Climate Solutions Group

4th Ontario Cap and Trade Auction Results



Dec 2017


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.

Key Results Breakdown

Ontario Auction Results

Undersubscription of Current Vintages

  • The undersubscription of the auction was surprising to the market, with a bid-to-cover ratio of 0.826 and 4,488,369 allowances unsold.
  • This may be partly attributable to the politics in Ontario, where the PC Party has promised to dismantle Ontario’s cap and trade program by July 1st 2019.
  • The full picture, however, highlighted by market analysts, is that the Ontario carbon market is currently long by 10.6M allowances which indicates market confidence remains high.

Settlement Prices

  • As the current vintage allowances did not sell out, the settlement price was equal to the reserve (floor) price at $17.38.
  • For future vintages, the settlement price was $18.89, which is $1.51 higher than the reserve price of $17.38. This is the highest settlement price for future allowances up to date.

Bid-to-Cover Ratio

  • The high demand for future vintages is indicated by the bid-to-cover ratio of 1.45, slightly down from the previous auction of 1.53. The high demand for future vintages may indicate hedging and continued confidence in the future of the cap-and-trade program.

Future Auctions

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.

If you have any questions or want to learn more about Ontario’s cap and trade program, kindly contact me at [email protected]

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