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Calif. carbon allowance prices advance amid increased activity

Secondary market prices for California carbon allowances worked higher during the first week of the new year on more active buying following a holiday-induced slowdown during the last two weeks of 2019.

As of Jan. 7, the January 2020 vintage 2020 California carbon allowance contract was pegged in a bid-and-ask range of $17.86/tonne to $17.94/tonne, up 15 cents from Dec. 27, 2019, assessments. As of Jan. 7, the new benchmark December 2020 vintage 2020 California carbon allowance contract was seen in a bid-and-offer spread of $18.69/tonne to $18.77/tonne, rising 23 cents from Dec. 27, 2019.

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California and Quebec will hold their first quarterly allowance auction of the year Feb. 19 under the Western Climate Initiative, or WCI. The sale will offer more than 57 million current vintage and more than 8.6 million future vintage allowances for sale. An auction reserve price of $16.68/tonne will be used this year, increasing from $15.62/tonne in 2019.

In the WCI's previous sale held Nov. 19, 2019, 100% of the more than 67 million current vintage allowances cleared at $17.00/tonne, $1.38 above the 2019 floor price of $15.62/tonne but 16 cents below the August 2019 auction value. Additionally, more than 9 million future vintage 2022 allowances were sold at a clearing price of $16.80/tonne.

The California and Quebec cap-and-trade programs were joined under the WCI at the start of 2014. California's cap-and-trade system covers emissions from utility and industrial facilities that emit more than 25,000 tonnes of carbon each year and from entities that opted in to the program.