California will start selling carbon allowances tomorrow

Nov 13, 2012 by

 Grist

13 Nov 2012 2:19 PM

By Philip Bump

Get out your wallets, Christmas shoppers! At 10 a.m. tomorrow, the California Air Resources Board will start auctioning carbon credits. (Not sure what the hell I’m talking about? Read this.)From the San Jose Mercury News:

The event comes six years after former Gov. Arnold Schwarzenegger signed AB32, the law that required California to lower its greenhouse gas emissions by 2020 to 1990 levels — the equivalent of a 17 percent reduction.

“It’s the largest carbon market in the United States, and the second largest in the world, behind the European Union,” [CARB spokesman Stanley] Young said. …

The air board estimates the regulation will add 10 cents per gallon to the price of gas for every $10 per ton that industry pays for allowances. On Friday, the futures market pegged the price at $12 a ton, which could result in a 12-cent per gallon increase.

Coal
abutyrin
“Son, you’re gonna need an allowance to burn those here in Santa Monica.” – A Santa Monica cop, I guess

Six years this has taken. At one point, the move faced a lawsuit on the grounds that it didn’t adequately address environmental justice concerns. It was further delayed last year to protect the market from outside manipulation. But, at last, here we are.

If you are wondering what you can buy tomorrow, Platts has your answer.

The auction will offer about 23.126 million vintage 2013 allowances and 39.45 million vintage 2015 allowances. The minimum price that a GHG allowance can be sold for is $10. Each GHG allowance represents one metric ton of emissions. …

The vintage refers to the first year in which a GHG allowance can be used. Compliance entities must hold enough GHG instruments to cover their emissions.

In other words: the CARB is selling the right to emit about 23 million tons of carbon dioxide in 2013 and just shy of 40 million tons in 2015. If you want to emit a ton of CO2 in 2013, it will cost you at least $10 — but, again, this is an auction. It could cost much more. But in 2013, when corporations are looking for extra permits around December, the price of a 2013 permit could skyrocket. That’s the goal of the market: to deter carbon emissions or, at least, to make them expensive.

Obviously these allowances make a great Christmas gift. And if you’re a dirty California polluter who regularly receives coal in his stocking — think twice before you burn it.

 

Philip Bump writes about the news for Gristmill. He also uses Twitter a whole lot.

We welcome your comments!