Latest Cap & Trade Auction Slumps, Yields Just $25 Million
The latest California Air Resources Board (CARB) cap & trade auction of greenhouse gas (GHG) permits raised just $25 million on the back of lower emissions and economic activity related to COVID-19 economic downturn.
The May 20 sale of GHG permits raised a fraction of February’s pre-pandemic auction, which netted $612 million for the State. None of the State-owned allowances to cover businesses’ current-year emissions sold, and only 18% of the State’s future-year offerings sold.
The low demand for State-owned allowances is bad news for a host of programs supported by the GHG Fund, including the State’s high-speed rail project, small and rural drinking water systems, and zero-emission vehicle rebates.
In anticipation, Newsom earlier this month proposed a pay-as-you-go model for the Greenhouse Gas Reduction Fund (GGRF) for 2020-21 that would prioritize a handful of programs, including community air pollution reduction plans, wildfire protection, agricultural diesel engine replacement, and funding for impaired drinking water systems. Other efforts, such as rebates for zero-emission vehicles and grants for zero-emission trucks and buses, would take a back seat.
Thanks to a reserve of nearly $550 million left over from last year’s auctions, many of those programs should still receive their full funding this year. However, the ones that are continuously appropriated, including high-speed rail, affordable housing, and drinking water, should see declines as their 60% allocation is based on current-year auction proceeds rather than the overall amount of money in the fund.
California utilities that receive allowances from the state to sell at auction sold 83% of their permits for a total of $297 million, which goes toward “climate credits” that offset utility customers’ bills. The province of Quebec, which holds joint auctions with California, raised $83 million in Canadian dollars, due to the order in which each jurisdiction’s allowances are sold. CARB’s portion of allowances are the last to be sold under auction rules, so the State received the lowest amount of proceeds.
Environmental advocates hope low revenue in the first post-pandemic auction will nudge Newsom and lawmakers to find alternate funding sources for climate programs.