California carbon auction raises $329M

The Air Resources Board (ARB) released the results from February’s California carbon auction, demonstrating the most successful auction held to date.


All 19.5 million 2014 California carbon allowances (CCAs) were sold at a price of $11.48, while all 9.2 million future 2017 allowances reached a settlement price of $11.38.


A total of 28.7 million allowances were sold, generating revenues of over $329 million.


The February auction was the sixth held by the ARB and set records for volume of allowances sold as well as revenue created.


Revenue will be used to fund other emissions reductions projects in the state, improve air quality, and offset any increases in electric prices for average consumers.


Businesses that must use allowances bought at the California carbon auction to account for their annual emissions purchased 84.5% of the available CCAs.


Purchasers included electric utilities like Pacific Gas & Electric and Southern California Edison, as well as oil giants BP, Exxon, and Chevron.


Financial institutions like Morgan Stanley and Citigroup also participated in the auction for speculative purposes.


The auction was oversubscribed with a ratio of 1.27 bids per allowances offered.


The ARB has sold 146 million CCAs over the six California carbon auctions they’ve held so far, amounting to an investment of over $1.6 billion in the state’s economy.


The Canadian province of Quebec linked with the California carbon market this year, and regulators expect to hold a joint auction between the two jurisdictions in May.


Quebec has set a goal to reduce their emissions to 20% below 1990 levels by 2020, an even more ambitious target than California’s, leading many analysts to believe the Canadian province will be a net purchaser of carbon allowances and offsets, further increasing market demand.


Other states including Washington, Oregon, and British Columbia plan to align their climate policies with California’s, which could lead them to join the carbon market as well.