A Fuel Carbon Tax for California?

After a fairly quiet start to the year, the California market saw an increase in activity last week as the first auction of the year coincided with the last days to file bills in the California legislature. One such bill filed last week proposes to remove transportation fuels from the cap-and-trade program and impose instead a tax on gasoline starting in 2015, and was opportunely leaked right when the auction was in process, on Wednesday February 19 midday.

Auctions: All Quiet on the Western Front

Auction participants seemed – thankfully – unfazed by the surprise proposal, if they even heard of it in time, and the auction cleared slightly below secondary market prices, in line with expectations. The current auction for V14 allowances cleared at $11.48 a ton, just 14 cents above the 2014 reserve price of $11.34 a ton, while the advance auction for V17 allowances saw a clearing price of $11.38. All of the 15.5 million V14 and 9.3 million V17 allowances sold out. The auction raised $175 for the benefit of ratepayers and $130for the GHG reduction fund. This confirms our forecast that the state is on its way to raising at least $529 million in fiscal year 2013-2014.

The bid-to-supply ratio was lower than at previous auctions, but the volume offered was quite a bit higher, for a total of 71 participants, also lower than at previous auctions. It is impossible to say if the bill leakage had any impact on the auction – in our view, the slight drop in interest is to be expected in a long market and not reflective of last minute rumors on possible changes to the program design.

Cap-and-Dividend, Here We Go Again…

While the market impact was limited, the fuel tax bill garnered quite a bit of media attention. The bill comes from the office of State Senator pro tempore Darrell Steinberg, a powerful Democrat who represents the Sacramento region and is supportive of California’s climate policy. Steinberg’s main concern is the risk of spikes and wild fluctuations in gas prices due to the carbon market, which he argues would affect disproportionately the low and middle-income families through higher energy costs. According to the Senator, such fluctuations would also give fodder to the fire of climate change skeptics who “[would] use the crisis to unravel AB 32 and weaken our essential climate goals.”

To remedy these concerns, the bill proposes to establish a carbon tax starting at 15 cents a gallon in 2015, rising to 24 cents a gallon in 2020, which is roughly equivalent to carbon prices of $16 a ton in 2015, rising to $25 a ton in 2020. The bill supporters argue that this would provide better price certainty, slightly higher than the reserve price, and without the upside price risk of the market.

In addition, the bill proposes to return most of the carbon tax revenues to poor and middle-income California families through a new state Earned Income Tax Credit, and inject the remaining revenues into a multi-billion dollar 21st century development of California’s mass transit infrastructure. This stands in contrast with the use of the auction revenues, which by law must be entirely spent on emission reduction efforts, and per the Governor’s proposed budget, would see over two thirds of the monies go to clean transportation and sustainable communities investments rather than tax credits.

Market Implications

None of the bill’s ideas are bad per se – a carbon tax is a very respectable way to price carbon, and returning revenues to poor household is certainly an important concern. The only real problem with this bill is that we’re in 2014, over one year into the program and ten months before the start of the second compliance period (CP2) and the inclusion of fuels under the cap. Such a proposal would have been fine to consider in 2008 while the Scoping Plan was studying at length the merits of cap-and-trade vs. carbon tax. Right now, it is disruptive and possibly counterproductive.

Disruptive because reopening Pandora’s Box so late in the game creates uncertainty for market participants and discourages long term investments, and counterproductive because it could potentially cause short term volatility on the market. Indeed, fuel providers are already actively buying allowances to prepare for next year’s compliance obligation. Sending mixed signals less than a year before CP2 creates uncertainty not just for fuel providers at a loss of how to best prepare for compliance, but also indirectly for all the other compliance entities wondering what the implications might be in terms of liquidity and volatility for them.

If fuels were actually excluded from the cap, the market would remain its current size instead of doubling overnight, leaving only power plants and industrial facilities in the program. This would mean a continuation of the market as we know it today, with low liquidity and limited offset demand. Also, a smaller market can be more prone to volatility due to changes in the demand side price drivers – for example, a heat wave would have a comparably larger impact in a market where the power sector drives over half of the demand than it would in a much larger market with more sectors covered.

As it stands, the market mostly shrugged the news, sliding down a few cents on Thursday, possibly on the back the proposed bill, but this could change if some of the bill’s provisions gained traction. Yet an extended discussion on the fate of fuels under the cap could create a sluggish buyer mood and hamper liquidity in an already slow market until the road is clear for fuel distributors to enter unreservedly the market.

A Low Probability, High Consequence Event

The bill in its current form is very unlikely to pass. In California, a new tax needs a 2/3 majority in the Legislature. Democrats have a bare majority, and Governor Brown has said: “now is not the time for new taxes”. He and the Legislature face elections later this year. Furthermore, most environmentalists oppose the bill, and while the fuel trade associations have expressed interest in the bill, they’re not openly leading the charge. All of these mean the bill’s odds are very, very low.

Yet the fact that the President of the Senate is willing to propose changes to the design of the program at this point in time is something worth paying attention to. While a fuel tax is unlikely to go anywhere, a bill requiring the Air Resources Board to impose a tighter price collar or offering an alternate compliance mechanism through a flat fee for fuel providers would not necessarily require a super majority. Neither would a bill to remove fuels from the cap entirely, for example if gas prices endured a sudden or significant increases and legislators faced urgent and widespread calls to act.

The bill also signals the Democrats are intent on seeing their spending priorities better reflected in the investment plan for carbon auction revenues. The Governor’s focus on the high-speed train is not exactly popular in the State Capitol, and many legislators would like to see more revenues directed to poverty reduction, possibly through a climate dividend, and mitigation of general cost of living increases. The amount of money forecasted to be raised from the carbon auctions, over ten billion dollars cumulative through 2020, should and will undoubtedly be the object of a healthy democratic debate in the Legislature this spring.

At this point however, it would be best for the success of the cap-and-trade program if this debate were limited to revenue allocation. One of the best ways to ensure price stability in the carbon market is to provide policy certainty, and questioning core design elements of the program at this point in time may not conducive to the price stability the bill seeks to foster.

Emilie Mazzacurati

A Closer Look at the Cap-and-Trade Investment Plan in Gov. Brown’s Proposed Budget

Governor Brown delivered this week the State of the State address to the California legislature, in a speech that included several references to climate change and California’s climate policy. The drought is naturally on everybody’s mind in California, as the state experienced its driest year on record (and possibly since 1580, according to scientists). The Governor proudly mentioned AB32 and the array of renewable energy and energy efficiency efforts across the state. However, he said, “in terms of greenhouse gases, our biggest challenge remains the amount of gasoline Californians use. Each year, our motor vehicles use more than 14 billion gallons of gasoline to travel over 330 billion miles. To put those numbers in perspective, the sun is 93 million miles away.”

