High-speed rail gets a financial boost from California’s heaviest polluters

A key source of money for California’s controversial high-speed rail project got a big shot in the arm this month from the auction sale of air pollution credits to industrial and commercial buyers.

The California Air Resources Board stands to receive more than $813 million from the Nov. 14 auction – the 17th quarterly cap-and-trade auction of carbon-emission credits since the fall of 2012. California holds its auctions in collaboration with the Canadian province of Quebec. The auctions are part of California’s greenhouse gas reduction program to reduce carbon emissions to 1990 levels.

The “cap” part of the cap-and-trade program is the limits that are placed on polluters’ emissions, and companies are required to get permits for each ton of carbon they produce as air emissions. The “trade” part comes from the ability of companies to trade for additional pollution capacity, buying allowances through the California-Quebec auctions or from private sellers whose pollution comes in under their cap.

Money from the auctions is used by the Air Resources Board for projects and programs that promise short- and long-term improvements in air pollution and carbon emissions. In California, 25 percent of the proceeds from auctions goes to the state’s High-Speed Rail Authority. That should translate to about $203 million for the high-speed rail project from the latest auction.

Not counting the November auction, the sales have generated more than $9.4 billion for California’s greenhouse-gas efforts since 2012. The California High-Speed Rail Authority has received a little more than $2.2 billion from the program.

The emission allowances are sold by the metric ton (1,000 kilograms, or 2,205 pounds). The price for the allowances at the November auction settled at $15.31 (in U.S. dollars) per metric ton for current allowances, and $15.33 for the purchase of future allowances for 2021.

More than 60 bidders were approved by the state Air Resources Board to participate in the auction. They include major petroleum companies such as BP Products North America, Chevron USA, Phillips 66, Shell Energy North America and Valero; utilities including Pacific Gas & Electric Co., Southern California Edison and San Diego Gas & Electric; public agencies including the cities of Anaheim, Los Angeles and Vernon and the California Department of Water Resources; and capital and finance companies such as Morgan Stanley and the Royal Bank of Canada.

The amounts of money generated by the auctions has, at times, been inconsistent. In 2016, particularly, sales fell far short of the number of emission allowances that were made available. Part of that was attributed to uncertainty over whether the California Legislature would extend the cap-and-trade program beyond 2020. In May 2016, for example, nearly 68 million metric tons of current allowances were available for bids, but fewer than 7.3 million metric tons were actually sold at a price of $12.73 per allowance.

After a 2017 deal between Gov. Jerry Brown and state legislators extended the cap-and-trade program through 2030 and resolved concerns about the program’s immediate future, every metric ton of current emission allowances offered for sale has been sold, and prices have risen in every auction since February 2018.

The Associated Press contributed to this report.