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State government

California sees a rebound in cap-and-trade auction, bolstering key climate change program

 (Irfan Khan / Los Angeles Times)
(Irfan Khan / Los Angeles Times)

State regulators announced strong results from California's cap-and-trade program on Wednesday, spurring analysts and supporters to say the system remains solid despite questions about its political future.

The program requires oil refineries, food processors, power plants and other facilities to buy permits to release greenhouse gas emissions. Nearly all of the permits offered by the state in its latest auction were purchased, generating an estimated $500 million in revenue.

That's a shift from other recent auctions, where most of the permits went unsold, reducing revenue that state leaders have counted on for environmental and infrastructure projects. 

But rules governing how the market for permits operates are helping to stabilize the system, said Chris Busch, research director at Energy Innovation. He called it "a triumph of policy design."

Previous auction results also had been weakened by legal and political troubles involving cap and trade. The state received some relief from the legal problem when an appeals court in Sacramento rejected arguments from business groups that the program functions as an unconstitutional tax.

However, lawmakers are still debating whether to extend the program past 2020. One of the proposals, SB 775, would dramatically overhaul cap and trade, an idea the Environmental Defense Fund opposes.

"California has a strong carbon market design that can weather legal challenges and the inevitable bumps of the political process," said Erica Morehouse, a senior attorney at the organization.

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