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Scant demand for California carbon emission permits

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POSTED March 1, 2017 8:33 p.m.

SACRAMENTO (AP) — California saw another three months of weak demand for pollution permits amid persistent uncertainty about the future of the state’s cap on carbon emissions, according to state data released Wednesday.
California will take in only about $8 million from an auction that could have generated $592 million or more if all permits were sold. The program is a prime funding source for projects including high-speed rail and transit construction.
For years, each quarterly auction consistently generated hundreds of millions of dollars.
Fewer than one in five permits were distributed at an auction last month, according to the data from the California Air Resources Board. The vast majority were sold by utilities, which get them for free from the state, while some were sold to polluters in Quebec, the Canadian province that sells permits at the same auction.
But revenue has plummeted in three of the last four actions amid a series of pressures that have depressed demand.
A glut of permits on the market means companies don’t need to buy them at auction to authorize their emissions in the near future. A state appeals court is considering a case that challenges the authority for the state to sell pollution permits. And the Legislature is considering whether to give the program clear authority to continue past 2020.
“The incentives aren’t such to be aggressively purchasing allowances from the auctions that you aren’t going to need in the near term,” said Alex Jackson, a lawyer for the Natural Resources Defense Fund.
The program, known as “cap and trade,” limits the amount of carbon that can be released each year and requires companies that pollute to buy permits for each ton of carbon they release.
The scarce demand for permits means revenue will likely fall far short of the $1 billion that Gov. Jerry Brown projected for the current fiscal year. Three quarters into the budget year, the auctions have generated only about $380 billion, according to the nonpartisan legislative analyst.
Brown and environmental groups have called on lawmakers to extend the cap and trade program beyond 2020 with a two-thirds vote, which would shield the program from some of the legal uncertainty that has helped to suppress demand.

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