Emissions are down and cap-and-trade revenue is up, but California’s Scoping Plan must accelerate climate ambition
- Nov 30, 2020 3:55 am GMT
Downtown Los Angles at sunset. Chad Ehlers / Alamy
Recent California climate news is about the past, present, and future of climate policy. Last month the state released their 2018 emissions inventory, showing a decline in transportation emissions. Today, results of the most recent Western Climate Initiative cap-and-trade auction were released and show a rebound in demand for allowances despite the ongoing COVID-19 crisis, and an increase in revenue for the Greenhouse Gas Reduction Fund. But as the California Air Resources Board previews priorities for the Climate Change Scoping Plan updated, set to begin in early 2021, it is clear that the state needs to ramp up its emission reductions.
Let’s start with today’s auction news.
- All current allowances sold of the 56,366,432 offered for sale. This is the first auction since February 2020 where all current allowances have sold. The August auction offered approximately 2.8 million more allowances than this quarter’s auction, but only 89% of them sold.
- Current allowances settled at $16.93, which is $.25 above the floor price of $16.68.
- 8,672,250 future vintage allowances were offered for sale, and 100% of them sold. This is the second auction in a row where 100% of future allowances sold.
- The future allowances cleared at $17.35, $.67 above the floor price and $.62 higher than they cleared in the August auction. These allowances cannot be used for compliance until 2023.
- The auction raised approximately $580 million for the Greenhouse Gas Reduction Fund, higher than the $474 million raised at the August auction.
- Quebec raised over $190 million CAD (approximately $146 million USD) for their own climate investments.
The stronger demand seen at this auction was not entirely surprising for a few reasons:
- This auction was the last opportunity to purchase state-owned allowances before the end of the 2018-2020 compliance period. As discussed after the August auction, while companies will have another year to turn in all necessary allowances for the current compliance period, they cannot use vintage 2021 or later allowances for 2018-2020 compliance.
- This was also the last auction at the current price floor. This minimum price increases annually at 5% plus the rate of inflation. CARB will soon be announcing the new price floor for 2021, but business can anticipate higher floor prices going forward.
- Despite the ongoing economic uncertainty caused by the pandemic, and the recent surge in COVID-19 cases in California, emissions are expected to rebound quickly from their drop earlier this year. While this points to the urgent need to rebuild our economy in ways that don’t contribute to air and climate pollution, the potential for higher emissions next year could be helping to drive allowance demand.
2018 emissions inventory shows progress, but more work to do
Last month, the California Air Resources Board released the final 2018 greenhouse gas emissions inventory. While overall 2018 emissions were slightly higher (0.8 MMT CO2e) than in 2017, the state is still 6 MMT CO2e below the 2020 goal of returning to 1990 emission levels. From 2017 to 2018, California’s economy also grew by 4.3%, demonstrating that economic growth is compatible with decreasing carbon intensity. California’s economy is producing more while emitting less per unit of production. Since peak emissions in 2004, California’s emissions have dropped over 65 MMT CO2e, or just over 13%. But CARB itself acknowledges that the state must do much more to reach the 2045 carbon neutrality goal.
An encouraging piece of news from the 2018 emissions inventory is that emissions from the transportation sector declined 1.5 MMT CO2e since 2017. This is an important step as transportation emissions make up approximately 40% of California’s emissions, and this sector has historically been hard to decarbonize.
However, new policies will help deploy the clean technologies necessary to accelerate emission reductions in the transportation sector. These include the Advanced Clean Trucks rule adopted earlier this year by CARB, and Governor Newsom’s September Executive Order to end the sale of internal-combustion engine vehicles by 2035 and require all medium- and heavy-duty vehicles to be zero-emission by 2035 or 2045, depending on their type.
To encourage the rapid decarbonization of heavy-duty transportation, EDF has published a new report, “Financing the Transition: Unlocking Capital to Electrify Truck and Bus Fleets.” This report finds that broader collaboration among key stakeholders and a new generation of finance solutions will be important to electrify truck and bus fleets at scale. These solutions form a Total Cost of Electrification Toolkit that policymakers, fleet owners, utilities and investors can use as a roadmap to accelerate demand for electric trucks and buses, while reducing barriers to investment.
Next up: Scoping Plan update needed to accelerate decarbonization
With these existing polices and new directives in place, the California Air Resources Board is set to launch the update of the Climate Change Scoping Plan: the strategy for achieving California’s climate goals for 2030 and 2045. The Scoping Plan is updated every five years, and this version is expected to focus on accelerating direct emission reductions to benefit the climate and local air quality, moving away from the combustion of fossil fuels, investing in environmental justice and a just transition, and developing a plan to ensure that California’s natural and working lands are a net carbon sink rather than source.
A rapid update of the Scoping Plan and key climate policies is absolutely essential. The next 10 years are critical to ensuring we are on track to achieve net-zero emissions by mid-century, as science demands. Some of the priorities EDF will be focusing on in this process include:
- Increasing and accelerating the climate ambition of landmark programs like cap and trade.
- Focusing on near-term reductions to achieve the greatest possible cumulative emission reductions.
- Accelerating building decarbonization and electrification of the transportation sector for both the climate and public health.
- Ensuring equitable processes and outcomes in California’s climate programs.
California has demonstrated that cutting emissions and rebuilding an economy can go-hand-in-hand and that the state’s key climate policies are working. And now is the time to enhance ambition; California has much more to do to achieve rapid and deep decarbonization on the timeline needed to avoid the worst impacts of climate change.
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