On November 14th, after 6 long years of waiting, the state of California became the first state in the United States to sell emission-trading certificates. On the first day of auction, the carbon market sold a total of 23.1 million certificates for a total of 233 million dollars making it the second largest emission trading system in the world, with the EU ETS on the first place. Given California’s importance as one of the most populated states in the US and making its economy one of the world’s strongest, this is a major breakthrough for climate policy.
Mary Nichols, Chairman of the California Air Resources Board, called the first auction a “complete success.” “This is an important milestone of our state,” Chairman Nichols proudly stated.
In this first round of auctions, 350 companies known to be major polluters, such as, cement plants, steel mills, refineries, and electrical manufacturing plants, took part in the auction. In years to come, the emissions market will include other industries.
Description of California’s Cap and Trade Market
Carbon auctions will be held four times per year until 2020, when the system will be re-evaluated. The total amount of certificates will be declining over time to encourage industries to emit less CO2. The money gained from each auction will go towards state investments with 25% of the money meant to support disadvantaged communities (although the details of such investments are still to be determined). The California Cap and Trade Market will try to prevent the price volatility seen in the EU ETS by establishing a price floor of certificates at $10 per tonne.
TheCompensators* believe that California has made a huge step in favor of progressive climate policy and believe that other states of the US should follow this example. Further, we believe that the EU ETS should learn from its mistakes and imitate ideas from other carbon market systems. We support, for example, the idea of a price floor. This measure would help increase the current price of emission allowances which has stagnated at 6 Euros per tonne.
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