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California Tests Cap and Trade System

Aug 31, 2012

California officials are ramping up for the greenhouse gas emissions cap-and-trade market this November, where companies will be required to pay for their pollution. The state held a trial auction to test the new system for selling carbon credits on Thursday.

The main goal of the test run is to make sure the software works smoothly and prevents attempts to game the bidding system, according to, Stanley Young who is with the California Air Resources Board.

“What we're trying to do is present the system with a range of challenges by putting in very low bids, high bids, and we're trying to make sure that the system rejects bad bids, and accepts the correct ones."

Young says the trial auction included 150 participants. “We learned from what happened and what was successful in other auction platforms, such as in the European market and in the Northeast with the regional greenhouse gas initiative, and we've taken those lessons to heart.”

Part of the challenge with cap and trade markets is how prices are set for the carbon credits. Too low, and it's inexpensive for companies to pollute. Too high, and companies face too heavy a burden.

So far, Young says the state is pleased with the trial auction, though the board won't complete its full analysis until next week.