The state of California, USA, is preparing to launch its greenhouse gas emissions trading system with a test run of the online allowance auction system.

The California Air Resources Board (CARB) has held a trial auction of emission allowances to enable market participants to gain experience of the trading system before its launch on 14 November 2012.

The trial also allowed CARB to discover and correct problems before the first real auction.

California enacted legislation requiring a cap-and-trade system for greenhouse gases in 2006. The law set a target of reducing greenhouse gases in the state to 1990 levels by 2020, and also requires mandatory greenhouse gas emissions reporting.

The first auction of allowances in November will involve the auctioning of 60 million allowances, each representing the right to emit one metric ton of carbon dioxide (CO2) equivalent. The scheme initially covers electric utilities and large industrial emitters, and will extend to other sectors in 2015.

The cap is set to decline initially at a rate of two per cent annually until 2014 and three per cent annually thereafter until 2020.