In California's first auction of greenhouse gas pollution credits, companies paid just a few cents more than the minimum price per ton of carbon, generating almost $290 million from the sale held last week.
The state Air Resources Board announced Monday that it sold all 23.1 million allowances available for 2013 at $10.09 each, generating $233.3 million. The minimum price was $10.
Additionally, the state sold only 14% of almost 40 million credits available for 2015. That generated an additional $55.8 million.
"The auction was a success and an important milestone for California as a leader in the global clean-tech market," board Chairwoman Mary D. Nichols said in a statement. "By putting a price on carbon, we can break our unhealthy dependence on fossil fuels."
The price per credit came in lower than what analysts and traders had expected. Some had predicted the allowances would sell for $11 to $15 a ton of carbon.
Quiz: The week in business
Nichols, however, said despite the low price, the Wednesday auction showed that the market is competitive because all the 2013 allowances were sold.
Some of the money will be used for energy efficiency and other projects. Utility regulators have proposed that some of the funds go to residential and business customers of Southern California Edison, Pacific Gas & Electric Co. and San Diego Gas & Electric Co.
The cap-and-trade program is the result of AB 32, also known as the Global Warming Solutions Act, a landmark law passed in 2006.
The legislation aims to reduce the state's production of carbon dioxide, methane and related gases to 1990 levels by 2020. The 1990 levels are about 17% lower than current amounts.
The auction involved 350 industrial businesses in the state, which as a group operate about 600 facilities throughout California. They include utilities, food processors and oil refineries. Starting in 2015, the program also will cover distributors of natural gas and other fuels.
After the announcement of the auction results, some firms said they would now be willing to invest in clean energy projects in the Golden State.
"This does make me want to invest more in California and send more of my companies there," said Robert Day, partner at Black Coral Capital, a private equity firm that focuses on the clean-tech and renewable-energy sectors.
Day said he was excited to see a viable market for pollution credits.
The program, however, has not been without controversy.
Critics have said the cap-and-trade program is unfair to large businesses and will kill jobs. On the eve of the auction, the California Chamber of Commerce filed a lawsuit to halt the sale. The group is challenging the state's authority to raise revenue from the sale of the credits.
The sale went ahead despite the lawsuit. Air Resources Board officials have said they expect the program to survive any legal challenges.
Polluters initially get 90% of their needed credits free, but they are required to buy more if they plan to release carbon dioxide and other greenhouse gases above allotted levels.
Pollution credits start at a minimum price of $10 for the right to emit 1 metric ton of greenhouse gases. Glendora cement maker CalPortland Co., for example, expects its plants in Colton and near Mojave to produce 1 million tons of greenhouse gases this year. By comparison, a typical passenger vehicle produces about 5 metric tons per year.