Nuclear woes raise concerns that prices will rise for carbon allowances

San Onofre Nuclear Plant
San Onofre sits on the coast north of San Diego

Layoffs and the shutdown of a California nuclear power plant have raised concerns that the price of carbon emission allowances for the state’s cap-and-trade program will increase sharply. Southern California Edison (SCE) announced that it will lay off 730 employees this year to cut costs at the San Onofre nuclear power plant in Southern California. The plant has been idle since Jan. 31, when a radiation leak in one of the plant’s two units was discovered.

On Tuesday, futures for California Carbon Allowances (CCAs) traded between $17.50 and $17.75, up from the week before. “San Onofre is the big wild card in the CCA market right now,” said Jeff King, managing director of environmental markets at Scotiabank.

San Onofre typically supplies 8 percent of the state’s electricity. Its closure has led SCE and the state’s grid operators to fire up older, natural gas-powered generation facilities that emit more carbon dioxide than that of the carbon-free nuclear facility.

SCE is the largest utility in California and has the biggest compliance obligation under the state’s cap-and-trade program. California will hold its first allowance auction in November.