Earlier this week, the California Air Resources Board released the results of its latest allowance auction for the State’s Cap-and-Trade program, the carbon trading program created in 2006 by Assembly Bill 32 to theoretically help the State dramatically reduce greenhouse gas emissions by the year 2020.
The auction, which took place last week, only moved around 35 percent of the available carbon allowances up for sale to industrial facilities covered under the cap. Among those allowances, a meager 2.1 percent were held by the State, and are estimated to have netted around $8.4 million total for the Greenhouse Gas Reduction Fund. The remainder of the sold allowances were held by Quebec’s auction system, to which California’s program is linked, or were consigned allowances from investor-owned utilities whose proceeds must go to the benefit of the ratepayers. The disappointing results of the auction echo the last auction held in April, when the State sold a mere 2 percent of its allowances.
The future of Cap-and-Trade is currently in question due to an industry lawsuit challenging the program as an illegal, de facto tax on its participants. Even with a ruling on the suit expected in the coming weeks, Governor Jerry Brown has been exploring ways to continue the program beyond its 2020 sunset date, including a possible ballot measure in 2018. A quarter of Cap-and-Trade auction proceeds each year are continuously appropriated to funding the High Speed Rail Authority, which is a priority program for the Administration. The lawsuit has also been one of the main delays in the Legislature allocating funds currently in the Greenhouse Gas Reduction Fund, which is backfilled by proceeds from the auctions. Legislative negotiations on allocating the funds stopped in June 2016, but the Senate recently unveiled a new proposal for allocating approximately $1.1 billion in Cap-and-Trade funds, mostly to programs that benefit urban and suburban communities. Now that the auction results have been released, the Assembly is expected to release its own Cap-and-Trade funding proposal before the end of the legislative session on August 31, 2016.