Search Climate Insights Directory

This research note examines 'consignment auctioning,' a hybrid carbon allowance distribution method used in California's emission trading system (ETS) that combines elements of free allocation and auctioning. The authors propose this model as a potential solution for China's national ETS to introduce auctioning while mitigating economic shocks to covered entities and bypassing institutional barriers regarding the handling of government revenue.

This report by Energy Innovation provides a quantitative analysis of the linked California-Quebec cap-and-trade program, identifying a systemic oversupply of carbon allowances. The author argues that emissions have fallen faster than regulators expected due to successful climate policies, technological innovation, and economic trends. While the program's price floor and holding limits act as stabilizers, the report suggests that the current oversupply has led to undersubscribed auctions. The author proposes four policy reforms—lowering caps, switching to annual compliance, increasing the price floor, and reducing free allowances—to drive more significant emission reductions and provide stable revenue for the Greenhouse Gas Reduction Fund.