This page last reviewed December 4, 2015

Estimated State Auction Budget

Estimate of State-Owned Allowances by Budget Year and Fiscal Year

This page provides an estimate of the total State-owned allowances that will be offered for sale at auctions through 2020 under the Cap-and-Trade Program. These estimates are for State-owned allowances only and do not include allowances consigned for sale by utilities from their electricity or natural gas allocation. This analysis does not include any post-2020 allowances.

Background

Under the Cap-and-Trade Program, emissions caps and associated greenhouse gas (GHG) allowance budgets are calculated for each calendar year (January 1 through December 31). In the Cap-and-Trade Program, the calendar year from which the allowances are assigned is referred to as the "budget year." California GHG allowances are sold at one of four quarterly auctions held by ARB each year in February, May, August, and November. The Legislature and Governor appropriate proceeds from the sale of State-owned allowances through the State budget process. Proceeds must be used for projects that support the goals of AB 32. For additional information on the use of auction proceeds, please refer to the California Climate Investments webpage.

In California State government, the budget process is based on the State fiscal year, (FY) which runs from July 1 of one year through June 30 of the following year. Therefore, proceeds from allowances sold in the February and May quarterly auctions are generally appropriated in one fiscal year, while proceeds from allowances sold at the August and November quarterly auctions are generally appropriated in the subsequent fiscal year. For example, allowances sold at the February 2013 and May 2013 quarterly auctions were appropriated in the FY 2012-2013 Budget, and allowances sold at the August 2013 and November 2013 quarterly auctions were appropriated in the FY 2013-2014 Budget.

As a result of the difference in accounting periods between the Cap-and-Trade Program and the State, the following spreadsheet presents estimates of State-owned allowances both by fiscal year, in line with the California budget process, and budget year, in line with how the Cap-and-Trade Program is structured. Detailed information on the assumptions used in this spreadsheet is outlined below under "Assumptions Used In Estimating State-Owned Allowances by Budget Year" and "Assumptions Used In Converting State-Owned Allowances from Budget Year to Fiscal Year."

Estimated State Auction Budget Spreadsheet

Assumptions Used In Estimating State-Owned Allowances by Budget Year

Estimates of the number of allowances that the State will auction each budget year (i.e., calendar year) are indicated in Table 2 in the spreadsheet above. These estimates rely on a number of assumptions that can affect the actual values significantly. The main reason for deviation from the projections listed below is that allowance allocation varies annually based on a number of different factors. For more details on allowance allocation, see the Allowance Allocation webpage. The assumptions used in Table 2 are as follows:

  1. Advance Auction: Assumes that 100% of the future vintage allowances that are offered sell at each auction. Advance allowances are not shown in the calendar year offered, but in the year of the budget from which they originate.
  2. Industrial Allocation: Budget years 2016 through 2020 allocation assumes a 1% growth in production each year relative to the production amounts used to calculate budget year 2015 allocation.
  3. "But-for" Combined Heating and Power Allocation: Budget year 2016 through 2020 allocation is projected as equal to budget year 2015 allocation.
  4. Universities/Public Service Facility Allocation: Baseline emissions used to calculate budget year 2015 allocation are assumed to be the same for budget years 2016 through 2020.
  5. Legacy Contract Allocation: All legacy contract generators that were provided allocation in 2015 are assumed to be the same for budget years 2016 through 2020, with the exception that legacy contract generators without an industrial counterparty are not eligible for assistance after budget year 2017.
  6. Natural Gas Supplier Allocation: Baseline emissions used for budget year 2015 allocation are assumed to be the same for budget years 2016 through 2020.
  7. Waste-to-Energy Allocation: Budget year 2015 allocation is assumed to be the same for budget years 2016 and 2017. These entities are not eligible for allocation beyond 2017.
  8. Total Current and Future Estimated Available State-Owned Allowances: For all budget years, totals represent the cap minus advance auction, minus VRE credits, minus free allocation. For budget years 2013-2017, this total also includes future vintage allowances from three years subsequent that are sold at advance auction (e.g., Budget Year 2013 total includes 2016 vintage allowances sold at advance auction).
  9. Total Current Estimate Available State-Owned Allowances: For all budget years, totals represent the cap minus advance auction, minus VRE credits, minus free allocation. For budget years 2013-2017, this total does not include future vintage allowances from three years subsequent.

Assumptions Used In Converting State-Owned Allowances from Budget Year to Fiscal Year

Estimates of the number of allowances that ARB will auction each FY are indicated in Table 1 in the above spreadsheet. The assumptions presented above also apply to the FY estimates included in Table 1, with the following exceptions:

  1. Current Auction: Current auction amounts in Table 1 (row 3) are based on the estimate of total current auction amounts in Table 2 (row 24). FY 2013-2014 Current Auction = (Budget Year 2013 Current Auction total/2) + (Budget Year 2014 Current Auction total/2), and so on for each fiscal year.
  2. Advance Auction (Available): Advance auction amounts in Table 1 (row 4) are based on the advance auction amounts in Table 2 (row 12). FY 2013-2014 Advance Auction = (Budget Year 2016 Advance Auction total/2) + (Budget Year 2017 Advance Auction total/2), and so on for each fiscal year.
  3. Total Estimated Available State-Owned Allowances: For each FY, totals in Table 1 (row 5) are equal to the sum of current auction (row 3) and advance auction (available) (row 4).

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