California Carbon Auction Prices Rebound, Market Awaits Clarity on Program’s Post-2030 Future

The 44th quarterly carbon auction held by California and Quebec sold all of the nearly 51.9 million carbon permits offered under the current auction at a price of $28.76 per allowance, above the floor price of $25.87, according to the results released on Aug. 27 by the California Air Resources Board. The current auction’s clearing price is 11.2 percent higher than the previous auction, which settled at the reserve price. The advance auction, which offered about 6.8 million allowances, also sold out, settling at $28.50 per allowance.

The results signal that demand has rebounded, with prices rallying, though they remain far below their 2024 peak amid uncertainty over the program’s future. At the previous auction, held in May, current allowances cleared at the reserve price of $25.87 per allowance and sold about 86 percent of the 51 million permits offered, marking the first time an auction has failed to sell out since 2020. In the May auction, advance allowances sold out, settling slightly higher than the reserve price. Auction prices have declined from the record high reached $41.76 last February, indicating market uncertainty surrounding the future design of the cap-and-trade program. State lawmakers are considering legislation to extend the cap-and-trade program from 2030 through 2045.

At the latest quarterly auction, compliance entities purchased 84.8 percent of the current allowances, slightly higher compared to 81.5 percent in the last auction. These entities acquired 79.8 percent of the advance allowances offered, up from 70.2 percent in the May auction.

The proceeds from the sale of allowances are placed in the Greenhouse Gas Reduction Fund, which funds clean energy projects in the state through the California Climate Investments initiative. The program has raised nearly $33 billion for climate solutions since its inception 11 years ago, according to the board’s annual report on auction proceeds.