New paper on California's carbon market

Andy Coghlan and I have a new article out in The Electricity Journal on recent developments in California's carbon market. In the quarterly auction this past May, 90% of allowances failed to find buyers. As a result, the joint California-Québec auction failed to collect over $880M, $550M of which was due to be delivered to California's greenhouse gas reduction fund (GGRF).

There will be significant consequences if Q3 (Aug) and Q4 (Nov) auctions follow the pattern observed in Q1 (Feb) and Q2 (May). As Andy and I discuss in our piece, the fundamental drivers of the May auction results include persistent market design issues and a lack of current legal authority to extend the market after 2020. This suggests that the market's problems are unlikely to be resolved anytime soon. 

Given the importance of carbon market revenue to the political economy of California's climate policy, Andy and I hope that readers will find our article a useful resource for putting the May auction in context. Thanks to the journal's editor, Rich Cohen, for expediting its publication.