California’s Thirtieth Carbon Auction Generates $975 Million

The thirtieth quarterly carbon auction held by California and Quebec sold all more than 58.5 million carbon permits offered for current emissions at a price of $29.15 per allowance, above the floor price of $19.70, according to the results released on Feb. 24 by the California Air Resources Board. The settlement price is nearly 3.1 percent higher compared with the previous quarterly auction, which settled at $28.26.

Notably, about 11 percent of advance allowances to be used in the future did not sell, and the settlement price for these allowances fell to $19.70 compared to the previous auction’s clearing price of $34.01. The advance auction for vintage 2025 allowances sold 7.1 million of the 7.9 million future allowances. This is the first auction since May 2020 that advance permits failed to sell out, which may be due to banking of allowances for future use.

The carbon market’s third compliance period (2018-2020) resulted in 100 percent compliance, according to the 2021 annual report of the independent emissions market advisory committee released on Feb. 4. The report indicated that a substantial number of allowances were held or banked in private accounts, raising concern about the cap-and-trade program’s ability to contain emissions adequately to support the economy-wide greenhouse gas limit in the years ahead.

The current auction offered 2017, 2018, 2019, 2020, and 2022 vintage allowances, and the advance auction offered 2025 future allowances. The parties obligated to comply with California and Quebec cap-and-trade programs made up 86.5 percent of current vintage allowance buyers and 81.6 percent of advance allowance purchases, compared with 81 percent and 88 percent, respectively, at the November auction.

The California cap-and-trade program, which covers major sources of the state’s greenhouse gas emissions, including power plants and transportation fuels, requires a 40 percent cut in emissions from 1990 levels by 2030. The policy survived long-standing litigation when the court ruled that cap-and-trade does not impose an unconstitutional tax.

California also has additional goals of achieving 100 percent carbon-free electricity by 2045 and economy-wide carbon neutrality by 2045. Quebec is aiming for a 37.5 percent reduction from 1990 emissions by 2030.