First Cap and Trade Auction – CPUC’s “Climate Dividend” – Investment Plan

Posted on Thursday, November 22nd, 2012 by Jeanne Merrill


The results from California’s first cap-and-trade auction were announced this week – nearly $290 million was raised.  The first auction included the selling of allowances (aka permits to emit greenhouse gas emissions) to be held by the utility sector and, separately, by the industrial sector.

In total about 350 entities in California – e.g. oil refineries, large manufacturers, food processors, utilities – will participate in cap-and-trade program. California will hold quarterly auctions and the percent of allowances that are auctioned will increase over time.  The funds generated will be invested back into the program with some important exceptions.

The California Public Utilities Commission (CPUC) recently proposed that 85 percent of the funds generated from the utility auction (about $233 million from the first auction) will be returned to rate payers in the form of “climate dividend” rate reductions.  The CPUC estimates the average residential customer in California will receive a rate reduction of about $30 dollars twice a year.

Good climate change policy limits impacts on the poor, including rising energy costs.  But the choice of the CPUC to return millions and eventually billions of dollars of auction proceeds in the form of relatively small rate reductions for most, and bigger pay-offs for the largest emitters of greenhouse gas emissions, rather than investing in green infrastructure, home weatherization, energy efficiency and renewable energy, represents a real loss in realizing long-term energy savings and clean energy development.

How the other portion of the auction revenue – funds raised through the auctioning of industrial sector allowances – will be invested will be taken up by the Governor’s administration and the legislature next year.

CalCAN will continue to advocate that by investing in agricultural solutions to climate change the state can achieve important GHG reductions while boosting our rural communities and improving our environment overall.

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