Surprise: California’s Cap And Trade Auction Fails Miserably

Members of the Cult of Climastrology keep telling us that one of the great methods to stop the Earth from burning to a cinder from a marginal greenhouse gas increasing marginally is a cap and trade scheme. How’s that working out in California? Well, you surely read the headline, so

(LA Times) The latest auction in California’s cap-and-trade market for greenhouse gases fell sharply below expectations, as buyers purchased just 2% of the carbon credits whose sale funds a variety of state programs — notably, the proposed high-speed rail project.

The quarterly auction, conducted May 18 and announced Wednesday, will provide just $10 million for state programs, including $2.5 million for the bullet train. The rail authority had been expecting about $150 million.

The reason is unclear, but state officials and outside experts pointed to several possible causes: less need for the credits, pending litigation that may overturn the entire system and volatility spawned by speculators in a secondary trading market.

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Whatever prompted the lack of buyers, the auction is a stark example of the uncertainty and risk of relying on actively-traded carbon credits to build the bullet train, a problem highlighted in recent legislative testimony by the Legislative Analyst’s Office and a peer-review panel for the $64-billion high-speed rail.

That’s the bullet train that is unpopular, doesn’t really go where people want to go, is close to the San Andreas Fault, and is vastly over budget. But, hey, I wonder if the costs of the permits are as low as all the other trading markets around the world

Buyers at the auction took just 785,000 of the 43 million allowances offered, each of which allow the emission of one metric ton of carbon dioxide. All the permits were bought at the floor price of $12.73.

But there is a secondary market, where the private parties who own the credits trade them daily. Those credits were recently priced at $12.34, well below the state floor in the auctions. It means that any company needing a credit could buy it more cheaply on the secondary market than in the auction.

For some reason, the California Warmists, many of them employed by the government, think that companies, forced to be part of this scheme, will gladly pay out the nose for permits, rather than seeking the lowest cost possible. This same thing has been seen around the world in these CO2 permit markets. What we further see is that these forced markets are really just schemes to raise money for other projects. Anyone who thinks that government will return money directly back to citizens to offset their rising costs of living is a fool.

Crossed at Pirate’s Cove. Follow me on Twitter @WilliamTeach.

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