The State of the State comes on the heel of the proposed budget 2014-2015, released earlier this month, which included the much-awaited proposal for disposing of auction proceeds. Anxiety ran high late last year at the thought that the Governor might withhold those funds again. Instead, his proposed budget included a detailed and thoughtful allocation to an array of new and existing state programs that reduce greenhouse gas (GHG) emissions and promote other desired goals, such as increased water efficiency, higher recycling rates and lower risk of wildfires.

We take a detailed look at the Governor’s policy and budgetary priorities for 2014-2015 and discuss market implications for California cap-and-trade.


The governor plans for $850 million dollars of revenues for the GHG Reduction Fund in 2014-2015, a conservative estimate in our view. Auctions so far have brought in $532 million, of which $500 million was loaned to the General Fund last year. We forecast $1300-$1500 of auction revenues in 2014-2015, a large increase compared to revenues in 2013-2014 due to the inclusion of fuels under the cap starting in 2015. The $850 million also includes the repayment of $100 million from the funds borrowed last year, with the rest to be reimbursed “over the next few years”.


The investments fall in three broad categories (see Figure 1 below):

  • Sustainable Communities and Clean Transportation (blue)
  • Energy Efficiency and Clean Energy (red and grey)
  • Natural Resources and Water Diversion (purple and grey)

Figure 1. Proposed Cap-and-Trade Expenditure Plan (Dollars in Millions)

Auction Proceeds Proposed Budget 2014-2015

Data source: Governor’s Proposed 2014-2015 Budget.

Sustainable Communities and Clean Transportation

The first category gets the lion’s share, with 71 percent of the monies allocated to three overarching programs: $300 million (35 percent) for “rail modernization”, $200 million (24 percent) for low carbon transportation and $100 million (12 percent) for “sustainable communities.” Rail modernization is a euphemism for high-speed rail, possibly one of the most controversial items in the entire budget – see below. The other two are much needed funding for existing and developing initiatives: the implementation of SB 375, the deployment of zero-emission vehicles (ZEV), for which the Governor has set a target of 1.5 million vehicles by 2025, and the transition to low-carbon freight.

Energy Efficiency and Clean Energy

The Energy Efficiency and Clean Energy bucket gets a much smaller share, 16 percent of the auction proceeds in total, which stands to reason given that so many programs and different sources of funding already promote energy efficiency and clean energy. The funds in this category are used for targeted programs: assistance for efficiency upgrades and weatherization of low-income dwellings, state green buildings, and projects focused on reducing methane and nitrous oxide emissions in the agricultural sector.

Water Action Plan

Water-related projects straddle the energy efficiency and natural resources buckets for a total of $50 million, dedicated to water efficiency projects that reduce GHG emissions and to wetlands and watershed restoration. These projects have significant co-benefits: water supply is always an issue in California, but is even more so now because of the drought and the expected shifts in temperature and precipitation patterns that climate change will bring to the Golden State. Wetland restoration is also an important measure to prevent catastrophic flooding that may become more frequent as the sea level rise. Both projects are part of the wider state strategy for water resources detailed in the Water Action Plan.

Natural Resources and Waste Prevention

Another $50 million goes to fire prevention, another project type that helps curb GHG while improving resiliency to drought and climate change. Budget cuts at the Federal and state level over the past years have limited the ability of firefighters and foresters to conduct effective fire prevention programs, so using auction proceeds to support forest health seems is a wise move. Urban forestry also gets dual benefits since in addition to sequestering carbon, trees help shade streets, regulate temperature, and avoid urban heat island effect – all of which are particularly useful as heat waves are due to become more frequent, hotter and longer in California.
Last but not least, waste diversion is $30 million to expand infrastructure and develop clean composting technology. As landfills are regulated and not eligible for offset credits in California, this provides an economic incentive to balance out the regulation and support technological innovation in the field.

An Integrated Climate Strategy

All in all, projects with direct climate adaptation co-benefits total $100 million and promote actions aligned with the top priorities in California’s draft update climate adaptation plan, Safeguarding California, released in December 2013.

One missed opportunity in this iteration of the budget is funding to develop localized smart grids. These grids can help bring small renewable projects online, and promote resiliency of the electricity system in case of extreme weather events, wildfire or flooding that can affect transmission lines or large power plants. Those projects typically reduce emissions and would satisfy the requirement that projects funded by auction proceeds contribute directly to emission reductions, and would also help prevent one of the most disruptive and immediate impacts of climate change for people and businesses alike.

Investing in Disadvantaged Communities

SB 535, passed in the summer 2012, required that at least 10 percent of the proceeds received by the state be invested within the most impacted and disadvantaged communities and at least 25 percent of the proceeds be invested to benefit these communities. The Investment Plan developed a methodology to identify ‘disadvantaged communities’ based on an array of indicators reflecting “burden of pollution,” including exposure and environmental effects, and “population characteristics, which includes socioeconomic factors. The map below maps the top 10% highest scoring (most disadvantaged) zip codes.

Figure 2. Mapping Disadvantaged Communities in California


Source: California Final Investment Plan, April 2013

Many of the proposed investments have a clause to ensure disadvantaged communities receive this funding in priority; and the budget proposal estimates that a minimum of $225 (26 percent) will go to those communities.

Should Auction Proceeds Fund the High-Speed Rail Train?

The high-speed train has garnered a lot of political and media attention – it is a stated priority of the Governor, receives 30 percent of the proposed allocation, and has been subject of a heated debate for decades in California.

Supporters of the project, starting with the Governor, argue that it is an overdue infrastructure that will help reduce emissions in California and steer the state towards low-carbon economy. Critics raise all kind of issues with the plans, notably legal and budgetary – only a small amount of the total funds are secured so far, which could endanger the viability of the entire project.

Two criticisms are directly relevant to the use of auction proceeds and the carbon market at large. First, according to an analysis by the Legislative Analyst Office (LAO), the high-speed train’s emission reduction benefits will only be felt in the very long-run – mostly after 2020 – while the construction itself will generate GHG emissions, yielding a net increase in emissions over the 2014-2020 timeframe. Second, the LAO and environmentalists all argue the same investments would generate more emission reductions faster if invested in local transit improvements, which also bring a number of social and environmental co-benefits to communities with reduced local pollution, better health outcomes and better access to job opportunities for low income households.

The takeaway from this discussion is that the flagship investment proposal for auction proceeds is vulnerable to legal challenges, on the ground that it does not help achieve AB32’s primary goal of reducing emissions by 2020, and vulnerable politically, since a cost-benefit analysis might show that other investment options could generate more emission reductions at a much lower cost per ton. We expect the issue will be up for debate in the Legislature over the coming months, and it is uncertain whether the Governor will be able to keep auction proceeds as a source of funding for the high speed train.

Market Implications

In its update on the status of scoping plan measures from 2011, the Air Resources Board provided estimates of emission reductions measures included in the Investment Plan.

