California carbon auction raises $296 million

The November 19 California carbon auction generated $296 million according a release from the state’s Air Resources Board (ARB).


According to the ARB’s summary report, the California carbon auction saw all 16.6 million California carbon allowances (CCAs) for delivery in 2013 reach a settlement price of $11.48, about 7% above the floor.


CCAs were in high demand as the California carbon auction saw nearly twice as many bids as available allowances.


Businesses that are required to begin accounting for their emissions were very active in the auction, purchasing over 96% of the offered 2013 CCAs.


An additional 9.5 million future CCAs to be delivered in 2016 were also offered at this month’s California carbon auction.


All future 2016 CCAs were purchased for the second auction in a row, at a price of $11.10, once again settling above the floor price.


The combined sale of 2013 and 2016 CCAs resulted in revenues of over $296 million.


The five California carbon auctions held to date have now produced over $1.3 billion that will be used to fund other emission reduction projects in the state, improve air quality in disadvantaged communities, and offset any increases in electric costs.


Next year the floor price for allowances will increase by 5% plus the rate of inflation, raising the floor to about $11.47.


Quebec will officially link with the California system next year by participating in a joint February auction.


As auction prices continue to rise, demand for carbon offset credits will also increase since they are typically sold at a discount to CCAs.


Despite a demand for up to 200 million credits by 2020, less than 3 million have been issued so far.