California holds cap-and-trade auction of greenhouse gas credits

SACRAMENTO — California environmental officials moved ahead with a first-ever auction of greenhouse gas pollution credits despite a last-minute lawsuit filed by the state Chamber of Commerce to invalidate the sale.

On Wednesday state Air Resources Board technicians worked at computer terminals to take bids from some major industrial facilities such as cement plants, steel mills, refineries and food processors.

Many companies that emit carbon dioxide, methane and other gases that contribute to global warming were expected to participate in the three-hour sale of so-called cap-and-trade credits. Results of the auction, including prices and volume, will be made public Monday.

Environmentalists, who had been working years on the market-based approach to curbing global warming, called the auction an important step.

“The launch of the nation’s first economy-wide carbon market emphasizes once again California’s leadership in developing innovative energy policies,” said Alex Jackson, an attorney with the Natural Resources Defense Council.


The sale of these pollution credits is a key part of a six-year state effort to curb and reduce to 1990 levels the amount of greenhouse gas emissions in California by the year 2020.

Polluters initially get 90% of their needed credits free, but they are required to buy more if they plan to release carbon dioxide and other greenhouse gases above allotted levels. Pollution credits start at a minimum price of $10 for the right to emit 1 metric ton of greenhouse gases.

Opponents brand the system a new pollution tax and contend that it is unfair to large businesses and a job killer. This year the program covers about 350 industrial businesses operating a total of 600 facilities throughout the state.

On Tuesday the California Chamber of Commerce sued in Sacramento County Superior Court, challenging the state’s authority to raise revenue from the sale of the credits. The quarterly auctions are expected to generate about $1 billion in their first year.

The Air Resources Board said it was “confident that the cap-and-trade program will withstand any court challenge.”