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Source: Graph by the U.S. Energy Information Administration, based on California Air Resources Board data Note: Prices are for the current vintage allowances sold in each auction.

Cap And Trade

California Emissions Credit Prices Increase in Early 2022 Auction

In its first quarterly auction of 2022, emissions credits in the joint California-Quebec allowance auction sold for $29.15 per metric ton of carbon dioxide equivalent, or nearly $10 per metric ton more than the minimum price for allowances. Emissions credits sold in this market can be used to comply with California’s cap-and-trade program, which covers nearly all sources of emissions within the state, including electric utilities, industrial facilities, and distributors of natural gas and gasoline.

Since 2012, most of the auctions have sold emissions credits at prices near the auction reserve price, the minimum price for allowances in each auction. Under the cap-and-trade program, the steadily declining cap on emissions helps California’s public and private energy producers to meet carbon dioxide emissions reduction goals set by the state legislature. Actual emissions have been below the cap in each of the compliance years through 2020, the latest data published.

California emissions cap and actual emissions

Source: Graph by the U.S. Energy Information Administration, based on California Air Resources Board data

Proceeds from the sale of allowances in California are split between the state and utilities that use the revenue to offset compliance costs. In the most recent auction, the California Air Resources Board collected more than $1.5 billion in revenue: 63% of the proceeds will go to the state, and 37% will go to public- and investor-owned utilities.

To comply with the cap, the program requires all facilities to submit emissions allowance permits for each metric ton of emissions they produce. The California cap-and-trade program is one of two major cap-and-trade programs for greenhouse gas emissions in the United States. The Regional Greenhouse Gas Initiative has been in effect in the northeastern United States since 2009, but it only applies to the electric power sector.

First published on “Today In Energy.” Principal contributor: M. Tyson Brown

Featured Graph: Graph by the U.S. Energy Information Administration, based on California Air Resources Board data. Note: Prices are for the current vintage allowances sold in each auction.

 
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-- the EIA collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment.

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