California court supports carbon market

In response to a challenge that the California Air Resources Board (ARB) did not have authority to hold quarterly carbon allowance auctions, a judge sided with the state’s governing environmental committee.


The ARB has been holding auctions since last November, where regulated businesses bid


Beginning this year, regulated businesses in the state like power plants and fuel refineries have had to start accounting for every ton of carbon dioxide they emit.


At the ARB auctions, these companies bid on carbon allowances that will cover the emissions of their operations.


The four auctions held so far have generated over $1 billion that will be used to fund other emission reduction projects in the state and help offset any increases in electric costs for average citizens.


The most recent auction held on August 16 produced a total of $275 million between the sale of allowances to be delivered in 2013 and 2016.


For the first time, all of the future 2016 allowances were sold, signaling the confidence businesses are showing in the longevity of the market.


In 2015 the California carbon market will expand to include natural gas suppliers and transportation emissions, which will increase demand for carbon allowances.


As the price for allowances continues to rise, businesses will likely look to take advantage of the cost savings provided by carbon offset credits.


Carbon offset credits are emission reductions that have been achieved by one of only a few ARB-approved project types, including Forestry.


Regulated California companies can purchase carbon offset credits to account for up to 8% of their emissions, creating the potential demand for over 200 million credits by 2020.


However, a study by the American Carbon Registry, one of two project registries accredited by ARB, shows a significant shortfall in the supply of credits, by as much as 67% by 2020.