Ontario’s fourth cap and trade auction, held on November 29th, 2017, sold out of future vintage allowances, and sold 82.6% of the current (2017) vintage allowances. This is the first auction where current vintage allowances have been undersubscribed, which came as a surprise to some in the market. Despite undersubscription and a drop in prices for allowances in secondary markets, confidence in the WCI carbon market remains high.
Ontario will participate in the WCI auctions with California and Quebec next year. Analysts had anticipated that Ontario would have a surplus of 1.23 million emission allowances, as there was an expectation that the auction would be fully subscribed.
In total, 4.4 million current vintage allowances were unsold and will be put in a reserve. These allowances will become available when two consecutive auctions are sold out above the floor price. The earliest possible date that will be is August 2018. Ontario will likely be a net buyer of allowances from 2018 onwards.
The proceeds from the auction are an estimated $420,516,503. If the current vintages had sold out at the price floor, the proceeds would have been higher by $78,007,853.
In total, the four auctions of Ontario have generated around $1.92 billion CAD. These proceeds will be used to further decrease GHG emissions within Ontario, based on the province’s Climate Change Action Plan.
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