California to sell more CO2 permits at 2013 auctions

California will offer an additional 779,369 permits to cover 2013 carbon emissions at its four auctions this year after utilities opted to sell a larger share of their permits, the cap-and-trade program’s regulator said Tuesday.

The California Air Resources Board (ARB) will sell 57.6 million 2013 vintage allowances at the quarterly auctions, a 1.4 percent increase over what it initially planned to put on the block after some publicly-owned utilities (POUs), which were given their allowances for free, decided that this year was a good time to put some of their allocation on the block.

The number of allowances offered at the next auction on Feb. 19 will remain unchanged, with the state offering 12.9 million allowances for 2013 delivery and 9.5 million 2015 permits.

The additional allowances will be sold at the final three auctions of the year, which are scheduled for May 16, Aug. 16 and Nov. 19. The exact number of allowances for sale at each of those three auctions will be announced 60 days before the auction date, the ARB said.

At its first auction in November, the ARB sold all of the 2013 vintage allowances it put up for sale for $10.09/tonne, nine cents above the minimum price.

The ARB will also sell 38.2 million allowances that cover 2016 emissions at the auctions, marking the first time permits for that year will be offered in the market.

The ARB also offered a large number of permits to cover 2015 emissions at the program's inaugural auction in Nov., but only managed to sell 14 percent of those permits.

Trading of California carbon allowances (CCAs) in the secondary market has been rampant since the program’s official start on Jan. 1, with prices outperforming analyst expectations.

On Monday, CCAs for 2013 delivery closed at $14.10/t on the IntercontinentalExchange (ICE) after a busy day of trading that saw 182,000 allowances change hands.

The ARB also reiterated that the price floor for allowances at the 2013 auctions will be set at $10.71 per allowance, up from $10 per allowance at the Nov. auction.

The cap-and-trade program requires the minimum price for allowances sold at auction to rise 5 percent plus the rate of inflation every new calendar year.

The rate of inflation used to calculate the 2013 auction reserve price was 2.16 percent, the ARB said.

(Source: Thompson Reuters)