Regulators holding cap-and-trade auction as lawmakers consider next steps on climate change

As lawmakers debate the future of California’s climate programs, they’ll be keeping an eye on new developments with the state’s cap-and-trade program.

Regulators are holding their regularly scheduled auction Tuesday, an opportunity for companies to bid on the permits necessary to emit greenhouse gases in the state. During the last auction in May, demand for permits dropped, evidence of the legal and political uncertainty surrounding cap-and-trade.

Full details on revenue from the auction won’t be available until Sept. 12, but a summary of the results will be released next week, before the end of the legislative session.

Top Democratic lawmakers and Gov. Jerry Brown have been discussing legislation that would extend California’s goal for reducing greenhouse gas emissions, intended to signal that the state’s commitment to climate programs will continue past 2020, the current target.

Although the measure currently under consideration would not resolve all the legal disputes involving the cap-and-trade market — there’s a pending lawsuit that accuses regulators of implementing an unconstitutional tax — some supporters believe it would still be a step in the right direction.

“Tomorrow’s auction will probably be a further signal that we have to stabilize and bring predictability to the market,” said Senate leader Kevin de León (D-Los Angeles). “Any investor would want to make sure that there’s stability, continuity, and predictability.”

Even though the goal of cap-and-trade is to lower emissions, revenue from the program has become a key part of political discussions over its future. Brown is counting on the money to help fund bullet train construction, and lawmakers are vying to ensure the money is spent in their districts.

“If [the auction] goes really badly, then there can be extra pressure on trying to pass an extension of cap-and-trade,” said Assemblyman Jimmy Gomez (D-Los Angeles).