Although specific information from the mock auction will not be made available, participants in the live auction in November will be able to see settlement prices and trade volumes.

In order to create a smooth transition to new emission regulations, the ARB will distribute a bulk of CCAs for free. On September 14 businesses will learn how many free allowances they will receive and can then determine the amount of CCAs they will need to buy at auction.

Regulated businesses will also be able to purchase certified carbon offset credits to meet up to 8% of their compliance obligation, which creates the potential demand for over 20 million carbon offset credits in 2013 and 2014 alone.