ARB estimated the high speed train would reduce emissions by 1 million metric ton CO2 (Mt) by 2020. Goods movement and medium/heavy duty vehicles, which overlap with the “low carbon transportation” investment category, were expected to yield 0.2 Mt and 0.9 Mt respectively, albeit with a high uncertainty since most measures were not fully developed at the time. Solar roods and solar water heating together would lower emissions by 1.2 Mt.

These estimates are to be compared with the emission reductions expected from leading measures, such as 15 Mt from LCFS, 30 Mt from Pavley standards or 12 Mt from energy efficiency programs.Thus from a market standpoint, none of these measures taken individually are market movers. However, over the long run, these investments contribute to the downward trend in carbon emissions for the state, and the likelihood that prices will stay near the floor on the carbon market for the coming years.


As auction revenues rise with the inclusion of fuels under the cap in 2015, the allocation of auction proceeds will gain increasing importance. The question of whether the high speed train qualifies as an eligible use of auction proceeds becomes all the more crucial because it will set a precedent for future investment plans. If it is allowed, then a larger portion of revenues will likely be directed towards the train in the future, since billions more are needed to complete the construction. If not, the government will have to be more creative on how to use the monies in a cost-efficient manner, which could bring about more innovation and also more support for projects with climate adaptation co-benefits.

Newsletter: What Does 2014 Hold for Cap-and-Trade?


Read our outlook for cap-and-trade in 2014
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‘Tis the Season… 
‘Tis the season to be jolly, but also to plan the year ahead! What does 2014 hold in store for California cap-and-trade?  

After a year of incremental regulatory action, 2014 promises to be a year ripe in political developments for California’s cap-and-trade program and climate policy in general. In our post: Outlook for 2014 California Cap-and-Trade: Politics Take the Center Stage, we examine key expected developments for the New Year and their potential impact on the California carbon market from Sacramento to Washington, DC.

And as a special gift to our reader, you can download our nifty California Carbon Calendar 2014 – pin it to your desk and don’t miss a beat in 2014!

Politics of Carbon Auction Proceeds – The Battle Ahead.
As the 2014/15 budget debate ramps up, the question is: what will the Governor do with 2014/15 auction proceeds, and when will last year’s loan be repaid and invested? In our estimates, revenues could rise to about $1.5 billion in FY14/15 and to $2.4 annually in 15/16 and 16/17. Read our analysis: Politics of Carbon Auction Proceeds – The Battle Ahead for a full analysis of the stakes and likely developments.

Quebec’s First Carbon Auction: A Gentle Warm-Up
Quebec’s first auction took place on December 3rd. Just over a third of allowances offered for sale were purchased by compliance entities at the reserve price of CAN $10.75 (US $10.10). The low interest in Quebec V13 allowances came as a surprise as many participants saw a potential upside price risk due to the uncertainty surrounding any first auction – which didn’t materialize. In our analysis: Quebec’s First Auction: A Gentle Warm-Up, we discuss potential explanations for the low participation.

Speaking of Staying Warm…
This is our last newsletter for the year. Stay warm and enjoy the holiday season! We will be back in the new year with more on carbon and climate!

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Outlook for 2014 California Cap-and-Trade: Politics Take the Center Stage

After a year of incremental regulatory action, 2014 promises to be a year ripe in political developments for California’s cap-and-trade program and climate policy in general. From Sacramento to Washington, DC, we examine key expected developments for the New Year and their potential impact on the California carbon market. You can also download our nifty California Carbon Calendar 2014.

Political Outlook

Complementary policies remain high on the political agenda on both sides on the aisle, and have the most direct potential impact on market balance and prices.

Low Carbon Fuel Standards and Fuels under the Cap

We expect the oil industry will continue its push to delay or amend the Low-Carbon Fuel Standard (LCFS). In court, the Rocky Mountain Farmers Union v. Goldstene case, which caused a temporary stay of the LCFS program earlier this year, has been remanded to District Court after the Court of Appeal judged the program did not discriminate. The revised Court decision is expected in 2014. Any delay or significant change to the program’s compliance schedule would lead to higher emissions in California, and potentially drive prices up on the market.

We also expect the oil industry to continue arguing in the Legislature for free allocation and/or a delay in the inclusion of the fuels in the program. The latter seems less likely, as it would appear as a significant setback for California climate policy, and therefore is unlikely to garner enough support either in the legislative or in the executive branch. Allocation to fuels, on the other hand, is sure to be high on the agenda, and if left to ARB will likely involve fewer free allowances than if legislators have a say.

Renewable Portfolio Standard, Clean Energy and Energy Efficiency Investments

As utilities are well on track to meeting their 33 percent renewable procurement target for 2020, the Legislature started in 2013 a discussion on going above and beyond the 2020 target and setting a more ambitious target – 51 percent – for 2030. We expect similar legislation to resurface in 2014, and the primary holdup against passage is likely to be technical rather than political, as utilities are concerned about ensuring grid stability and reliability with such a high level of renewable integration. A more ambitious RPS would lower emissions in California in 2020 and beyond, and would contribute to keeping prices low in the carbon market.

Revenues from Prop 39 and its implementing legislation have started flowing, with $106 million going to California public schools in 2013. The revenue stream is expected to increase, with up to $500 million going to energy efficiency and clean energy investments yearly over the next five years.

Prop 39 revenues come in addition to the auction proceeds, which must be invested in emission reductions as well. The fate of the fund is in the Governor’s hands, but assuming funds will be directed towards their intended purpose, both investments will contribute to curbing emissions and prices. (Read our recent analysis on budget politics.)


The conversation on offsets was largely dominated by SB 605 in 2013, a bill that proposed to restrict offsets to projects in California. We expect similar legislation to be introduced again in 2014, which would carry a risk of driving prices high by creating sudden scarcity in offset supply. Criticisms and questioning of protocols for mine methane and rice cultivation also meant neither protocol got approved in 2013.

We expect 2014 will see a continuation of ARB’s work on new protocols, with mine methane most likely to make it in the regulatory amendment package in the spring. We don’t anticipate any major breakthrough on REDD, in spite of the excellent guidelines laid out by the REDD working group in July 2013. Offsets in general and REDD in particular remain a contentious topic for a number of environmental organizations, and we expect continued push back from these organizations, and the same commitment to extreme caution from ARB.

Post-2020 Policies and Emission Reduction Target

The single most important development for the short and long-term health of the carbon market is the setting of a clear target and policy framework post-2020. ARB has clearly indicated in the October 2013 draft Scoping Plan Update that cap-and-trade would continue past 2020, but stopped short of setting a target for 2030 and beyond. We expect 2014 will see the 2030 target rise on the political agenda – Sen. Fran Pavley, Chair of the CA Senate Select Committee on Climate Change & AB32 Implementation, indicated early December that she would consider sponsoring legislation to establish long term reduction targets for the state.

