Understanding California’s cap and trade auction results

November 20, 2012

When assessing the nation’s first cap-and-trade carbon auction—whereby major polluters bid on permits to continue polluting—it’s no small task to interpret the results. Such was the challenge faced by observers of California’s cap-and-trade auction (held November 14th) after results were announced by the California Air Resources Board yesterday.

The numbers—without context—don’t tell much of a story. 23+ million allowances for 2013 were offered for sale, and all of them sold. The price per ton of carbon for 2013 allowances was $10.09, and for 2015 allowances was $10.00 – the auction reserve price. $39 million 2015 allowances were offered for sale, and $5.5 million were sold.

But what does it all mean?

Well, a lot, it turns out. Blog posts published quickly after the auction announcement by Huffington Post, Natural Resources Defense Council and Environmental Defense Fund highlighted the auction’s success and indicated the low price per ton of carbon is proof that reducing greenhouse gas emissions can be done much more cheaply than major polluters had anticipated.

Many mainstream news articles—including this one from the Sacramento Bee—highlighted the fact that every single allowance for 2013 sold out, with 97 percent going to the industrial polluters that need them to comply with California’s new carbon emission limits. A San Francisco Chronicle article titled “State’s 1st carbon auction goes smoothly,” noted the high volume of bids, suggesting it provides evidence that major polluters are taking the auction seriously.

The flurry of blog and news coverage and online pontification following the auction highlights a central truth of strategic communications—and one that drives policy experts, scientists and many others to distraction: Facts, by themselves, are meaningless. The trick is defining what it all means. Is a low carbon price a good thing or bad thing? Was selling all of the 2013 allowances a sign of the auction’s success? Was failing to sell more of the 2015 allowances evidence of failure?

Those seeking to tell the story of the auction sought to put the numbers into a context – a frame of reference—to help people interpret and understand the results. And to do so, they used simple anecdotes and stories and turned to people with credibility and a unique insight into the issue to explain what the auction meant.

For example, this radio story published by Public News Service this morning featured Mike Hart with Sierra Energy, a company that transforms waste and trash into syngas (a mixture of carbon monoxide and hydrogen), which can be used to generate electricity or produce transportation fuel, thereby creating some of the carbon credits big polluters can buy to offset their pollution. Hart was able to put a human face on an abstract concept, helping listeners understand how the cap-and-trade program will support clean energy development in California. The story also featured Dallas Burtraw, one of the nation’s foremost experts on carbon markets, whose considerable credibility lent weight to the general assessment that the auction was a success.

It’s always a struggle to help lay audiences understand complex scientific and technical issues. Coverage of California’s cap-and-trade auction underscores a few techniques to make data mean something. Get ahead of the story—as NRDC and EDF did with their early blog posts—when trying to influence how data are interpreted. Use simple anecdotes to help people understand what facts and figures mean. And, perhaps most importantly, put a human face on abstract concepts by featuring people with compelling, personal stories to tell.

Amy Frykman