California is taking a number of steps in 2014 to further implementation of its Global Warming Solutions Act. These steps include an update to the strategy (the "Scoping Plan") for reducing the emission of greenhouse gases ("GHG"), continuing the state auctions to sell GHG emissions allowances, and developing the link between the California and Quebec cap-and-trade programs.
The California Air Resources Board ("CARB") issued a discussion draft of an update to the Scoping Plan on October 1, 2013. In late January 2014, CARB staff released a draft proposed update to the Scoping Plan, as well as an environmental assessment of the update. In February, CARB will hold a board meeting that includes a discussion of the draft and time for additional public comments. CARB is scheduled to convene a board hearing to consider the final Scoping Plan Update and environmental assessment in the spring.
One of the key strategies under the Scoping Plan is the cap-and-trade program, and an important part of the program is the auction of GHG emissions allowances. As done in 2013, CARB will hold quarterly allowance auctions in 2014. The allowance auction dates will be February 19, May 16, August 18, and November 19. At the first quarterly auction in 2014, 19,538,695 (2014 vintage) allowances and 9,260,000 (2017 vintage) allowances will be offered. A total of 80,980,578 (2014 vintage) allowances and 37,040,000 (2017 vintage) allowances will be offered at the four auctions held in 2014. The auction reserve price (the minimum price that CARB will accept for one allowance) for all of the auctions in 2014 will be $11.34, as established by a formula set out in the cap-and-trade regulations. This compares to an auction reserve price of $10.71 in 2013. These numbers include California-owned allowances and the allowances to be consigned by the electricity distribution utilities.
California and Quebec formally linked their cap-and-trade programs on January 1, and there are plans for jointly held allowance auctions by the two jurisdictions. Under the linked programs, covered entities are able to purchase on the secondary market, and use, allowances issued by either California or Quebec. Thus, industries in Quebec can purchase allowances from California on the secondary market in order to meet Quebec targets for GHG emissions reductions, and industries subject to California's cap-and-trade program can purchase allowances from Quebec's carbon market to satisfy California requirements. However, covered sources from one jurisdiction are not able to purchase allowances at an auction held in the other jurisdiction until joint auctions are held. Participation in the auctions is restricted to entities registered in the jurisdiction holding the auction. A joint auction is expected later this year. Quebec held an auction in early December 2013 for emissions allowances that covered both 2013 and future needs. The allowances sold at the reserve price of $10.75 per allowance.
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