California Cap-And-Trade Auction Fails to Sell Out
David R Baker
Thu, February 24, 2022,
(Bloomberg) -- The latest quarterly auction in California’s cap-and-trade carbon market failed to sell out, a sign that a growing surplus of banked credits may be hampering the system used to fight climate change.
The market, which also includes the Canadian province of Quebec, holds quarterly auctions of “allowances,” each of which gives the holder the right to emit one ton of greenhouse gases. The number of allowances available decreases over time, giving companies an incentive to cut their emissions. Holders can also sell their allowances on a secondary market.
The most recent quarterly auction, held Feb. 16, sold out all available allowances to be used in the current year, at a price of $29.15 each, according to results published Thursday by the California Air Resources Board. But about 11% of allowances meant to be used in the future failed to sell, and the price for such future allowances fell to $19.70. That’s a steep decline from the last quarterly auction, in November, when future allowances sold for $34.01.
Concern has been growing that companies participating in the market have been buying and holding more allowances than they actually need, in part because the pandemic reduced economic activity in both California and Quebec. A recent report from an independent market monitoring committee warned such banked credits could hinder California’s greenhouse gas reduction goals.
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