At the second auction, held on February 19, 2013, the California Air Resources Board (CARB) sold all of the Vintage 2013 (V13) 12.9 million allowances available for 2013 at $13.62, 27% above the $10.71 floor price. There were 91 qualified bidders, almost 25% more compared to the last auction, and there was close to 2.5 times more V13 credits bid on than were sold. The state also auctioned 9.56 million Vintage 2016 (V16) allowances and 4.44 million of those were sold at the floor price of $10.71. In total, this second auction sold more than 7 million state-controlled carbon allowances, resulting in about $83.6 million, money that will be used to advance the goals of AB 32. A completeCARB report (PDF) gives more details on the results.
The second auction showed continued success for the cap-and-trade program which officially started on Jan 1st. Key takeaways include:
- The 100% sale and increased settlement price of V13 allowances point to a strong & viable carbon market.
- The fact that V13 allowances had 2.5 times as much bid-side interest and that there was an increased number of qualified bidders, 88% of which were compliance entities, affirms strength of demand and that participants are taking the program seriously. Qualified bidders included oil companies, dairies, manufacturers, and banks.
- Moderate demand for future allowances is not surprising given 2016 is still a few years away; however the fact that 46% of available V16 allowances sold denotes belief in program longevity.
- A diverse array of qualified bidders and a low HHI index (728) point indicate a competitive market and is a sign that there is no concentration of allowances in the hand of a single bidder.
- The approximately $140 million generated by the sale of utility owned allowances and $83.6 million by the sale of state-held allowances will go back to furthering the goals of the program and move California towards a clean energy economy.
The state is in the process of developing an investment plan for the cap-and-trade auction proceeds. Three public workshops were held last month to collect input on the plan and written comments are being accepted through this Friday, March 8th. EDF will continue to monitor and provide our input in this process.
Our California Climate Team continues to work closely with CARB, the Governor’s Office, and the Legislature to make sure implementation continues to go smoothly. Your feedback and input has been and will continue to be critical to the success of this program.
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