Cap and Trade in California: Auction Revenues and Options for the Electricity SectorRFF Feature
May 24, 2012
Beginning in 2013, California will enact an economy-wide cap-and-trade program on carbon dioxide. Estimates of the value of tradable emissions allowances in the first year range from roughly $2.6 billion to $7.8 billion, when electricity and industry are covered under the program. Those sectors will receive most of their allowances for free. In the first year, however, a fraction of allowances (mostly for future years), will be sold through an auction—yielding revenues of roughly $0.6 billion to $1.8 billion. That revenue will be returned to the California economy through appropriation by the legislature. The allowance auction revenue will grow five-fold in 2015 when transportation and natural gas are included under the cap-and-trade program.