California Carbon Price Surpasses Expectations

by | Feb 25, 2013

California raised about $176 million selling GHG emissions permits in its second carbon auction, with businesses paying $13.62 per metric ton of carbon, exceeding analysts’ expectations and selling at $2.91 above the reserve price.

The state sold all of its 12,924,822 carbon permits for use this year.

Chevron, BP, Exxon and Shell were among the companies qualified to buy permits, according to the California Air Resources Board.

Bids for the 12.9 million 2013 carbon permits ranged from $10.71 to $50.01 per allowance, with the reserve price at $10.71. The settlement price of $13.62 bested the $12.30 price Bloomberg New Energy Finance analysis had expected.

In addition to this year’s permits, the state also sold some 9.56 million emissions permits for businesses to use in 2016. These didn’t sell as well with less than half (4.44 million) being bought at the reserve price of $10.71 each. The highest bid for 2016 permits was $40.

California’s inaugural auction in November raised nearly $300 million, with emitting businesses paying $10.09 per metric ton for the right to release carbon in 2013. All 23.1 million permits on offer were purchased.

The Feb. 19 auction sold a little over half as many allowances with a reserve price set 71 cents higher. The price increase is in line with California cap-and-trade regulations, which state that the auction reserve should increase annually by five percent plus the rate of inflation.

The value of global carbon markets fell 35 percent to €62 billion ($84 billion) in 2012, largely due to an oversupply of credits, according to analysis from Thomson Reuters Point CarbonThe EU’s Emissions Trading Scheme, the largest global carbon market, saw its estimated carbon price drop 49 percent to €5.82 ($7.73) per metric ton in 2012, down from €11.45 per metric ton in 2011.

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