February 2018 Cap-and-Trade Auction Results

February 2018 Auction Generates About $725 Million in Revenue. The California Air Resources Board (CARB) released a summary of the results from the most recent quarterly cap-and-trade auction held on February 21, 2018. Based on the preliminary results, the state will generate an estimated $725 million in revenue from the auction. As shown in Figure 1, this amount is less than what the state received from the last auction in November 2017 ($863 million), but more than the August 2017 auction ($642 million). All 44 million of the 2016 and 2017 vintage allowances offered for sale in the current auction were purchased at a price of $14.61—which is slightly higher than the minimum price established by CARB ($14.53). In addition, over 5 million (70 percent) of the state 2021 vintage allowances offered in the advance auction sold at the minimum price.

Auction Results Tracking Slightly Above Governor’s Budget Assumptions for 2017‑18. The Governor’s budget assumes total revenue of $2.7 billion in 2017‑18 (and $2.4 billion in 2018‑19). The total 2017‑18 revenue through the first three auctions is more than $2.2 billion. There is one more 2017‑18 auction in May. If the May results are similar to the February auction, 2017‑18 revenue would be between $2.9 billion and $3 billion—a couple hundred million dollars higher than the budget assumes. As we discussed in our recent budget report, there continues to be significant uncertainty about future auction revenue. Consequently, we recommend that as the Legislature develops its 2018‑19 cap-and-trade expenditure plan, it consider options to prioritize spending to ensure fund solvency in the event that future revenues are lower than current budget estimates.