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Only a few drips of cash expected from cap-and-trade auction

Mary Nichols is chairwoman of the California Air Resources Board, which runs the cap-and-trade program. (Carl Costas / For The Times)
Mary Nichols is chairwoman of the California Air Resources Board, which runs the cap-and-trade program. (Carl Costas / For The Times)

California's cap-and-trade program limped through another weak auction of pollution permits last month, according to results provided by state regulators Wednesday.

Demand for the permits, which are required to release greenhouse gas emissions into the atmosphere, has fluctuated over the last year amid questions about the program's long-term viability.

A state appeals court is expected to rule soon on whether cap and trade represents an unconstitutional tax, and lawmakers are debating whether they should ensure the program continues past 2020.

Final details on the latest auction have not been released, but the summary of results posted Wednesday indicates that revenue likely will be only about $8 million. Less than 20% of the permits offered through the auction were claimed.

That's a drop from the two previous auctions, which saw higher demand, and roughly equivalent to the May 2016 auction.

Regulators insist that generating revenue is not the goal of the cap-and-trade program. But among lawmakers, the money has been in high demand to fund transit projects and other initiatives. Gov. Jerry Brown also is counting on the program to help finance the bullet train from Los Angeles to San Francisco.

Senate leader Kevin de León (D-Los Angeles) said he's looking forward to working more on cap and trade and questioned whether it was delivering on its goals.

“The program is not producing stable revenues for important priorities like increased transit and other clean transportation investments," he said in a statement. "According to California Environmental Protection Agency, it may not even be achieving pollution reduction in disadvantaged communities, when that should be our utmost priority."

Chris Busch, who tracks the cap-and-trade market for environmental firm Energy Innovation, said the results announced Wednesday were surprising.

"It's going to take some more unpacking to really understand them," he said.

Busch expects demand to pick up in the coming months and years because more permits will be needed to cover the state's economic activity.

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