Shrinking Fossil Fuel Demand Could Hit California’s Cap-And-Trade Auction, Experts Say

May 2020

fossil fuel factoryUtility Dive

Amid stay-at-home policies caused by the COVID-19 pandemic, California has seen a reduced demand for fossil fuels. Energy Institute Faculty Director, Severin Borenstein, estimates that this weak demand may pose a risk to the next cap-and-trade auction.

“Whether future auctions are also impacted depends on the extent of the economic downturn, experts said. And there’s also an element of political uncertainty, according to Borenstein —​ other cap-and-trade markets, when prices stayed very low for a long time, decided to adjust the total number of allowances to try and boost the prices up. ‘I certainly wouldn’t rule that out,’ Borenstein said, adding, ‘I think that we’re going to see very weak demand, so it would not surprise me to have that happen here.'”

Photo: Kavya Balaraman,