Climate policy could well become a key issue in the 2014 gubernatorial campaign. Gov. Jerry Brown is said to prepare an announcement as part of his platform for his (likely) re-election campaign. Climate change is high on the agenda for California voters, with 65 percent supporting AB32 goals and policies and saying the government should do more. Gov. Brown sports high approval ratings, 49 percent of likely voters as of December 2013, down from 54 percent in July, and has made climate and clean energy a priority for his administration. Yet his re-election could be challenged, especially in the context of California’s new Top 2 primary system. The 2014 gubernatorial election could play a significant role in bolstering or reshaping California climate policy, which could impact the carbon market as well.

Federal & Global Climate Policy

2014 is also an election year at the federal level, but unless Republicans capture the majority in the Senate, we don’t expect a significant change of course in either direction, as the gridlock in Congress will continue to leave the initiative to the President. The Environmental Policy Agency (EPA) is chugging along on its GHG regulations under the Clean Air Act, which is generally supportive of and compatible with existing state programs (read our analysis on this topic)

It is probably fair to say that the global climate community is more interested in California than the other way round, but generally still worth mentioning that the expectations for the 2014 round of global negotiations are nil, as all eyes are on the December 2015 Paris Conference for a possible international agreement of a sort towards global carbon reductions.

Carbon Market Outlook

Regulatory Changes

Make no mistake – there are still quite a few loose ends to tie up on the regulatory front that will keep market regulators and emitters alike busy through the year.

  • As of January 1st, the linkage with Quebec will become effective, meaning that allowances and offsets issued by the Quebec government will gain full currency in the California market. The first joint auction should take place in May 2014 (not February), according to the Quebec government.
  • ARB staff needs to finalize the regulatory amendments discussed at length through 2013, which contain a variety of provisions addressing industry allocation and product benchmarking, market oversight and information disclosure, conflict of interest rules, cost containment, coal mine methane protocol, and more. Final amendments are expected in the spring.
  • 2014 will see the first partial annual compliance on November 1st, 2014. For the first time, emitters will have to surrender 30 percent of their 2013 emissions to ARB for permanent retirement. This should boost volumes in the secondary market ahead of the surrender deadline, and will be a good opportunity to check whether ARB has ironed all the kinks in terms of retirement order.
  • Who says compliance says emissions true up – ARB will be releasing historical verified emissions for 2013 in probably in the fall 2014, which will likely confirm that the market has indeed started with an excess of allowances compared to emissions.

None of these is expected to have a noticeable price impact except maybe for the CMM offset protocol, but their successful completion is integral to the proper functioning of the market and must be checked off the list.

Market Trends

We expect 2014 will see higher traded volume on the secondary market than in 2013, especially ahead of the partial compliance deadline in the fall 2014. As the second compliance period and its substantially larger cap draw near, we also anticipate oil companies will start buying larger volumes at auctions and over-the-counter. While fundamentals do not point towards a price increase, the sheer size of potential demand from fuel distributors compared to current size of the market could drive up prices a bit towards the end of the year.

We expect the primary market to continue to perform well, and all current and future allowances offered for sale at auctions to be purchased, mainly by compliance entities – in line with auction results so far.

For offsets, as ARB continues to issue compliance-grade offsets, and the market explores the many variants offered by the IETA-sponsored California Emission Trading Master Agreement (CETMA), we expect to see a little more activity in the secondary offset market. But we don’t anticipate a large increase in liquidity as offset contracts will remain, by design, not fungible.


2014 will bring plenty of opportunities for political changes, and derived policy changes, although in California the popular support for climate policy is such that change is likely to mean strengthening and deepening of current policies.

We also anticipate 2014 will see growing emphasis on the issue of climate adaptation. California is in the process of updating its state climate adaptation plan, and since the world is generally failing to address GHG emissions and global climate change, we anticipate climate adaptation will increasingly get people’s attention as the impacts of the changing climate are being felt in California and beyond.

Pin it to your desk! Download Four Twenty Seven’s California Carbon Calendar 2014

Politics of Carbon Auction Proceeds – The Battle Ahead

Carbon and the California Budget

The Governor’s office is busy preparing its proposal for the 2014/15 budget, which is due to the legislature by January 10th. After years of ongoing budgetary crisis, California is, for the first time in a decade, looking at a forecast of budget surpluses for the years to come. In November, the Legislative Analyst Office projected a $5.6 million budget surplus by June 2015.

While this year’s budget turned the corner with a projected surplus of over one billion dollars, California still face major budgetary challenges in fixing its education, social and prison systems, and paying back the so-called Wall of Debts, a massive amount of debts in the form of loans and deferrals to local communities and various state programs accumulated over the years.

One such loan came from the Greenhouse Gas Reduction Fund, established by AB32 and funded by proceeds from carbon allowances. The 2013/14 budget included a $500 million loan from the GHG Reduction Fund to the General Fund, arguing that the Air Resources Board (ARB) needed to complete the Scoping Plan Update first to ensure better investment decisions (see below for more on the Investment Plan).

The budget did not include a specific timetable for the loan repayment, indicating only that the loan would be “repaid with interest immediately when needed to meet the needs of the Fund.”. As the 2014/15 budget debate ramps up, the question is: what will the Governor do with 2014/15 auction proceeds, and when will last year’s loan be repaid and invested?

Politics of Carbon Investment Planning

The Governor’s Budget Proposal in January should include a proposal for the use of auction proceeds in 14/15, and possibly address the issue of borrowed funds in 13/14. The Governor has not given any indications at this point of what he intends to do with auction proceeds – past and future.

Meanwhile, the Democratic Caucus in the CA Assembly released on December 11 its budget blueprint, which mentions specifically cap-and-trade revenues as a means to bolster job growth. The same budget highlights as a priority the need to repay debts and loans promptly, which could bear on the auction proceeds loan. In parallel, a coalition representing California businesses, local government, health, transportation, economic justice and the environment called last week for the Governor to repay the $500 million loan.

A poll from the Public Policy Institute of California from July 2013 shows a large majority of voters favor spending auction revenues on public transit, such as more buses or reduced transit fares (78%), and repaving roads and highways (72%), and 83% support spending this money to support disadvantaged communities.

These positions indicate that the Governor may not get away with another ‘loan’ from the GHG Reduction Fund this time around. A clear commitment to invest auction proceeds this year would go a long way towards assuaging concerns that the loan would never be reimbursed – while another loan would revive fears of political holdup over the cap-and-trade revenues. As the Governor looks at a possible reelection campaign in 2014, we expect he will tread carefully and avoid a new loan so as not to taint his shiny environmental record.

Billions of Dollars at Stake

Why so much fuss, you might ask? The state of California has raised $532 million since the beginning of the program: $256 million in fiscal year 2012/13 and $275 million in FY 13/14. In our estimates, revenues for FY13/14 should add up to a little over that half million loaned to the General Fund, around $530 million. This amount, though, will almost triple overnight when the second compliance period starts and the cap rises to 400 million tons (from 165 Mt). Depending on market conditions, revenues could rise to about $1.5 billion in FY14/15 and to $2.4 annually in 15/16 and 16/17.

