Pollution Credits Fetch Low Price at First California Auction

The price of spewing greenhouse gases came in relatively cheap today, as California officials released the results of their first-ever cap-and-trade carbon auction.
by | November 28, 2012

A ton of carbon sold for $10.09 - just pennies above the $10 minimum established by the California Air Resources Board. Mary Nichols, chair of the board, called the auction "a success" because it showed that California can reduce greenhouse gas emissions at an affordable cost. She said fears that the cost of carbon would "go out of sight" proved unjustified.

In a separate auction for 2015 credits, the price was the bare minimum: $10 a ton. Most of the 2015 credits went unsold.

The auction, held last Wednesday, marked the kickoff of the state's "cap-and-trade" market, the centerpiece of California's effort to curb greenhouse gas emissions that contribute to global warming. Big industrial polluters rushed in to buy the credits, each of which represents the right to emit a ton of carbon.

In all, more than $286 million was spent on carbon credits during the auction. Auctions will be held every quarter. The state said 97 percent of the emissions credits were sold to affected companies, as opposed to traders or speculators.

"We're delighted by this," Nichols said after the results were released. "Our goal is to reduce carbon at a good price."

The state has established a ceiling on total carbon emissions. Affected companies have to reduce their emissions to comply with the regulations - or buy carbon credits, either from the state or on private secondary markets, to compensate for their excess pollution.

Companies bid as much as $91.13 a ton during the first auction. But the auction is designed so purchasers get their credits at the lowest possible price, not the highest. "The goal of this auction is not to raise money," Nichols said.

Big business groups have complained that the market is a giant tax that will cost companies at least $1 billion a year. The California Chamber of Commerce sued the state last week in an effort to invalidate the program. Nichols said the chamber's lawsuit had no apparent impact on the first auction.


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