UPDATE 1-Calif. carbon permits fetch $12.22 each at auction, below expectations
expectations@ (Adds market and environmentalist reaction)
Aug 21 (Reuters) - California's largest greenhouse gas-emitting businesses paid $12.22 per metric tonne (1.1 tons) for the right to release carbon this year, lower than expected and down almost 13 percent from the previous sale in May, the state said on Wednesday.
Oil refineries, utilities and market speculators were among the companies that snatched up all 13.87 million current year permits offered at the state's fourth quarterly auction, according to the program's regulator, the California Air Resources Board.
For the first time the state also sold all future-year permits they offered. All 9.56 million allowances it offered to cover emissions in 2016 sold for $11.10 each at the auction, which was held on Aug. 16.
The weak clearing price for current year permits sent the price of California carbon allowance (CCA) futures for December delivery down 7 percent on the contract's primary exchange immediately following the release of the results.
"The result of $12.22 was lower than we expected," one trader said. "The market is trading $12.50 on the screen right now," he said.
The clearing price may have been weaker due to news that the state was planning to give manufacturers more free allowances to ease the burden of complying with the program, the trader said.
Tim O'Connor of the Environmental Defense Fund said the fact that the state sold all of the 2016 allowances it offered was a vote of confidence by the market in the long-term prospects of the program.
He noted that the majority of those permits were sold to businesses regulated by the program, not speculators.
California's cap-and-trade program is a key part of its broader effort to roll its emissions back to 1990 levels by 2020.
(Reporting by Rory Carroll; Editing by Andre Grenon and Phil Berlowitz)