We developed three scenarios to illustrate a range of revenue estimates for the duration of the program (Figure 1), building on ARB’s estimate of state-auctioned allowance budget by fiscal year (see below for more details on the scenarios and results). For the sake of the budget discussion, we consider that our main scenario provides a reasonable, conservative forecast for revenues, totaling over $12 billion through 2020. This is no trivial amount, and how and when it will be spend will make a noticeable difference in California’s ability to reach its emission reduction targets.

Impact on California Emissions and Economy

recent study by the consultancy ICF International compares the benefits of different “revenue recycling” scenarios, looking at different “distribution” options – a lump sum to all California residents, free allocation to fuels (which would shrink by two-thirds auction proceeds in 2015-2020), and “investment” options – energy efficiency and clean transportation. The study finds investment options fare best for job growth and wages and economic growth, while the lump sum dividend is most beneficial to low income groups. The study also includes a ‘blended approach’ that attempts to maximize the benefits for all groups with a mix of investments and dividend.

The study does not quantify GHG reductions for each scenario, but investment options would logically fare better to distributive options. If $12 billion are invested as planned in energy efficiency, clean energy, and clean transportation over the next seven years, the impact on California emissions will be noticeable and should contribute to keeping carbon market prices low through the second and third compliance period. And as with any other investment, the sooner the investment starts, the larger the benefits down the road.


We expect the 2014/15 budget will provide for auction proceeds to be invested towards emission reductions, even if last year’s loan is not paid back immediately. With over a billion dollars to be spent in the next fiscal year, monitoring how the monies are spent will be crucial to forecasting the pace of emission decrease in California and supply and demand dynamics in the carbon market through 2020 and beyond.


Forecasting Revenues – Our Scenarios:

  • Our main scenario assumes a conservative clearing price at the reserve price through 2020.
  • Our ‘bearish’ scenario includes the same clearing price, but assumes that not all allowances get sold, as might be the case, for example, if emissions continue to decrease faster than the cap.
  • Our ‘bullish’ scenario assumes prices rise moderately to $30-40/ton through 2020 as the market anticipates deeper reductions post-2020.

Figure 1. Scenarios for Forecasting Auction Revenues
Source: Four Twenty Seven

In our ‘bearish’ and ‘main’ scenarios, revenues decrease after 15/16 as the decline in volume (cap and auction subscription rate) outweighs the slow increase in the reserve price. In our bullish scenario, the price effect makes up for the decrease in the allowance budget, except in 19/20 where no ‘advance auction’ occurs since the post-2020 has not been set yet.

Table 1. Auction Revenue Forecasts by Fiscal Year (million dollars)
CarbonAuction Revenues by FY
Source: Four Twenty Seven
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Backgrounder: The Investment Plan

The implementing legislation for auction proceeds lays out a number of goals that the investments should further, ranging from the obvious – emission reductions – to larger policy goals, such as economic growth, job creation, and environmental and health benefits. The money could be stretched to fund state climate adaptation efforts, as another goal is to ‘lessen the impacts and effects of climate change on the state’s communities, economy and environment.” Last but not least, a percentage of the money is earmarked for projects that benefit disadvantaged communities.

In line with legislation passed in 2012, the Department of Finance submitted a Three Year Investment Plan for auction proceeds developed jointly with the ARB and other relevant agencies. This plan identifies three broad sectors that will be the focus of those investments, based on a gap analysis of California’s current greenhouse gas reduction strategy:

  • Sustainable communities and clean transportation
  • Energy efficiency and clean energy
  • Natural resources and waste diversion

The legislature will appropriate funding to State agencies, consistent with the three-year investment plan.

ARB is in the process of finalizing its Scoping Plan Update, which will include policy recommendations to reduce GHG emissions in these very sectors, so that part of the GHG Reduction Fund is logically expected to fund new measures to reduce emissions as proposed by ARB. Yet as of right now, with the Scoping Plan Update still in the works, the details of how the money will be spent within those sectors remain unspecified.
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Quebec’s First Carbon Auction: A Gentle Warm-Up

Quebec’s first auction took place on Tuesday, December 3rd and results were published on Friday, December 6th. The auction regulations are largely similar to California’s, and this was the sole auction where only Quebec allowances were offered for sale, to the benefit of Canadian-based entities only. Starting in 2014, California and Quebec will hold joint auctions where allowances from both jurisdictions will be offered for sale.

Auction results

Quebec’s December auction saw 1 Mt of V13  allowances sold, 34 percent of the 2.97 Mt offered for sale, at the reserve price of CAN $10.75 (US $10.10). The take up for V16 allowances was even lower, with 1.7 Mt sold, only 27 percent of the total 6.32 Mt offered for sale. The low interest in Quebec V13 allowances came as a surprise as many participants saw a potential upside price risk due to the uncertainty surrounding any first auction – which didn’t materialize. We discuss below potential explanations for the low participation.

The low take up rate of V16 allowances, on the other hand, was to be expected, since the volume offered was large compared to current year emissions. V16 allowances offered for sale amounted to over 25% of covered emissions in 2013, and therefore were unlikely to be absorbed by current participants.

The Quebec market has been ramping up slowly overall, with over-the-counter transactions few and far between. This is to be expected with a small market, only a few large players and a generous free allocation. Linking to the California market is therefore an important step for Quebec, which will open access to a larger, more liquid secondary market and more anonymity in the primary and secondary market.

Industrial emitters dominate

In Quebec, 95 percent of the electricity is generated from hydropower, so that the power sector has virtually no emissions, leaving almost exclusively industrial emitters in the first compliance period. The industrial sector emitted a total of 23.2 Mt in 2011, with aluminum companies making up a quarter of the sector’s emissions, followed by pulp & paper, refining and cement according to data provided by our partners in Quebec, EcoRessources (see Figure 1.)

QC Industrial Sectors Emissions
Figure 1. Industrial Emissions in Quebec
Data: EcoRessources

The program covers 91 emitters in total, but many of these facilities are very small emitters, leaving only a dozen covered emitters likely to participate actively in the traded market.  Just like California, the largest emitting sector is the transportation sector (35 Mt) and natural gas (7 Mt), and the bulk of the emission reduction effort will really start in the second compliance period, in 2015.

While Quebec has a more aggressive emission reduction target than California, of 20 percent below 1990 levels by 2020, EcoRessources forecasts the first compliance period will also be overallocated.  The Quebec allocation formula is somewhat more generous than California’s, and it is quite possible that some industrial emitters have more permits in hand already than they need to cover their 2013 emissions.

Some surprising no-show

Nineteen bidders participated in the auction – Figure 2 provides a breakdown of the number of potential bidders by sector. The vast majority of bidders came from the industrial sector, mostly refineries, metals (steel) and cement. Surprisingly, aluminum companies did not participate – they constitute the largest emitting sector in QC, and their absence likely contributed to the low take-up rate of allowances. Even in the cement sector, only two of the largest four cement plants joined the auction. All three large refineries participated.

