November 20, 2012 in Nation/World

California exhausts pollution permits

‘Cap and trade’ bids put price on carbon
Associated Press
 

SAN FRANCISCO – California sold out of the first pollution permits issued as part of a landmark offensive against greenhouse gases at an inaugural auction that regulators said Monday went smoothly.

The effort to curtail carbon emissions involved the sale of 23.1 million permits – each allowing for the release of 1 ton of carbon – for $10.09 apiece, the California Air Resources Board said.

The permit sales last week opened the largest carbon marketplace in the nation and the second-biggest in the world after the European Union. The California air board will hold four such auctions a year.

“By putting a price on carbon, we know we are beginning the process of breaking our dependence on fossil fuels,” Mary Nichols, board chairman, said during a conference call with reporters.

The board would not divulge specific figures on how many permits were bought by individual polluters covered under newly instituted caps on carbon emissions. The board does not comment on bidding activity to protect each polluter’s strategy regarding use of the carbon market, Nichols said.

However, a sampling of the more than 300 companies that are covered include utilities such as Pacific Gas & Electric Co., petroleum refiners such as Phillips 66 Co. and even food processing companies such as Saputo Cheese USA Inc.

The board said participation in the auction was robust, with three times more bids submitted than allowances available for sale.

The permits are part of California’s so-called “cap-and-trade” program – a central piece of the state’s 2006 global warming regulations seeking to dramatically reduce emissions of heat-trapping gases.

Businesses are required to either cut emissions to cap levels annually, or buy pollution permits called “allowances” from other companies for each extra ton of emissions discharged annually.

The cap and number of allowances will decline over time in an effort to reduce greenhouse gas emissions year-by-year.

The final price for 2013 allowances was just nine cents above the $10 minimum price set by regulators.

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