At the over-the-counter market, California carbon allowances extended lower in the wake of the latest quarterly greenhouse gas allowance auction held by the Western Climate Initiative.
As of March 7, the March 2018 vintage 2018 California carbon contract was assessed in a bid-and-offer spread of $14.73/tonne to $14.83/tonne, easing 14 cents from prior assessments at the end of February. The benchmark December 2018 vintage 2018 California carbon contract was quoted in a bid-and-ask range of $15.16/tonne to $15.26/tonne, down 11 cents from previous assessments.
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Secondary market prices for California carbon allowances had already been aimed lower before the WCI auction, as participants had stepped back from buying.
In the Feb. 21 auction, the Western Climate Initiative, or WCI, which includes California, Quebec and now Ontario, saw 100% of the more than 98.0 million current vintage allowances sell at US$14.61/tonne, or 8 cents above this year's price floor of US$14.53/tonne.
Auction results, released Feb. 28 by the California Air Resources Board also showed that more than 8.5 million, or 69%, of the more than 12.4 million vintage 2021 carbon allowances were purchased at US$14.53/tonne.
Compliance entities purchased 92.1% of the current vintage allowances, which comprised vintage 2016 and vintage 2018 allowances, and bought 89% of the future vintage allowances in the February auction. Demand was strong, with the current vintage oversubscribed at a 1.21 bid-to-cover ratio.
Under the WCI, the California and Quebec cap-and-trade programs were formally joined at the start of 2014, with their first joint auction held in November 2014. Ontario became the third member of the WCI on Jan. 1, allowing the three governments to hold combined auctions under the program.
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