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California’s first cap-and-trade auction sells out, declared ‘a success’

State regulators on Monday celebrated the results of last week’s first-ever auction of California greenhouse gas emission permits, declaring the long-awaited kickoff to the nation’s first effort to put a price on carbon pollution a success.

The state did not disclose how many companies participated in the historic auction. But there were three times as many bidders than buyers, a sign that the business community is taking the new carbon market seriously. A ton of carbon sold for $10.09 at the auction, just slightly above the $10 floor price established by regulators, according to data released by the California Air Resources Board.

More important, all of the 23.1 million permits offered at the auction to cover 2013 emissions were purchased, raising $233 million and calming fears that the market would be under-subscribed.

The money will be funneled to residential customers of the state’s utilities to offset higher electricity rates that are expected to result from the shift to clean energy. Under a proposal released Friday, California residents would twice a year get a “climate dividend” worth about $30.

While some speculated that the nation’s biggest banks would jump into the new carbon market and buy up allowances, 97 percent of the allowances were purchased by “compliance entities,” or companies that must reduce their greenhouse gas emissions.

“The first auction of carbon allowances was a success,” said Mary Nichols, chairwoman
of the Air Resources Board, during a conference call with journalists. “This is an important milestone for our state. By putting a price on carbon, we know we are beginning the process of breaking our dependence on fossil fuels.”

California’s cap-and-trade program is the cornerstone of the state’s landmark global warming law, known as AB 32, that was signed by Gov. Arnold Schwarzenegger in 2006. AB 32 includes a suite of regulations meant to dramatically reduce emissions of heat-trapping gases, including requiring utilities to obtain 33 percent of their electricity from renewable sources by 2020.

Under the program, the state sets an overall emissions “cap” for individual California companies that emit more than 25,000 metric tons of carbon dioxide or other greenhouse gases. Those that reduce emissions below their cap can sell or trade their unused allowances to companies that exceed their limits. If the system works as designed, the most efficient companies will be financially rewarded, polluters will pay and greenhouse gases will be dramatically reduced.

An independent market monitor verified the results of last week’s auction and found no evidence of collusion or manipulation in the bidding process, according to Nichols.


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