Demand for the California pollution permits rebounded in the latest carbon auction after plummeting earlier this year, according to an article in The OC Register. However, the permits did not sell out. Buyers purchased just 88% of available credits, whose sales are meant to supply funding for the high-speed rail project.

 

This is a huge improvement from the 35 percent sold in August and 10 percent in May. In the recent 2016 plan that was released by the authority earlier this year, they were counting on getting about $17.8 billion from the greenhouse gas fees through 2050.

 

Since 2012, California has required companies emitting climate-changing gases to buy pollution permits, which are auctioned quarterly. Demand started to soften in February of 2015, when about 95% of the available credits were sold. Experts believe the uptick this quarter was spurred by an increase in the price floor for credits next year.

 

To fulfill its legal obligation of matching about $3.5 billion in federal grants, the rail authority is relying on the greenhouse gas fees. Now, it is unclear whether the shortfall will exacerbate the cash-flow problem the authority has been experiencing.

 

Earlier this year, the Federal Railroad Administration modified one of its two grants to allow the state to spend all of its money by next year, but not match its funding until 2022. If the auction results reflect a long-term shift in greenhouse gas revenue, it would raise new concerns about the viability of building the bullet train.

 

The continued shortage means the rail authority may have to secure funding through other channels, like private funding. However, the revenue projections for the HSR are unattractive for more private infrastructure investors.

 

The project has started with state bond money and federal grants. These funding sources are only a small fraction of the capital needed to build out the system. Now with the White House and Congress in GOP hands, many worry that the federal cash will be cut off.

 

We will continue to follow this project as plans evolve, and will continue to represent property and business owners as they face eminent domain for the project. If you think your property or business may be taken for the high-speed rail project, you can learn more about your options by giving us a call at (866) EM-DOMAIN.