Nation Watches as California Opens Cap-and-Trade Auction

Leslie Blodgett, GEA
November 19, 2012 | 6 Comments

California's cap and trade system kicked off this week, and the ARB will announce results of the auction on November 19. A November 8 Reuters story, "Auction to kick-start California carbon market," quoted analysts that 2013 permits are expected to sell at between $11 and $12 per unit. Leading up to the sale, there has been much discussion over the likely results.

Dallas Burtraw, Senior Fellow and Darius Gaskins Chair, Resources for the Future called the California program “the best-designed program in the world to date” in an Op-ed to the Sacramento Bee, “State’s well-designed cap-and-trade plan will defy cynics.” The program “is likely to influence the design of emerging programs in Australia, South Korea and even China,” Burtraw wrote. Among the program’s attributes, Burtraw hailed the adoption of a price floor, a central role for auction, and its transparency. The program also has designations in place to ensure protection of disadvantaged communities.

In the Huffington Post, Ann Carlson, Shapiro Professor of Environmental Law, UCLA School of Law notes the use of proceeds from the cap and trade auction is undetermined in “California’s Cap-and-Trade May Solve State’s Budget Problems.” A supermajority of Democrats in the state Assembly and Senate “could reaffirm AB 32 with a 2/3s vote and then could use the auction revenue from cap-and-trade for general purposes,” such as education and other programs, Carlson writes.

The Reuters article presaged lawsuits that could arise after the auction from companies claiming to be damaged by the program, such as out-of-state power producers with coal interests, who would claim violation of a U.S. Constitution dormant commerce clause and appeal to a federal court.

But in an article from InsideClimate News, “California’s Model Climate Policies Will Maintain Momentum in Obama Second Term,” Maria Gallucci notes that an Obama White House could provide “steady support from the top,” perhaps leading to other states joining the initiative or forming their own. California is expected to link its cap-and-trade program to Quebec’s carbon market in 2013.

This article was originally published in GEA's Geothermal Energy Weekly and was republished with permission.

Lead image: California flag via Shutterstock

6 Comments

cj janis
November 29, 2012

Old tired arguments against progress by those stuck in the past are quite boring. Taxes on pollution have been in place for generations and are increasing as the impacts to our environment have a greater effect on our quality of life. This is essentially the free market in action. I'm surprised that those opponents to taxation of pollution can't seem to grasp these simple realities and instead chose to bury their heads in the sand. All economic activities generate waste and that waste has to go somewhere. It's not magic and it doesn't just disappear. It makes perfect sense to charge the biggest polluters the largest fees. Either that or we will have to raise everyone's taxes to pay to clean up their mess. I forgot, you could just bury you head in you own mess and act like you loved it. Just don't expect me to join you.

CHET LOCKWOOD
November 26, 2012

Cap and Trade is a penalty paid by all the users, it is a Giant Tax, it is a naive viewpoint to think this is a penalty a company will pay and result in a lowering of emissions. This is a cost that will be passed on to the consumer and do nothing to lower emissions, the only benefit it provides is bailing out California without having to beg to the federal government. It disproportionatey affects those in the lower economic strata, because it is a Tax that is not based on one's income but on usage. California may find itself one day being the sole provider of the in-state electrical service because the rest of the country doesn't want to play in their feel good do nothing tax bailout. Much like OBamaCare it is a TAX.

Timothy Baye
November 22, 2012

Tom Butler, Kudos to you. I hope you receive the recognition, by other stakeholders, that private initiatives from leaders like you is crucial to effectively transforming all sectors within the 'value-added' spaces in our economy. Monetizing your environmental attributes is logical and necessary. Policy initiatives, such as California's, is both necessary and sufficient. When externalities from polluting activities are not negatively monetized (penalties/taxed) we all pay!! My 28 years in renewable finance has taught me an important lesson: sustainability investment, when viewed as effective risk management does pencil out. But it takes a strong will and stomach to see that return pay off. Keep up the good work. Tim Baye Professor, Business Development State Energy Specialist University of Wisconsin-Extension

peter stuyt
November 21, 2012

The Great State of California often inspires cranky comments by folks not troubled by much relevant information.
Concerning the health of California business, Inc.Magazine offers some of this relevant info, see link:

http://www.inc.com/inc5000/2012/top-lists.html

Reports of California's demise seem premature..

Of the 2012 - 500 fastest growing companies in the nation 78 are in CA, followed by no.2 Florida: 40. Texas, this job machine and de-regulated paradise: 38.
Inc. 5000, America's fastest growers, 680 are located and thriving in California, followed by Texas at 389.
True entrepreneurs see opportunity and act, others complain and sit on their hands.
Peter Stuyt, Total Energy Group,Inc.

ANONYMOUS
November 20, 2012

The state of California has been running multi-billion dollar budget deficits for the past few years. And this is mostly due to the fact that many traditional manufacturing businesses, and the high-wage blue collar jobs they provided, have moved due to the state's oppressive regulatory environment. This state cap-and-trade carbon emissions system will only make things worse for the few remaining California manufacturers.

Before long, the only remaining private-sector businesses left in California will be those in the service industry paying minimum wage.

William T. (Tom) Butler
November 20, 2012

I am a North Carolina Pork Producer and I have been sequestering carbon since 2008. We sequester 6000 metric tons per year of CO2 and 265 metric tons of CH4 from our swine waste. I do hope the Cap and Trade Auction goes well. We should give this program a chance to work. It is the right thing to do. It will help our environment.
Tom Butler bfbiogas@gmail.com

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Leslie Blodgett

Leslie keeps up on the geothermal industry to contribute to the Geothermal Energy Association's weekly newsletter, reports, events, and initiatives. Previously she edited for the American Geophysical Union's peer-reviewed journals.