2.5.2.RGGIWhile the initial set of RGGI auctions did reasonably well, by September of 2010 they beganterminating at the reserve price and not allocating the entire supply. In Auction 13 for instance,only about 7 million of the 42 million 2009–2011 allowances put up for auction were sold, andnone of the 1 million 2012–2014 allowances were sold. This auction cleared at the reserve priceof $1.89 and raised $14,150,430, which is significantly lower than the amount raised in previousauctions. Auctions 9–19 (Sept. 2010–March 2013) all cleared at roughly the reserve price, andmany of them ended with a significant number of credits left unsupplied. The demand forfuture vintages dried up even sooner: starting in September of 2009 the auctions for futurevintages were finishing at their reserve price and not allocating the entire supply. Afterreadjusting the supply in 2013, the auction performance has improved dramatically, indicatingthat many of these problems were due to the supply being too high relative to theunexpectedly low demand.2.5.3.CaliforniaCalifornia sets its reserve price significantly higher than RGGI’s reserve price (at about $10).These auctions tend to end at or just a bit above the reserve price, and for the most part haveallocated all of the supply of current vintages. Demand for future vintages tends to be muchlower than demand for current vintages, even relative to the lower supply of future vintages.Overall, California’s markets seem to have worked better than the other markets discussedhere. The price of carbon has been relatively stable, and the auctions that undersell do notundersell by very much.2.5.4.QuebecThere have been three auctions for carbon credits run by the government of Quebec. All ofthese auctions have ended at the reserve price, which is around $11. The first auction, run inDecember 2013, ended with over half the supply unallocated. The performance of theseauctions will probably improve after the Quebec market is linked with California.
Pilot Auction Facility for Methane and Climate Change MitigationDesktop Review of Environmental Auctions7Power Auctions LLC2.6.Carbon TradingAn important aspect, both of the allowances in these carbon markets and of the options thatthe PAF is proposing to sell, is their tradability. Similar to many of the issues in these carbonauctions, many of the problems in these carbon markets are due to the supply being too high.The European Union’s carbon market has been extremely volatile. Demand for the Kyotocredits (CERs and ERUs) is very low at the moment, as is demand for European UnionAllowances. The CER price for instance, was about €0.14 in June of 2014. Lower demand thanwas projected and high supply due to unambitious caps set by the participating nations has ledto the low price in this market.The American markets seem to have stabilized to some extent. The California market hasperformed relatively well. The price has been relatively flat at around $12. RGGI had a difficultstart: the cap was set substantially too high, given the recession and the increased use ofnatural gas. But the market now seems to be recovering. In fact demand was high enough inthe most recent auction that allowances from the CCR were added for the first time. In 2013,