California’s signature climate change program, cap-and-trade, passed its first test since lawmakers extended the program last month.
Results released Tuesday by the state show pollution credits—which give companies the right to release emissions—sold out at the latest auction this month. That follows a turbulent year, where the state often sold a fraction of the available credits.
"I would say this is the strongest result we’ve seen," says Chris Busch of the research firm Energy Innovation. "There’s a new certainty that the program is with us for the long run and that it’s going to start really demanding steep reductions—eventually."
He attributes the strong sales to lawmakers extending the cap-and-trade program last month, but also thinks the state has more credits available than companies need.
"People are going to snap up allowances now, because they’re expecting much higher prices later," Busch says.
That could create less incentive for businesses to cut emissions in the future.
The state will receive about $640 million from this month’s auction for clean energy programs and the high-speed rail project.