There's no gavel. It's all done on computers. On the virtual auction block? Millions of permits. Each one covers a metric ton of carbon dioxide emissions. The carbon trading system only applies to the state's biggest emitters -- think utilities. Any company that emits carbon dioxide beyond its state-imposed limit has to get permits to cover the extra.
"Another cost has been injected into the business world," says Lawrence Goldenhersh, CEO of Enviance, a software company that helps businesses track how much they emit, "and in order to remain competitive these companies need to effectively manage their carbon costs just like other costs, like inventory."
Goldenhersch says those most affected have invested heavily to track emissions, even as they've fought the law.
Patrick Pfieffer follows carbon trading for the company Eos Climate. He says the auction will help heavy-emitting businesses, "help them determine the price of carbon in their operations, and whether certain upgrades make sense now."
The California state budget assumes a billion dollars in carbon auction revenue in the next year.