SAN FRANCISCO, Aug 21 (Reuters) - California carbon emission permits fetched $11.50 a tonne at the cap and trade program’s eighth auction, bringing the total amount raised for the state to more than $833 million, officials said on Thursday.
As expected, California sold all of the nearly 22.5 million allowances it offered to cover emissions this year. Oil refineries, cement manufacturers and other large carbon-emitting businesses snatched up 88 percent of the allowances offered, according to data released by the California Air Resources Board, the program’s regulator.
The auction saw stronger-than-expected demand for the nearly 9.3 million permits it offered to cover emissions in 2017, selling 70 percent of those allowances, up from 44 percent in the previous quarterly auction.
“This level of demand for 2017 credits ... is promising for the future of the program,” Katie Hsia-Kiung, a carbon market analyst at the Environmental Defense Fund, wrote in a blog post published on Thursday.
The secondary market for carbon allowances was largely unmoved by the auction results, which were in line with expectations, a carbon trader said.
Revenue from the auction will be deposited into California’s greenhouse gas reduction account, where it will eventually be used to help build low-income housing near mass-transit hubs and support construction of the state’s ambitious high-speed rail project.
The auction results come as the state prepares to expand the program’s reach next year to cover distributors of transportation fuels, a move opposed by oil companies which argue that doing so will lead to higher prices at the pump.
Energy companies have thrown their support behind a bill by California Assemblyman Henry Perea, which would delay putting fuels under the cap until 2018.
“The cap-and-trade system should not be used to raise billions of dollars in new state funds at the expense of consumers who are struggling to get back on their feet after the recession,” Perea said when the bill was introduced last month.
Supporters of the program argue that expanding it is necessary if the state is to reach its target of rolling greenhouse gas emissions output back to 1990 levels by 2020. Transportation fuels account for 40 percent of the state’s carbon emissions, the single-largest source.
“Reversing or delaying the scheduled inclusion of transportation fuels under the pollution cap would worsen the situation, making Californians more dependent on oil and more vulnerable to rollercoaster gas prices,” Merrian Borgeson, a senior scientist at the Natural Resources Defense Council said in a blog post on Thursday.
California plans to link its program with a similar effort under way in the Canadian province of Quebec, a move designed to increase market liquidity and enhance the environmental impact of the program.
A spokesman for the California Air Resource Board said the state has not determined whether the next auction in November will be the first joint auction between the two partners.
California officials hope that other states such as Washington and Oregon will eventually join the program as well. (Reporting by Rory Carroll)