Ontario’s third Cap and Trade Auction, held on September 6th, completely sold out for both current (2017) vintage and future (2020) vintage emission allowances. The previous two auctions sold out of current vintage allowances as well so Ontario’s cap and trade auctions are off to a healthy start.
The previous two auctions did not sell out of future vintage allowances. In the second auction, 53.7% of future vintage allowances sold, which is more than double the amount that sold in the first auction (26%). The steady uptake of future vintage allowance purchases shows that Ontario emitters are increasingly active. This may be a result of the increased regulatory certainty of the California cap and trade program, as well as the strong demand for future vintage allowances in the previous California-Quebec joint auction.
The proceeds, estimated at$525,694,672, adds to the $976,213,345 raised in the first two auctions. These proceeds will be invested in Ontario to help businesses and families reduce GHG emissions through various initiatives outlined in Ontario’s Climate Change Action Plan. So far the government has invested the proceeds in programs including rebates for homes and businesses, building retrofits, support for municipal climate change action programs, and commercializing low-carbon technologies.
Ontario’s next auction is schedule for November 29, 2017. Based on the Ontario Government’s revenue expectations, the trend of over-subscription should continue. Additionally, as regulated emitters attempt to fill their annual compliance goals within Ontario’s tight cap, strong demand should also drive a strong final 2017 auction for both current and future vintages.
The last three auctions have demonstrated the robustness of the Ontario Cap and Trade Program. The trend of oversubscription of current allowances show that regulated entities are on board with the program. The growth in demand for future vintage allowances specifically shows an increasing demand for emission allowance volume.
This year’s auctions should demonstrate the regulatory success of cap-and-trade to stakeholders as Ontario finalizes its linkage with California and Quebec in the Western Climate Initiative (WCI).
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