California may have lost up to $3 billion in potential revenue from its cap-and-trade program over the past year.
The report, published by nonprofit research group Clean and Prosperous California, attributes the losses to weak auction results stemming from a plunge in allowance prices.
Driving the news: Allowance prices have dropped from an all-time high of $42 per metric ton of carbon dioxide emitted to near-historic lows of $26 per metric ton.
- The funds could have been directly invested into communities and used to lower utility bills for ratepayers.
- The poor auction outcomes are attributed to legislative uncertainty surrounding the program’s future, with allowance prices showing no signs of recovery ahead of an upcoming auction on Aug 20.
What we’re watching: Bolstering future revenue would require urgent action from the state Legislature to extend the program’s shelf life beyond its current 2030 end date.
- The California Air Resources Board (CARB) would need to resume rulemaking processes to allow for the reduction of available permits, with the authors stressing that failure to do so could result in continued revenue loss from each quarterly cap-and-trade auction.
- The report suggests that swift legislative extension of the cap-and-trade program, along with subsequent rulemaking including permit supply cuts, could help California achieve its 2045 carbon neutrality goals.