Dec 2013 QC Auction participants
Figure 2. Quebec auction participants.
Data: Ministère de l’Environnement, du Developpement Durable, de la Faune et des Parcs du Québec

It is unclear whether aluminum facilities did not join the auction because they didn’t need the allowances or because they preferred to wait for the California auction. One could speculate that large emitters would rather wait for the joint auction, where their demand is less likely to drive prices up because it will be lumped together with that of many other large emitters from  California.

Another absence worth noting is that of fuel distributors – none of the large gasoline and natural gas distributors participated in the auction, indicating that these entities have not started banking yet for the second compliance period. And finally, no financial player joined the auction, not even the Canadian bank that has bid in California auctions in the past.

The absence of many large emitters, fuel distributors and financial players altogether explains the low take up rate of V13 and V16 allowances.

A Question of Timing

It’s also worth noting that Quebec does not have a partial annual compliance requirement. California requires its emitters to surrender 30 percent of the previous year’s emissions on an annual basis, and emitters are left to make up the difference at the end of the compliance period. In the absence of such an annual obligation, Quebec emitters are not required to surrender any allowance until November 2015, which probably also explains the lack of interest in this week’s auction. We expect to see more interest from Quebec emitters in the joint auctions starting next year.

What to expect from the joint auctions?

The next auction will likely take place in May 2014. The February auction should be simultaneous but not on the same platform – see Table 1. for the full 2014 auction schedule.

2014 auction schedule
Table 1. Auction Schedule for 2014
Source: California Air Resources Board.
Note that “Reserve Sale Events” date refer to the sale of Price Containment Reserve Allowances, which will be offered for sale at a price ranging from US $42-$53, and therefore are not expected to see any buyers.

Auctions going forward will see CA and QC allowances offered for sale jointly, on the same auction platform. The reserve price will be US$11.34 (CAN $12.09) in 2014 for both jurisdictions. (If Quebec was going it alone, the 2014 reserve would be around CAN $11.38 (US $10.67) for QC allowances, but the regulation stipulates that the common reserve price will be set on the highest of the two reserve price based on the exchange rate at that time, which means the CA reserve price will set the floor for both jurisdictions). Allowances from either jurisdictions will be fully fungible starting January 1st, 2014 and can be indiscriminately traded, banked, and retired for compliance in either jurisdiction.

Auction 5 Results and Analysis

Auction 5 results showed continued interest and participation from natural buyers, which resulted in a higher than expected clearing price for V13 allowances. The results indicate healthy market participation. We expect price on the secondary market will remain in the $11-$12 range through the end of the year, with increased market volumes in December for the close of the year.

Clearing Prices

Vintage 13 allowances sold for $11.48 a ton, 74 cents (6 percent) below the August auction clearing price of $12.22, and almost 20 cents above secondary market prices. The clearing price and the subscription rate (see Figure 1) were a little higher than most market participants and analysts (including us) expected. Vintage 16 allowances sold for $11.10 a ton, the exact same price as the August auction and 15 cents below closing prices on ICE the day before the auction. Both auctions were fully subscribed.
These results indicate not only that participants are stockpiling allowances to prepare for the long haul, but also that a number of large emitters are still buying for their 2013-2014 compliance needs.

Auction Participation Nov 13
Figure 1. Participation at California auctions, 2012-2013
Data source: California Air Resources Board

Who Were the Bidders?

As expected, the number of participants was slightly lower than at previous auctions. Demand from utilities and independent power generator remained strong (see Figure 2.). Auction 5 also saw the first participation from a voluntary buyers looking to purchase allowances to use as voluntary offsets rather than for compliance.
Bidders Nov 13

Figure 1. Bidders at California auctions, 2012-2013
Data source: California Air Resources Board

Auction revenues

The auction brought $137 million in revenues to the State of California. Investor-owned utilities raised $150 million on behalf of ratepayers, and publicly-owned utilities sold $10 million worth of allowances. The use of auction revenues will be determined by the Auction Proceeds Investment Plan, which is being drafted by the Air Resources Board.

Newsletter: Outlook for Tomorrow’s Carbon Auction


Read our analysis of California’s last auction results
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Outlook for Tomorrow’s Carbon Auction
Expect lower clearing prices and fewer bidders – but this is all normal for the last auction of the year.  

We expect the 5th auction for California carbon allowances will see fewer bidders, a lower ratio of bids to supply, and a lower clearing price than previous auctions. These are normal developments for the last auction of the year, and in line with recent price trends on the secondary market. We expect the long term prospective will outweigh current concerns regarding market over-allocation, and we anticipate that the reserve price will prevent the auction from being undersubscribed. Read the full outlook and analysis on our blog.

The November 19 auction will see 16,614,526 Vintage 2013 (V13) allowances and 9,560,000 Vintage 2016 (V16) allowances offered for sale at a reserve price of $10.71 a ton. Check our blog on Friday, November 22 after Noon PT for an analysis of the auction results.

Should Climate Risks be Included in Sustainability Reports? 

Historically, sustainability reporting has been largely about the firm’s impact on society and the environment. Is the firm using up a lot of resources? Polluting? How does it impact local communities’ lives and livelihoods? How does it treat its employees? And so much more. Recently though, stakeholders have also been asking for disclosure on risks and opportunities related to climate change. Are the firm’s operations at risk for a Category 5 hurricane? Will its supply chain be impacted by more frequent floods in Bangladesh? How will the firm procure water or agricultural goods in a dryer world? How will it pay for shipping in a world with high carbon prices?

It could be argued that including climate change impacts into sustainability reports turns sustainability reporting on its head: when a firm reports on the impact climate change may have on its operations, supply chain or business model, it is really reporting on the impact of the environment on the firm, not the other way round. So, should climate risks be included in sustainability reports? Read our analysis published on Triple Pundit.

More Publications on Carbon Markets:

  • Lessons Learned from California Cap-and-Trade: It’s not quite one year yet, but it’s never to early to start reflecting on how far we’ve come since the launch of the program. Four Twenty Seven contributed a thought piece to the International Emissions Trading Association (IETA) Greenhouse Gas Market 2013 report, published November 13. Our article looks at liquidity, price trends, supply and demand fundamentals, and regulatory challenges ahead – download the pdf.
  • A Primer on California Auctions: our primer Selling California Auctions (Carbon Market Tracker, In Focus #20, May 2013), published jointly with Carbon Credit Capital LLC provides a thorough description of the auction mechanics, participant dynamics, the role of utilities, and the use of auction revenues – a must-read for market participants!

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Operation Supply Chain Workshop

This week is Operation Supply Chain Workshop in Las Vegas, organized by the Association of Climate Change Officers (ACCO). Emilie Mazzacurati will discuss metrics and indicators to monitor climate risks on November 18, and will teach a bootcamp on tools to quantify climate risks in the supply chain on November 19. Email us to learn more about this issue.


