Interesting parameter is that compliance entities bought 97.0% of 2013 vintage allowances and 91.0% 2015 vintage allowances at California November 14, 2012 auction. It appears to show that speculative trading in California allowances has the potential to rise.
On November 14, 2012 California held its first auction of greenhouse gas allowances. The auction included a so-called “Current Auction” of 2013 vintage allowances and an “Advance Auction” of 2015 vintage allowances. Pursuant to auction statistics published by the California Air Resources Board (ARB) Settlement Price Per Allowance cleared at $10.09 for 2013 vintage allowances and at $10.00 for 2015 vintage allowances.
Auction Reserve Price for both sets was established at $10.00.
The proportion of total submitted bids to total 2013 allowances available for sale for 2013 vintages was 3.10 showing moderate interest in auction, however the same value for 2015 vintage allowances amounted to 0.14 only, which resulted in only 5,576,000 2015 vintage allowances being sold from the totality of 39,450,000 2015 allowances available for sale at this auction.
Moreover, Herfindahl–Hirschman Index (a measure of the concentration of allowances purchased by winning bidders relative to the total sale of current vintage allowances in the auction) shows in my opinion rather low level of concentration (the values 1133 for 2013 vintages and 1485 for 2015 vintages.
Publication of the Reserve Price for 2013
When it comes to future California auctions, 2013 Annual Auction Reserve Price Notice issued by the California Air Resources Board on December 3, 2012 specified the 2013 auction reserve price at $10.71 for allowances to be auctioned in 2013 for the quarterly auctions as part of the current auction (2013 vintage allowances) and advance auction (2016 vintage allowances).
Pursuant to the California cap-and-trade rules, beginning in 2012, and each year thereafter, the Auction Administrator announces the Auction Reserve Price for auctions to be conducted the following calendar year on the first day in December that is a business day in California. The Reserve Price is stated in U.S. dollars.
The auction administrator calculates the Auction Reserve Price taking the Auction Reserve Price for the previous calendar year increased annually by 5 percent plus the rate of inflation as measured by the most recently available twelve months of the Consumer Price Index for All Urban Consumers.
No allowances can be sold at bids lower than the auction reserve price.
It is noteworthy that Auction Platform will accept bids lower than the reserve price during the bidding window, however, bids lower than the auction reserve price will be rejected during settlement.