California’s Cap and Trade Allowances Auction: Canary in a Coal Mine

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[author: Kerry Shea]

California holds its first Cap and Trade Allowances auction on Wednesday November 14, 2012. Some see this as a make-or-break time, the test case to see if a Cap and Trade program for greenhouse gas emission allowances can get off the ground. The first auction was originally scheduled for August 2012. Some industry groups are urging Governor Brown to put the brakes on this Wednesday’s auction, but as of this writing no such order has been offered.

The California Air Resources Board (CARB) will hold the auction between the hours of 10:00 a.m. and 1:00 p.m. (PST) on Wednesday November 14, 2012. Approximately 63,000 allowances relating to 2013 through 2015 will be on the auction block. The minimum price will be $10 per allowance, which is significantly higher than the emission allowances traded in the East Coast’s Acid Rain program involving power plants, called the Regional Greenhouse Gas Initiative (RGGI).

Before bidding on allowances, a participant must be registered with CARB and its bids must qualify by meeting other rules and standards. The Notice for this auction, which includes those requirements, is located at http://www.arb.ca.gov/cc/capandtrade/auction/november_2012/auction_notice_updated.pdf

All eyes are on California with the pundits waiting to assess the success or failure of the program.  California is the Canary in the Coal Mine.