California holds first U.S. auction of carbon dioxide emission rights

California took another step forward in its innovative program to mitigate emission of heat-trapping gases to the atmosphere earlier this month as it held the first-ever sale of carbon dioxide pollution permits in the nation.

The auction, which occurred Nov. 14 in Sacramento, resulted in a modest price for the right to pollute the air.

According to data released by the state's Air Resources Board, bidders will pay $10.09 for each metric ton of the greenhouse gas they emit. The minimum bid was $10.

California's leading air pollution regulator said she is pleased with the results, notwithstanding the relatively low price paid by the 71 participants.

"The auction was a success and an important milestone for California as a leader in the global clean tech market," Mary D. Nichols, chairwoman of the agency, said in a statement. "By putting a price on carbon, we can break our unhealthy dependence on fossil fuels and move at full speed toward a clean energy future. That means new jobs, cleaner water and air - and a working model for other states, and the nation, to use as we gear up to fight climate change and make our economy more competitive and resilient."

The sale of the carbon allowances for 2013 generated only a little more than $233 million and not much of that money will be kept by the state.

"Some of the allowances are consigned with us from the utilities," Dave Clegern, a spokesperson for the agency, said. "The money that comes from that goes back to the utilities, in a form worked out by the [Public Utilities Commission], as a buffer for ratepayers. The rest goes into the California Air Pollution Reduction Fund."

The California Legislative Analyst's Office has said that it expects state coffers to swell by an average of billions of dollars per year as the auction program reaches more and more of the polluters in the nation's most populous state.

Whether or not that estimate is accurate, it is likely that the price of the required pollution permit will rise as the state's groundbreaking AB 32, a wide-ranging 2006 law to reduce greenhouse gas emissions in the nation's most populous state, ratchets down the ceiling on facility emissions.

The likely downward impact on California's future accumulation of greenhouse gases excites the environmental advocacy community, notwithstanding the financial return the first effort generated.

"We had the benefit of learning from others like the European Union and have been able to put together a really great program that creates a market incentive for innovation and reducing carbon," Emily Rayna, a spokesperson for Environmental Defense Fund, said. "This is an exciting time in California."

The state's business community does not seem to be so thrilled. The California Chamber of Commerce sued the state on the day before the auction in an effort to prevent repetitions of the event. The litigation did not seek to enjoin the Nov. 14 auction but does argue that requiring companies who must comply with air pollution limits to pay for permission to pollute is an unauthorized tax or an illegal fee.

Rayna said that environmental advocacy organizations are not worried about the Chamber of Commerce's move.

"We don't anticipate that further auctions will be stopped because of this lawsuit," she said.

Those future auctions will occur on a regular basis during the next eight years. The next one is scheduled for Feb. 2013.