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Outlook for the Fifth California Carbon Auction

We expect the 5th auction for California carbon allowances will see fewer bidders, a lower ratio of bids to supply, and a lower clearing price than previous auctions. These are normal developments for the last auction of the year, and in line with recent price trends on the secondary market. We expect the long term prospective will outweigh current concerns regarding market over-allocation, and we anticipate that the reserve price growth rate will prevent the auction from being undersubscribed.

Auction: Price and Volume Outlook

The November 19 auction will see 16,614,526 Vintage 2013 (V13) allowances offered for sale, a volume noticeably higher (12-22 percent) than previous auctions. This additional volume comes in part (0.3 Mt) from small adjustments to ARB inventory data, and for the rest, likely from consigned allowances by publicly-owned utilities (POU).
We expect the V13 allowances will sell in the range of $10.71-10.85 per ton, at or just above the reserve price of $10.71. There is a small risk that V13 allowances will be undersubscribed, due to a widely shared view amongst market participant that the California cap-and-trade program will be long in the first compliance period and beyond. Nevertheless, we think it is unlikely that V13 allowances will remain unsold: allowances bought at $10.71 in November 2013 can be turned around and sold in early 2014 for close to $11.45, the 2014 floor price. This 5 percent interest rate with near-zero risk acts as an incentive for compliance entities and financial investors to bank extra allowances in the early years. Five percent return over a few months’ time is nothing to sneeze at in today’s financial markets, so we expect enough bidders will see it as a worthy investment to prevent the auction from being undersubscribed.
The ‘Advance Auction’ will see 9,560,000 Vintage 2016 (V16) allowances offered for sale, at the same reserve price. Similarly, we anticipate that the general confidence that the program is here to stay will lead the ‘advance auction’ of V16 allowances to be fully subscribed and clear in the range of $11.00-$11.25. Indeed, all V16 allowances in the August 2013 auction sold at a clearing price of $11.10, and if anything confidence in the long term viability of the market has been bolstered since.

The Short Term Prospective: the Annual Compliance Cycle

The California cap-and-trade program is structured around two- or three-year compliance periods: this structure is meant to provide flexibility for compliance entities that have large year-on-year variations – such as the power sector – and avoid price spikes.
However, most entities on the market still look at their emissions on an annual basis, and purchase allowances accordingly. They may take advantage of the flexibility afforded by the two-year compliance period ex-post, but not necessarily by on an annual basis. At this point, most compliance entities have likely already purchased enough allowances to cover their 2013 allowances, except for the largest ones – the IOUs and large oil companies, which need to purchase as much as possible at each auction to meet their compliance needs. The majority of firms – and so many of the potential bidders – will likely wait until 2014 to start purchasing their 2014 allowances rather than banking allowances at the last 2013 auction, even at bargain prices. They simply may not have the budget or strategy to start purchasing their 2014 allowances.
The same dynamic could be observed in the Regional Greenhouse Gas Initiative in the first compliance period (2009-2011), as shown in Figure 1.

RGGI Participants
Data source: RGGI

In each of the first three compliance years, participation in the auction was lower in the last two auctions (Sept and Dec) than in the first half of the year. In 2010 and 2011, participation was also lower in December than in September – the only exception was December 2009, where the RGGI auction attracted unusual interest from financial investors in the context of the debate over the Federal cap-and-trade bill ahead of the Copenhagen global climate negotiations.
The trend in California looks very similar so far (see Figure 2), with the number of participants decreasing from 91 to 79 and the subscription rate dropping from 2.47 to 1.6 between February and August.

California Participants Nov 2013
Data source: ARB for Nov 2012 – August 2013, projections for illustrative purposes for November 2013 by Four Twenty Seven.

The main difference with RGGI is that we don’t expect the overall number of auction participants in California to decline so dramatically over the years, but rather to remain overall stable as participants will have to come back to the auctions in 2014 and 2015 to procure the allowances they need. California market participants will be unable to build a bank as large as RGGI emitters because of holding limits and because California is nowhere near as over-supplied as RGGI was in 2010 and 2011.

Is California Really Over-Allocated, and Does It Matter?

In September 2013, Thomson Reuters Point Carbon published a report forecasting that California emissions will remain lower than the cap through 2018 due to the rapid decline of emissions observed since 2011 and anticipated through the end of the decade. 2012 GHG emissions data published by ARB on November 8, 2013 confirm the downward trend in most sectors except the power sector, where emissions increased slightly due to a dry year (leading to lower levels of hydro generation) and the shutdown of the SONGS nuclear plant. If emission reductions continue to outpace the cap decline, this would be good news for the program, since it would mean reductions mandated by complementary policies – the Renewable Portfolio Standard, Low Carbon Fuel Standard, etc. – are bringing about enough emission reductions, and prices are likely to stay low over the coming years. If this proved true, prices would likely stay at the price floor (the auction reserve price), rising moderately to reach about $17.50 in 2020.
Yet such over-allocation is not a done deal by any means. Tight offset supply, additional demand from California’s trading partner Quebec, and an economic revival could put upward pressure on prices through a combination of rising demand and rigid supply. The lack of readily available low-cost emission reductions means a short market could see rising prices in the third compliance period, albeit most likely kept in check by the price containment reserve.
And even if California were indeed over-allocated through 2020, the annual supply and demand balance would matter less and less as 2020 approaches. In a carbon market, prices are largely driven by policy expectations. Even if there are more allowances than emissions in 2018, prices could still rise above the reserve price if the market anticipates a tight cap after 2020 will bring scarcity. Market participants could well start buying allowances to bank for post-2020 period.

Long Term Prospects for the California Carbon Market

Two noteworthy developments have reinforced the long-term viability of the program in the past couple of months.
On November 14, the California Superior Court upheld the cap-and-trade auction provisions, which had been challenged by the California Chamber of Commerce. This decision once again sends the signal that the program will be resilient to legal challenges, and that it is unlikely it will be brought down by a lawsuit.
More importantly, the Discussion Draft for the Scoping Plan Update, released early October, reiterated ARB’s intent to continue the program past 2020, and proposed a state-wide GHG emission target for 2030 in the range of 30-55 percent below 1990 (and 2020) levels. While the final target will be a political decision from the Governor and the Legislature, the will to continue aggressive carbon reductions in the state is clearly there, and cap-and-trade will remain part of the arsenal. We expect California will set a target of at least 40 percent below 1990 emission levels for 2030, halfway to the 2050 target of 80 percent below 1990 levels. As shown in Figure 3., a 40 percent target would be a fairly linear continuation of the current cap, while a 55 percent target would see an acceleration of reductions after 2020.

