California aims for permit auction in cap-and-trade

Mon Jan 25, 2010 3:50pm EST

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By Laura Isensee

LOS ANGELES, Jan 25 (Reuters) - California is aiming to auction off all its permits to emit greenhouse gases -- rather than give them away -- in its cap-and-trade program, but how quickly it will reach that target is still unclear, the state's chief climate regulator said on Monday.

"That's the goal," said California Air Resources Board chair Mary Nichols, referring to the goal of 100 percent auction of permits.

"The question is when do you begin and how quickly do you ramp up," Nichols told Reuters on the sidelines of an environmental conference in Los Angeles.

California's strategy on cap-and-trade could influence how allowances are distributed in a future national carbon market.

While a U.S. climate bill has been delayed, any problems or successes with state carbon auctions could help lawmakers decide in future years whether permits in a national market should be given away, mostly sold to build revenues for clean energy programs or given directly to consumers.

California's cap-and-trade program is part of its efforts to meet a landmark state climate law that it cut its greenhouse gas emissions to 1990 levels by 2020. The scheme, which lets factories and power companies trade credits to emit gases that heat up the earth, is set to begin in 2012.

A northeastern U.S. regional trading system is already under way, focusing on carbon dioxide emissions by big emitters. California, however, plans to include nearly every source of emissions to reach its goal.

An advisory committee to the California Air Resources Board this month recommended auctioning 100 percent of greenhouse gas permits for industry. Emitters want allowances given to them, in particular early on, while California businesses regularly criticize the plan as pushing too far too fast and costing too much.

Nichols said that advisory group's recommendation is useful and echoes the board's intention, but also noted "more thinking" is needed.

"I don't think people should get too alarmed or excited one way or the other about a 100-percent auction being the thing that first happens right out of the box. I think we have got to do a lot more thinking about it," Nichols said.

(Reporting by Laura Isensee; Editing by Mary Milliken and Lisa Shumaker)

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