Bloomberg News

California Lawmakers Pass Measure Limiting Cap-And-Trade Links

June 27, 2012

California lawmakers passed a bill that may stall plans for a link of the state’s cap-and-trade system with Quebec that would allow companies to exchange carbon permits across the borders.

The measure, approved as part of the legislature’s $95.1 billion budget package, requires the state’s air resources board to gain approval from the governor before linking cap-and-trade systems with other jurisdictions. The board was expected to decide tomorrow on a link with Quebec that would allow companies to use carbon offsets and permits issued by the province to meet California’s greenhouse-gas emissions targets.

Dave Clegern, a spokesman for the air resources board in Sacramento, declined in an e-mail to comment on the bill’s approval, saying the agency is “withholding any comment until after the governor signs” the legislation.

California, which established a carbon program after U.S. policy makers failed to develop a federal plan, is set to join more than 30 other governments operating emissions-trading programs worldwide next year, including 27 European Union member-states, Norway, Switzerland and New Zealand, as well as Quebec. The state’s air board has supported a link with Quebec to strengthen its carbon market and drive down emissions by larger volumes.

Linking the two programs would send “a strong message to two national governments that now is the time to support innovation, energy efficiency and the development of clean technologies,” Mary Nichols, chairman of California’s air resources board, said in a statement when the board’s staff proposed rules that would join the systems May 9.

Board Action

Clegern declined to comment on whether the air board will still decide tomorrow on a linkage with Quebec.

“What happens tomorrow will be up to the board,” he said.

IntercontinentalExchange Inc. (ICE:US) cleared a record number of California carbon options contracts, with 750 traded as of 6 p.m. New York time, topping a previous record of 600 on Sept. 19. All of the contracts were for options, with puts traded at $1.75 a ton and calls from $1.25 to $2.50, Brookly McLaughlin, a spokeswoman for the Exchange in Chicago, said in an e-mail.

California carbon futures for December 2013 delivery rose 15 cents to $17.40 a ton, the highest since Nov. 16, according to data compiled by CME Group Inc. (CME:US)’s Green Exchange.

The bill approved today also requires the air board to deposit all revenue collected from carbon allowance auctions and sales into a fund that would be available for appropriation by the legislature.

California Governor Jerry Brown has until midnight to sign the legislature’s spending plan, which takes effect July 1, the start of the fiscal year.

To contact the reporter on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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