CA Cap Scenarios Nov 2013
Source: Four Twenty Seven projections

Because California has done so well at reducing its emissions so far, and political support for climate policy remains at an all-time high, we wouldn’t be surprised for the Governor to embrace the more ambitious target as part of his 2014 re-election campaign. Such a bold commitment would provide support for carbon prices before 2020.


The upcoming auction will likely see lower clearing prices and less participation than previous auctions, but this is a normal development for an end-of-the-year auction. The long term perspective for the program remains strong, and the reserve price will sustain prices until California decision-makers finalize the target for 2030.

Smooth Sailing for California Cap-and-Trade

The launch of the California carbon market was watched with much scrutiny worldwide and in the United States. California is the 12th largest economy in the world, and its cap-and-trade program, with a cap over 400 million metric tonnes (Mt) in 2015, is the second largest compliance program in the world. California leaders are committed to setting an example for the nation and for the world of a tightly-run, ambitious emission trading program that would blaze the trail for other states and countries to follow. Given the state of disarray of the EU ETS and the Clean Development Mechanism (CDM), both vastly oversupplied, and the slow progress of climate policy at a U.S Federal level, the bar was high for California’s new program. Almost a year after the launch, how is California doing?

Healthy allowances trading

One of the biggest worries for the California was the potential lack of liquidity on the secondary market. With less than forty-five large emitters (over 500,000 t of annual emissions) in the first compliance period, the pool of potential market participants was fairly narrow, especially since a number of these emitters receive at least part of their allocation for free. Yet trading has proven healthy, with 377,480 t average daily volume year-to-date (YTD) for all vintages together, according data from the InterContinental Exchange (ICE) and Evolution Markets. (…)

Download and read the full article (PDF): 05 Smooth Sailing for California Cap-and-Trade

About this article:

This article was published as part of the International Emissions Trading Association (IETA) Greenhouse Gas Market 2013 report. The publication brings together carbon market professionals, policymakers, academics and NGOs to provide in-depth analysis and perspective on the main issues affecting carbon policy worldwide. IETA is global in its outreach and the publication features latest developments in current and emerging carbon markets, as well as taking a step back to consider the wider implications of climate policy design and implementation.

The Full Report of IETA Greenhouse Gas Market 2013 features the following articles:

The Markets: Existing Policies Around the World

1. EU ETS: The Cornerstone of Future EU Energy and Climate Policy? – Sarah Deblock, IETA and Ingo Ramming, Commerzbank
2. EU ETS Pricing and Trading Trends: Improving Outlook– Trevor Sikorski, Energy Aspects
3. Smooth Sailing for California Cap-and-Trade– Emilie Mazzacurati, Four Twenty Seven
4. Australia Carbon Policy Update – Martijn Wilder, Baker and McKenzie
5. Can the Obama Administration meet its Copenhagen Goals? – Tom Lawler, IETA and Bruce Braine, American Electric Power (AEP)
6. The Regional Greenhouse Gas Initiative: Building on Success – Colin O’Mara, Secretary of the Delaware Department of Natural Resources and Environmental Control
7. Canada’s Tradable GHG Intensity Standard for Oil and Gas: The implications of leading proposals – Dave Sawyer, EnviroEconomics, and Dale Beugin, IISD

The Future: Carbon Markets On The Rise

8. The Road to 2020: What Will We Get? – Pedro Martins Barata, Get2C
9. China’s Carbon Market. Where Next? – Wu Qian, British Embassy, Beijing
10. An Overview of Emissions Trading in Korea – Dalwon Kim, European Commission DG Climate Action
11. Kazakhstan’s developing ETS – an example of emerging carbon pricing schemes in the East – Friso De Jong, Janina Ketterer, and Jan Willem Van de Ven, European Bank for Reconstruction and Development (EBRD)
12. Market and Non-Market Approaches: A Hybrid Approach in Taiwan – Hui-Chen Chien, PhD, Taiwan Environmental Protection Administration, Wen-Chen Hu, Industrial Technology Research Institute (ITRI), Robert Shih, YC Consultants, Ltd.
13. Using Offsets Within the South African Carbon Tax Regime – Patrick Curran and Alex McNamara, Camco Global
14. Toward a cap on the carbon emissions of international civil aviation: One Step Forward in 2013 – Annie Petsonk, Environmental Defense Fund (EDF)

The Design: Examining What Makes Climate Policy Tick

15. Prospects for the World’s Offsetting Market – Can the Patient be Cured? Guy Turner, Bloomberg New Energy Finance
16. Fragmented Markets with Fragmented MRV Practices: Does it Matter? – Madlen King, Lloyd’s Register Quality Assurance (LRQA)
17. What’s Covered? Trends in Coverage of Different Sectors and Gases – Edwin Aalders, Det Norske Veritas (DNV KEMA)
18. The Cost of Carbon Pricing: Competitiveness Implications for the Mining and Metals Industry – John Drexhage, International Council on Mining and Metals (ICMM)
19. Case Study: California’s Response to the Lessons Learned from the EU ETS – Melanie Shanker and Chris Staples, Linklaters

The Bridges: Aligning Markets Within a Fragmented Architecture

20. Carbon Pricing, the FVA and the NMM: Charting a Course to a New UNFCCC Agreement – David Hone, Royal Dutch Shell PLC
21. The Linking Rainbow: Evaluating Different Approaches to Joining Carbon Markets – Anthony Mansell, IETA and Clayton Munnings, Resources for the Future (RFF)
22. Japan’s Joint Crediting Mechanism: A Bottom-Up CDM? – Takashi Hongo, Mitsui Global Strategic Studies Institute
23. Lessons from the PMR’s First Years and Looking Forward – World Bank PMR Secretariat
24. The B-PMR: One Year On – Mark Proegler (BP) and Karl Upston-Hooper (Greenstream)
25. Leveraging the Potential of the Voluntary Carbon Market as a Credible Tool for Mitigating Climate Change – Sophy Greenhalgh, IETA and International Carbon Reduction Offset Alliance (ICROA)
26. When Trade and Carbon Collide: WTO and Climate Policy Realities – Elisabeth DeMarco, Norton Rose Fulbright

The Tools: Financing Low Carbon Development

27. Financing the Transformation: The Importance of the Private Sector – Paul Bodnar, United States Department of State
28. Adding to the REDD Finance Toolbox – Charlie Parker, Climate Focus
29. NAMAs: Aligning development imperatives with private sector interests – Frédéric Gagnon-Lebrun and Jorge Barrigh
30. The Green Climate Fund: Paradigm Shift or Incremental Improvement? – Gwen Andrews, Alstom
31. Analysing the Potential for a CDM Capacity Fund – Joan MacNaughton, IETA Fellow and Vice Chair, UN High level Panel on the Policy Dialogue on the CDM
32. Towards Supranational Climate Tax or Levy: The Case of the Adaptation Fund – Laura Dzeltzyte
33. Private Sector Finance for Adaptation – Gray Taylor, Bennett Jones LLP


Picture credits: Robert Bissett, Smooth Sailing