California sells out of first pollution permits

Associated Press Modified: November 19, 2012 at 7:16 pm •  Published: November 19, 2012
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Businesses are required to either cut emissions to cap levels annually, or buy pollution permits called "allowances" from other companies for each extra ton of emissions discharged annually.

The cap and number of allowances will decline over time in an effort to reduce greenhouse gas emissions year-by-year.

The final price for 2013 allowances was just nine cents above the $10 minimum price set by regulators.

"The fact that the prices are clearing a little above the reserve is a good sign that people's fears about out of control costs for cleanup are not justified by the way the market actually worked," Nichols said.

About 97 percent of the allowances were bought by companies regulated under the program, and another 3 percent were bought by financial traders for later sale.

Nearly 40 million permits for 2015 — a year when cap-and-trade widens to include more entities — were made available in the first auction. About 5.5 million of those allowances were auctioned for $10 each.

Petroleum refiners, manufacturing companies and other industries have been outspoken opponents of the program, calling it an illegal tax that will hurt California's economic recovery.

The California Chamber of Commerce has filed a lawsuit seeking to invalidate the program, arguing the board does not have the legal authority to collect money for the state.

"Instead of hiring workers, expanding production, or investing in new carbon-reducing equipment, these auction dollars will be distributed by government for other purposes," said Shelly Sullivan of the AB32 Implementation Group, a business coalition that supports greenhouse gas reductions but opposes the auctioning of allowances.

Some of the money collected by the state between now and 2020 is earmarked for residential utility ratepayers and small businesses to help offset an expected rise in their bills due to cap and trade. Other portions of the funds will go to energy efficiency and other projects in low-income neighborhoods.

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