Renewable + LawSM
Results of California Cap and Trade Quarterly Auction Released
On February 19, 2013, the California Air Resources Board held its second auction of greenhouse gas (GHG) emission allowances for its Cap and Trade Program. This was the first quarterly auction for 2013; the first auction was held November 14, 2012. All ‘covered entities’ – GHG emitters regulated under Cap and Trade – were eligible to participate in the auction. Voluntarily associated entities, i.e. groups who wish to retire allowances or sell allowances on the market, were also eligible to participate. Some key rules of the auction:
- Participants submit sealed bids, for multiples of 1,000 allowances.
- For 2013 auctions, the minimum bid is $10.71 per allowance.
- One allowance equals the right to emit one metric ton of CO2 (or other GHGs in CO2-equivalent terms).
- Allowances are awarded beginning with the highest bid and proceeding through successively lower bids until the total number of allowances available for sale have been awarded.
- The final price of allowances for all participants in the auction, the “settlement price,” is the lowest bid received at which the supply of available allowances for sale is exhausted.
In this auction, the settlement price for 2013 vintage allowances was $13.62. All of the approximately 13 million allowances offered for sale were sold. The auction also included the advance sale of 2016 vintage allowances. The settlement price for 2016 allowances was $10.71. 4,440,000 2016 vintage allowances were sold, approximately half the total number offered for sale. There were approximately 2.5 bids for every one allowance, compared with approximately one bid for each allowance during the November 2012 auction. Not surprisingly, auction participation is up, with covered entities facing compliance obligations this year.
The settlement prices for this auction were slightly higher than those of the first auction, held November 14, 2012. The settlement price for 2013 vintage allowances in November 2012 was $10.09. Advance sales of 2015 vintage allowances were settled at $10, the minimum price, in the November 2012 auction. The Air Resources Board will hold an allowance price containment reserve sale on March 8, 2013, offering allowances at a three tiers of fixed prices.
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