AB 32 Cap-And-Trade Auction Tax

An auction tax is one of the proposed methods for allocating permits to California companies and public agencies subject to the AB 32 cap-and-trade program under preparation by the California Air Resources Board.

Thomas Tanton, Principal of T2 & Associates and Senior Fellow with Pacific Research Institute (Cal Watchdog’s parent institute), was hired by the AB 32 Implementation Group to undertake an analysis of the economic impacts of an AB 32 cap-and trade auction tax on California.

In an auction system for allocating Greenhouse Gas (GHG) permits, CARB would hold an auction between cap-and-trade participants to determine the price of emission permits.  Entities would then have to purchase permits equal to every ton of GHG emissions they generate.  In practice, these auction costs on companies and agencies would function much like a direct tax because, in order to operate, they would be required to purchase these permits.

Tanton offers a few examples of what individual companies and public agencies would have to pay under a cap-and-trade program using 100% auctions at a price of $60 per ton:

  • A California winery would pay $2.6 million a year for these AB 32 Auction Taxes or more than $26 million over ten years.
  • The Los Angeles Department of Water and Power would pay $246 million a year for its electricity generation facilities in California alone.
  • UCLA would pay nearly $11 million a year in AB 32 auction taxes.

Tanton explained the impact of the economic impact of AB 32 includes, but is not limited to:

An annual effective cost increase to the typical family of four to be $818 the first year growing to $2800 in 2020, if market clearing prices for permits are $60 dollars per ton. Those figures are $270 and $930 if permit prices are at $20 and as much as $2720 to over $9330 per family if prices clear at $200 per ton. Costs increase for most goods and services. These cost increases are average for the population, although some residents may be compensated through a partial return of auction revenues.

Annual job losses to the California Economy of 76,000 to 107,000 the first year growing to perhaps 485,000 jobs in 2020, assuming a market clearing price of $60 per ton. These are net jobs losses, accounting for lost jobs and for jobs created by redirecting revenues collected from the auctions.

Lost economic activity of nearly 2% of gross state product, or about $250 to 350 billion over ten years. Much of this derives from reductions in productivity across the economy, and negative trade implications due to reduced competitiveness.

The intended and unintended consequences from AB 32 are going to be staggering and far reaching. No business, family or individual will be untouched, and most will crumble under the impossible regulations and costs.

Review Study documents here.

Read the Poll here.

for all information about AB 32: http://www.ab32ig.com/

Katy Grimes

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