Tweaking the market will help, but so will recognizing its limits.
After California’s May allowance auction settled at the minimum price and generated almost no revenues for the state, the long knives are again out in Sacramento for the state’s cap and trade program. What’s the point of a carbon market, some are asking, if price and revenue volatility make planning nearly impossible?
The disappointing auction has caused proposals for stabilizing the market price – such as those from the Independent Emissions Market Advisory Committee (IEMAC) in its 2019 report – to be taken more seriously, as they should be. But the tweaks suggested by the IEMAC and others aren’t likely to live up to the expectations of policymakers. That’s not because the proposed changes