It has been a while since my last blog post. In the climate change legal world, most of what has happened in the past few months has been of the utilitarian, and not the showy variety. California continues to implement its Global Warming Solutions Act (A.B. 32) and has already held two auctions of the emissions allowances which cover most of the California economy. Prices have moved between approximately $10 and $14 a ton.
As I have stated before, California has recognized some of the mistakes of the EU in its carbon system, and seems to be doing well. There are still questions about what the proceeds will be used for and how California can apply its requirements to out of state electricity suppliers; but all in all, the strong price at the latest auction signals that the scheme is not likely to be derailed legally. The rules for offsets have been set up and offset trades on the futures market have occurred. California is also proceeding with linking its market with that of Quebec (which is one eighth the size of California’s market).
The EU has faced a very flat carbon market apparently due to its originally over-generous allocation of allotments in the system. The EU countries seem poised to do a unilateral reduction of allowances to shore up the market, but this is again a warning about how setting up a system is critical to good market functioning. The EU plans to link its market with Australia, Japan, New Zealand ,and South Korea. In general the discussion of over linked markets continues to grow.
The Regional Greenhouse Gas Initiative has unilaterally cut the amount of emissions allowed within its system by almost half, which should finally move the price there above the minimum floor where it has rested since RGGI’s inception. This will also allow an offset market to come into being.
On the US federal front, the EPA has missed its deadline to propose greenhouse gas controls on new electricity generating units (EGUs), but its current Deputy, Bob Perciasepe, has stated that not only will those be coming soon, but that the rules for existing sources should be out in 2014. I will have a later blog on what these might look like and what it means for existing coal plants.
One “showier” story is the announcement that the United States and China will work jointly to reduce greenhouse gas emissions. This is part of the broader trend towards “practical” reductions out of the UN framework negotiations. The agreement has been characterized as an “energy” agreement, allowing both countries to move ahead with the development of other energies besides fossil fuel.