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Calif. to Auction Fewer Carbon Allowances

California’s next carbon auction, on February 19, will offer 12,924,822 current vintage allowances – a little over half as many as were offered in the last auction in November – with a reserve price set 71 cents higher, at $10.71 per metric ton.

The price increase is in line with California cap-and-trade regulations, which state that the auction reserve should increase annually by five percent plus the rate of inflation. Bloomberg has forecast that allowances will sell at $14.06 this year.

The current allowance figure includes both state-owned allowances and those consigned by utilities. In addition to the 2013 allowances, the February auction will offer 9,560,000 future vintage allowances for 2016.

Over the course of 2013, the California Air Resources Board predicts it will auction 56,848,885 vintage 2013 permits and 38,240,000 vintage 2016 allowances, although this could increase based on how publicly-owned utilities choose to distribute their allowances.

In California’s inaugural sale of greenhouse gas permits, in November, all 23.1 million current vintage permits on offer were purchased, raising $233 million, at $10.09 per metric ton – only nine cents above the reserve price. But the sell-out was due in part to an administrative error by Edison International, which mistakenly bid for twice as many allowances as were for sale.

Edison, which owns the state’s second-largest power utility, submitted its bid proposal in the wrong format and accidentally offered to purchase 21 times more allowances than it wanted, accounting for 72 percent of all bids. Had the company submitted its bid in the correct format, around 225,000 permits would have gone unsold, Bloomberg has calculated.

Back in November, observers suggested the high volume of bids meant companies covered by the state’s cap-and-trade program were taking seriously their need to comply with the system.

The auction also included 39.5 million permits that can’t be used until 2015. Only 5.6 million of those sold, all at the minimum price of $10.

Additional auctions are scheduled to take place on May 16, August 16 and November 19.

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