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May 2013 California Cap-and-Trade Auction Shows Strengthening Carbon Market

On May 21, 2013, the California Air Resources Board (CARB) released the results of its most recent auction of allowances pursuant to the Cap-and-Trade Program Regulation, which was conducted on May 16, 2013. Significantly, the settlement price for 2013 vintage allowances was $14.00, marking a small, but nevertheless important, increase from the February 2013 auction. Additionally, there was increased participation in the auction for 2016 vintage allowances, suggesting that market participants are becoming increasingly confident that CARB’s Cap-and-Trade Program will not be halted by a judicial challenge. Together, these results send a strong signal that—whatever hesitations may have suppressed interest in the earlier auctions—the market is coalescing around a clear price for allowances for the first compliance period (2013-2014) and reflecting participants’ views that the Program will continue to be implemented well into the second compliance period (2015-2017).

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