California to auction 118 million emission allowances in 2014, increases reserve price by 6%

December 2, 2013 by CaliforniaCarbon.info

CaliforniaCarbon.info, 02 December 2013: The California Air Resources Board (ARB) will auction a minimum of about 81 million allowances of 2014 vintage and over 37 million allowances of 2017 vintage during 2014, it was announced today. As was the case in 2013, these allowances will be auction every quarter, in February, May, August, and November.

Auction Budget

The total budget of about 118 million allowances includes approximately 8.8 million of state-owned allowances and over 72.1 million allowances consigned by the electricity distribution utilities. 25% of the state-owned allowances will be available at each auction. The board will also offer 37 million allowances of 2017 vintage which represent 10% of the annual allowance budget of 2017.

Increase in Reserve Price

The Cap-and-Trade Regulations require the reserve price of the allowances to increase by 5% every year plus the rate of inflation measured for the most recent 12 months. The rate of inflation used for calculating the 2014 reserve price in 0.936. Thus, the reserve price for 2014 is $11.34. The reserve auction price in 2013 was $10.71.

Industrial Assistance – Free Allowances

The board also announced a list of 156 entities which will receive over 54.3 million emission allowances free of cost as industrial assistance. Petroleum refineries would receive over 28.7 million free allowances while petroleum extraction companies would receive over 10 million free allowances. Cement and industrial gas manufacturing facilities would receive over 6.8 million and 2.6 million free allowances respectively.

Secondary Market Price

Following completion of the last auction of 2013 last week, prices of ICE-listed emission allowances of 2014 vintage with delivery dates in December 2014 jumped sharply by about 1.6% to end the November trading at $12.28.

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