News and analysis about energy in California with an eye toward renewables.

Greenhouse Gases Now Have A Market Price In California

$13 a ton, now | Photo: ribarnica/Flickr/Creative Commons License

What's a ton of carbon dioxide worth in California? As of this week, there's a new answer to that question: about $12 or $13. That's the average of the bids placed on greenhouse gas emissions allowances for 2013 in California's first-ever carbon cap and trade emissions auction, held last week, according to results released Monday.

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Under the requirements of the state's Global Warming Solutions Act of 2006, California's largest emitters of greenhouse gases must hold permits to emit those gases. For 2013, most of the permits a company will require -- termed "allowances" -- will be given to the companies for free, but a certain amount must be bought at auction. That provides an incentive to reduce emissions -- not only as a way of avoiding buying allowances, but so that companies can sell allowances they don't use to other companies that haven't been as diligent in reducing their emissions. Each year until 2020, the number of allowances issued by the state's Air Resources Board (CARB) will diminish, bringing the state closer to its target of reducing greenhouse gas emissions by 25% in 2020.

Last week's auction's "reserve price" -- the minimum price per unit, a familiar concept to those of you who participate in online auctions -- was $10.00 per allowance, each of which covers the emission of a metric ton of CO2 or its equivalent in other greenhouse gases. According to CARB's report on the auction, the highest bid per 2013 allowance was $91.13, with the average bid coming in in the $12-13 range.

Among the bidders on emissions allowances were some of California's largest corporations. California utilities Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric took part, as did smaller municipal utilities and irrigation districts, and other energy firms such as Sempra, BP, Chevron, Exxon-Mobil and Tesoro. Other California business giants submitted bids as well, ranging from Lockheed Martin to Central Valley agribusiness giant J.G. Boswell to Morgan Stanley. So did government bodies such as the University of California and the state's Department of Water Resources -- which last generates a whole lot of atmospheric carbon pumping water from one place to another in the state's aqueducts.

"The auction was a success and an important milestone for California as a leader in the global clean tech market," said CARB Chairman Mary D. Nichols. "By putting a price on carbon, we can break our unhealthy dependence on fossil fuels and move at full speed toward a clean energy future. That means new jobs, cleaner water and air -- and a working model for other states, and the nation, to use as we gear up to fight climate change and make our economy more competitive and resilient."

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About the Author

Chris Clarke is a natural history writer and environmental journalist currently at work on a book about the Joshua tree. He lives in Joshua Tree.
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