California’s Thirty-Fifth Carbon Auction Prices Increase

The thirty-fifth quarterly carbon auction held by California and Quebec sold all of the nearly 56.08 million carbon permits offered for current emissions at a price of $30.33 per allowance, above the floor price of $22.21, according to the results released on May 25 by the California Air Resources Board. The settlement price is nearly 8.9 percent higher compared with the previous quarterly auction, which settled at $27.85.

The auction for advance vintage 2026 allowances sold all of the nearly 7.58 million allowances offered for sale at $30.05 per allowance, well above the reserve price of $22.21. The auction proceeds are placed in the Greenhouse Gas Reduction Fund and distributed through the California Climate Investments initiative to statewide projects that deliver environmental, economic, and public health benefits across the state. The money is allocated to individual projects selected by over 20 different state agencies.

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 aims to have a 100 percent clean energy grid capable of carbon neutrality by 2045, with greenhouse gas emissions reduced by up to 48 percent by 2030 and 85 percent by 2045.

Washington, which launched its cap-and-invest program this year, is examining the possibility of linking the state’s cap-and-invest program with the initiatives in California and Quebec. Linkage with other jurisdictions would facilitate a single market with a larger pool of participants, potentially increasing the stability of the emissions market and reducing carbon prices. Following a decision to pursue linking, the three programs may need to revise some regulations, so linkage would not happen until at least 2025.