Dive Brief:

• An auction held this month between California and Quebec for greenhouse gas emissions allowances sold out, with prices stable and clearing above a set floor price — proof, say observers, that there is confidence in the market's long-term viability.
• The auction raised more than $850 million for the Greenhouse Gas Reduction Fund, which will invest in programs that include clean transportation and improving local air quality.
• All of the almost 80 million vintage allowances offered for sale were snapped up, including almost 16 million that were previously unsold in 2016. This was the first auction including previously-unsold allowances.

Dive Insight:

Results of this month's California-Quebec auction signal a "new normal," according to an environmental group keeping a close watch on the process. 

Before California extended its cap-and-trade program sunset date from 2020 to 2030, the Environmental Defense Fund says demand for allowances was falling off, "in part because emissions were already below the cap and the uncertainty of the future program discouraged any banking."

In a blog post, the group noted that this auction was the first to offer previously unsold allowances held over from the 2016 auctions. 

All of the 79,548,286 current vintage allowances were sold, including 15,909,657 that did not sell in last year's auction. Current vintage allowances sold at $15.06 — $1.49 above the $13.57 floor price, and $0.31 higher than the August clearing price.

"These auction results show that businesses’ ability to 'bank' allowances for use in later years when prices will be higher and the cap tighter are critical for market stability, and most importantly, emissions performance," Erica Morehouse wrote for EDF's blog. 

Demand was falling in 2016 and early 2017, before California extended the program. But with the cap extended to 2030, "demand and prices are more stable and there is once again a strong incentive for polluters to save their allowances for future years and make cost-effective emission reductions sooner than required," Morehouse explained.

California Gov. Jerry Brown signed the extension into law over the summer, giving the program another 10 years. The law establishes the California Air Resources Board as the statewide agency responsible for ensuring that California meets its carbon pollution reduction targets, while retaining local air districts' responsibility and authority to curb toxic air contaminants and criteria pollutants.