California’s 2013 carbon revenue tops $1 billion


California has generated over $1 billion in carbon revenue from the four allowance auctions held by the state’s Air Resources Board in 2013.


Auction settlement prices averaged $12.83 over the course of the year, reaching a peak of $14 in the May auction, which resulted in $283 million in carbon revenue.


The ARB has also offered future carbon allowances to be delivered in 2016 which have sold out at the past two auctions, demonstrating long-term confidence in the California carbon market


In all, nearly 90 million carbon allowances were auctioned off in 2013, most of which were purchased by businesses that are facing new emission regulations.


Companies like Shell, BP, Chevron, Phillips66, Pacific Gas & Electric, and Southern California Edison are required to account for each ton of their annual carbon dioxide emissions.


The carbon revenue will be used to keep electric prices from skyrocketing, to improve air quality, and to fund other emissions reduction projects in the state.


2014 will see even larger carbon revenue when the auction floor price increases to $11.34.


As the cost for allowances continues to climb, businesses will look to purchase carbon offset credits.


Carbon offset credits represent emissions reductions that have been produced from one of the ARB’s four project protocols.


Regulated companies can purchase carbon offset credits instead of relying on acquiring all of their necessary compliance instruments at auction.


Despite a demand for up to 200 million carbon offset credits by 2020, just over 4 million have been issued so far.


A report from the American Carbon Registry predicts a potential shortfall in carbon offset credit supply by as much as 67% by 2020.