California-Quebec carbon auction clears at floor price for first time since 2020

The California-Quebec joint cap-and-trade program's Q2 2025 auction cleared at the floor price, California Air Resources Board data showed May 29, as the program faces legal and regulatory challenges.

Auction 43 saw a settlement price of $25.87 per allowance, the price floor for this year. This clearing price is the lowest since Q3 2021 and represents a 12% drop from Q1 and a 30% drop year over year.

The last time an auction cleared at the minimum price was August 2020, according to CARB data.

Platts, part of S&P Global Commodity Insights, assessed California carbon allowance current-month strip costs on the secondary market at $25.99/alw the day auction results were released.

Not all the offered 51 million current-year vintage 2025 allowances were sold in the auction, with just 43.8 million being sold.

Allowances owned by California that remain unsold for more than two years are transferred to the Allowance Price Containment Reserve for use when an auction settles at the price ceiling.

The low clearing price and declining auction participation showed an "unconfident market," Commodity Insights analysts Aldo Muller and Matt Williams said in the latest North American Emissions Bulletin.

"President Trump's April 8 executive order and further lack of regulatory movement from California has clearly had a greater impact on the market than we previously thought," the analysts said.

All of the 6.8 million advance auction of vintage 2028 allowances were sold. The advance auction cleared at $26.15/alw.

Compliance entities won 81% of allowances in the current-year vintage auction and 70% of allowances in the advance auction.

Background

The previous auction in Q1 also cleared at multiyear lows, the first time in the history of the program that the Q1 auction settled lower than the preceding Q4 auction.

Allowance prices have been deflated so far in 2025 due to various regulatory delays, US tariff announcements, and an executive order taking aim at the cap-and-trade program. Secondary market prices in April dropped to the lowest levels since Platts started assessments in 2022, then rallied slightly in early May before dropping again.

California legislators are working on a plan for the cap-and-trade program amid a tight budgeting process and legal challenges from the Trump administration. California Governor Gavin Newsom's May budget proposal includes moving $1.54 billion from the state's general fund to the Greenhouse Gas Reduction Fund and reauthorizing the program to continue until 2045.

Newsom proposed creating a budget cushion for cap-and-trade in case auction proceeds fall below projected revenues.