Quebec-California cap-and-trade auction sells out current allowances

Quebec-California cap-and-trade auction sells out current allowances

The latest Quebec-California cap-and-trade auction sold out of its current allowances, a stark improvement from the previous one in which only 18 per cent of its offerings sold.

Ontario, which started a cap-and-trade program this year, will hold its second auction on June 6.

The province, which is expected to join the Quebec-California market next year, saw strong results in the first auction — it brought in $472 million for green programs — but the Liberal government has warned of possible volatility in the carbon market.

Since 2014, the Quebec-California market has sold roughly three quarters of its credits at auction.

Ontario Environment Ministry spokesman Gary Wheeler said the results of the latest auction demonstrate that California and Quebec’s carbon market system is functioning as intended and there is high engagement in the market.

The system aimed at lowering greenhouse gas emissions puts caps on the amount of pollution companies in certain industries can emit.

If they exceed those limits, they must buy an equal number of allowances at auction or from other companies that come in under their limits.

Ontario had initially been projecting its cap-and-trade program would bring in $1.9 billion per year, but this year’s budget projected $1.8 billion for this fiscal year and $1.4 billion annually starting in the next year, an adjustment the government said was to allow for market fluctuations.

Ontario’s four-year climate change action plan is funded by cap-and-trade revenues and has planned for a range of between $5.9 billion and $8.3 billion. The money is set to go to green initiatives such as social housing retrofits, an electric vehicle incentive program and public transit.

Most large emitters in Ontario are receiving allowances for free until 2020, which the government says is meant to prevent them from moving to jurisdictions without carbon pricing.

The government is looking at a regulatory change that would lead to a “small” increase in the number of free allowances that get distributed.

Since Jan. 1, cap and trade in Ontario has added 4.3 cents per litre to the price of gasoline and about $80 a year to natural gas home heating costs, in addition to indirect costs that will be passed onto consumers.

Allison Jones, The Canadian Press

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