trending Market Intelligence /marketintelligence/en/news-insights/trending/b0lqpVOdUmrWvMegQ7Tppw2 content esgSubNav
In This List

Western Climate Initiative auction clears at record high price

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


Western Climate Initiative auction clears at record high price

The latest quarterly greenhouse gas allowance auction held by Western Climate Initiative, or WCI, members California and Quebec saw 100% of the 63,638,629 current vintage 2017 allowances sell at a record high of US$15.06/tonne, or $1.49 above the price floor of US$13.57/tonne and up from a clearing price of $14.75/tonne in the previous sale.

Results for the Nov. 14 auction, which were issued Nov. 21 by the California Air Resources Board, or CARB, also showed that 100% of the 9,723,500 vintage 2020 carbon allowances were purchased at US$14.76/tonne.

SNL Image

The CARB said compliance entities purchased 96.5% of the current vintage allowances and 92.3% of the future vintage allowances in the latest auction. Demand was strong, with both the current vintage and the future vintage auctions oversubscribed, with a 1.37 bid-to-cover ratio and a 1.27 bid-to-cover ratio, respectively.

In a research note preceding the release of the auction results, analysts with ClearBlue Markets said that a clearing price above $15.00/tonne would be considered bullish.

"This auction marks two milestones: it is the last official one for the 2nd California/Quebec Compliance Period and for the first time in WCI history, some of the unsold allowances of 2016 were added to the volume for sale," the analysts noted.

In addition, with a total of 79.5 million current vintage allowances for sale, this auction is the largest auction to date.

"Its result will be key to understanding future price developments," ClearBlue Markets noted.

"Furthermore, not only did the auctions clear over the current floor price of USD13.57, but well over next year's estimated floor near USD14.52," analysts with CaliforniaCarbon.info said in a Nov. 21 note. "A strong performance in the Advance Auction highlights a continued interest in securing future compliance obligations following the extension of the program to 2030."

In the WCI's August auction, 100% of the 63,887,833 current vintage allowances sold at US$14.75/tonne. Also, all of the 9,723,500 vintage 2020 carbon allowances sold at US$14.55/tonne.

For entities who qualified in the November auction, the allowances will be transferred into their accounts Dec. 13.

Under the WCI, the California and Quebec cap-and-trade programs were formally joined at the start of 2014, with their first joint sale held in November 2014. Ontario will become the third member of the WCI on Jan. 1, 2018, which will allow the three governments to hold joint auctions under the program.

In the Canadian province's most recent carbon allowance auction held Sept. 6, approximately 25.3 million 2017 allowances sold at C$18.56/tonne each, while 3.1 million 2020 allowances were sold at C$18.03/tonne apiece.

Ontario will hold its third auction on Nov. 29.

At the over-the-counter market, California carbon allowance prices advanced once again during the week ended Nov. 20.

The November 2017 vintage 2017 contract was seen in a bid-and-ask range of $15.16/tonne to $15.28/tonne, increasing 7 cents on the weekly period. As of Nov. 20, the December 2017 vintage 2017 California carbon allowance contract was eyed in a bid-and-offer spread of $15.20/tonne to $15.30/tonne, climbing 8 cents week over week.

SNL Image

SNL Image

Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power, natural gas and coal index prices, as well as forwards and futures, visit our Commodities Pages.