Press Release: Sluggish Auction Results — Market Still Waiting for Leadership to Recommit to California’s Cap and Trade Program
Sacramento, CA – Today’s quarterly auction results from the cap-and-trade program show allowances selling at $28.76, $2.89 above the minimum price of $25.87. “The draft proposal on cap-and-trade extension released by the Assembly increased demand for allowances” said Clayton Munnings, Executive Director of Clean & Prosperous California. “However, the market still holds substantial reservations that cap-and-trade extension will occur this year, especially given the lack of a cap-and-trade proposal from the Senate.”
“We fully expected this auction to clear above the minimum price, based solely on the prospect of extending the cap-and-trade program in the next two weeks” said Lenny Hochschild, Founding Partner of Environmental Commodity Partners LP. “If California’s leaders fail to extend the cap-and-trade program, then the next quarterly auction in November, and auctions beyond that, will unquestionably have starkly worse results.”
Today’s quarterly auction result shows the cap-and-trade program raised $680 million, a significant improvement from the last quarter’s results of $448 million. However, Clean & Prosperous California calculates that this quarterly auction lost up to $307 million in GGRF revenue based on the assumption that allowance prices would have been around $42 today without uncertainty around legislative extension and delayed supply cuts from regulatory rulemakings. The methodology for these calculations is similar to a report released by Clean & Prosperous California in July.
“The Assembly draft proposal on cap-and-trade is the most important piece of proposed climate legislation in the United States right now,” said Dr. Kyle Meng, Professor of Economics at UC Santa Barbara. “The proposal shows that California can lead on climate change with an economically smart and environmentally sound approach that addresses affordability challenges”. He added that “the ball is now in the Senate’s court.”
The auction results come on the back of news that the Senate has blocked the Assembly’s proposed amendments to make their draft proposal official. “Blocking amendments on the Assembly cap-and-trade bill at this late date feels like political theater and increases the odds that Senate inaction will kill cap and trade” said Dr. Joe Nation, Professor of the Practice of Public Policy at Stanford University. “That is a huge disservice to the overwhelming majority of Californians who want strong climate laws and support setting a price on carbon.” He added: “The program should be extended this year.”