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Calif. carbon allowance secondary markets prices end 2018 with gains

Over-the-counter prices for California carbon allowances ended the month and the year of 2018 with gains.

As of Dec. 28, the December 2018 vintage 2018 California carbon contract ended its run in a bid-and-offer range of $15.57/tonne to $15.60/tonne, up 6 cents from the start of December. The January 2019 vintage 2019 California carbon allowance ran in a bid-and-ask spread of $15.60/tonne to $15.70/tonne.

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Activity for December 2018 vintage 2018 and future delivery contracts increased at the end of December amid the expected hike in the market floor price at the start of 2019, which is set to rise to $15.62/tonne, from $15.31/tonne this year.

Secondary market prices also advanced after the Western Climate Initiative held its last quarterly auction for 2018 in November. The auction saw 100% of the more than 78.8 million current vintage allowances sell at US$15.31/tonne a piece, up 26 cents from the August 2018 sale.

The California cap-and-trade system covers emissions from utility and industrial facilities, which emit more than 25,000 tonnes of carbon each year, and from entities that opted into the program.

Those facilities must purchase either carbon allowances or carbon offsets to account for their annual emissions under the annual emissions cap. The cap is reduced annually until the 2020 target is reached.

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Carbon allowances are sold at quarterly auctions run by the California Air Resources Board. Up to 8% of an entity's emissions can be covered using offset credits from certified projects. Carbon offset credits, as well as carbon allowances, can be purchased in the secondary market.

The California and Quebec cap-and-trade programs were joined under the WCI at the start of 2014, with their first auction taking place in November 2014. Ontario briefly became the third member of the initiative Jan. 1, 2018, but Ontario Premier Doug Ford, in June 2018, ended the province's involvement.