First-Year Report: Market Strong for Cap and Trade in California

NEWS RELEASE

Contact:
Media Inquiries: Joaquin McPeek, jmcpeek@edf.org, 916-492-7173
Report Author Inquiries: Emily Reyna, ereyna@edf.org, 415-293-6068

(San Francisco, CA – January 8, 2014) Environmental Defense Fund (EDF) today released an in-depth assessment of the first year of California’s historic cap-and-trade program for greenhouse gas pollution, showing the carbon market is well-constructed and strong while the state’s economy continues to improve.

The report, Carbon Market California: A Comprehensive Analysis of the Golden State’s Cap-and-Trade Program, Year One, analyzes critical data and key metrics of the landmark program, including a focus on the development of the secondary carbon market. It also examines the impact of notable partnerships, including recent linkage with Quebec and agreements signed with China, Australia, and other regions.

“The first year results are highly encouraging and proof positive that we can successfully harness the power of the marketplace to solve climate change without sacrificing economic growth,” said EDF President Fred Krupp. “In a year marked by gridlock and polarization, the Golden State is a shining example of climate leadership.”

Since California’s landmark program started on January 1, 2013, the state has transitioned smoothly to a capped economy, weathered legal challenges, and expanded its clean energy sector. Most notably, under cap and trade, California has continued its economic recovery, balancing its budget for the first time in over a decade.

First-year conclusions from Carbon Market California include:

• Five successful cap-and-trade auctions are evidence of a well-constructed, strong, and adaptive policy.
• The average price for allowances suggests that reducing emissions under the cap may be less costly than some expected.
• The secondary market for California carbon allowances is robust and healthy.
• Wise investment of auction proceeds will be an integral part of achieving California Global Warming Solutions Act’s (AB 32) carbon pollution reduction goals.
• Market experts have given overwhelmingly positive views of the first-year performance of California’s cap-and-trade program.

“After its inaugural year, most would agree that the state has developed a program to be proud of—one that is poised for future success and emulation across other economies, both inside and outside U.S. borders,” said Dirk Forrister, President and CEO, International Emissions Trading Association (IETA).

As described in Carbon Market California, the year ahead will be pivotal for the state. Covered entities will have to surrender allowances to account for their carbon pollution, the state must prepare for fuels to come under the cap starting in 2015, and key questions remain regarding auction proceeds investment, offset supply, and future linkages.

“This reports highlights that one of the most positive takeaways from 2013 was the auction results. In a year marked by inaction in Congress, California held five successful carbon auctions with the complete sale of all current allowances and broad participation, all signs indicating a healthy carbon market,” said Emilie Mazzacurati, Founder and Managing Director, Four Twenty Seven.