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Uncertainty Regarding Cap-and-Trade Regulation Reflected In Price Of GHG Emission Allowances Sold At First Auction

The California Air Resources Board (CARB) published the results of its first auction of greenhouse gas (GHG) emission allowances today, November 19, 2012. The publication of the auction results follows on the heels of last Wednesdays inaugural auction, a major milestone in CARBs development and implementation of a GHG cap-and-trade program. The auction sold all of the current vintage allowances at $10.09/allowance and 14% of the available future vintage allowances at $10.00/allowance. The allowance clearing price may have been depressed due to gathering litigation threats against the cap-and-trade program. Thus, the auction clearing price published today may better reflect auction participants views on whether the program will survive legal scrutiny, than the actual abatement costs needed to achieve Californias GHG reduction goals or participants estimate of future compliance costs.

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