On November 14, 2012, California held the nation’s first economywide auction of GHG allowances.  The 3-hour online event sponsored by the state Air Resources Board (CARB) offered about 23 million 2013 vintage allowances and 39 million 2015 vintage allowances.  Vintage refers to the year the allowances can first be used for compliance purposes.  One allowance permits the release of 1 metric ton of CO2. Bidding started at $10 for each 2013 vintage allowance.  Bids had to be submitted in allowance multiples of 1,000. 

AB 32

The auction is a product of California Assembly Bill 32, which was signed into law in 2006 and empowered CARB to undertake measures to reduce the state’s GHG emissions to 1990 levels by 2020 and to 80 percent below 1990 levels by 2050.  In addition to a GHG cap-and-trade program, which CARB claims is the basis of the auction, other measures authorized by AB 32 include a low-carbon fuel standard, advanced clean cars, a renewables portfolio standard, energy efficiency, and sustainable communities.

The cap-and-trade program covers any facility that emits more than 25,000 metric tons of CO2 per year, estimated at about 600 facilities in California.  This economywide approach contrasts with the GHG cap-and-trade and allowance auction program of the Northeast’s Regional Greenhouse Gas Initiative (RGGI), which was launched in 2008 and affects only electric power plants.  RGGI officials issued a press release congratulating California on the auction.

California is the only member of the original Western Climate Initiative  formed in 2007 by a number of states and Canadian provinces to initiate a mandatory cap-and-trade program for industry.  Arizona, New Mexico, Oregon, and Washington subsequently dropped out of the program. 

The results of the auction will be published on the CARB website on Monday, November 19, 2012.  Once results are posted, CARB will notify auction participants of the availability of their auction results.  Starting 2013, CARB will hold four auctions each year.

Chamber lawsuit

The day before the auction was held, the California Chamber of Commerce filed a suit in the state Supreme Court seeking to invalidate the auction.  According to the Chamber, AB 32 does not allow CARB to impose fees other than those needed to cover the ordinary administrative costs of implementing a state emissions regulatory program.

“What was not authorized by AB 32 is CARB’s decision to withhold for itself a percentage of the annual statewide GHG emission allowances and to auction them off to the highest bidders, thus raising from taxpayers up to $70 billion or more of revenue for the state to use,” states the Chamber’s complaint.   

The Chamber emphasizes that the lawsuit does not challenge any AB 32 provisions nor the merits of climate change science.  “The only issue addressed in the litigation is the portion of CARB’s regulatory program that seeks to permit CARB to allocate to itself GHG emission allowances and to profit by selling them to GHG emitters,” says the Chamber. 

Click here for information on CARB’s GHG cap-and-trade program and allowance auction.