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Calif. carbon allowance prices slide after latest auction

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Calif. carbon allowance prices slide after latest auction

At the over-the-counter market, prices for California carbon allowances slipped in value during the final week of November in the wake of the latest quarterly auction. As of Nov. 27, the November 2017 vintage 2017 contract was assessed in a bid-and-ask range of US$15.07/tonne to US$15.20/tonne, down 8 cents week over week.

The December 2017 vintage 2017 California carbon allowance contract was assessed in a bid-and-offer spread of US$15.10/tonne to US$15.30/tonne as of Nov. 27, easing 5 cents from the week prior. The December 2018 vintage 2018 California carbon contract was seen in a bid-and-ask range of US$15.40/tonne to US$15.68/tonne, falling 12 cents from a week ago.

SNL Image

SNL Image

Secondary market prices for California carbon allowances have stepped lower in the wake of the Western Climate Initiative, or WCI's latest quarterly carbon allowance auction. At the Nov. 14 sale, 100% of the 63,638,629 current vintage allowances sold at a record high of US$15.06/tonne, or US$1.49 above the price floor of US$13.57/tonne and up from a clearing price of US$14.75/tonne in the previous sale.

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

The board 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.

Under the WCI, the California and Quebec cap-and-trade programs were formally linked at the start of 2014, with their first joint sale held in November 2014. Ontario will formally join the WCI starting Jan. 1, 2018.

In what will be its last solo auction, Ontario will offer for sale Nov. 29 more than 25.3 million vintage 2017 allowances and more than 3.1 million vintage 2020 allowances. In it prior auction in June, Ontario sold approximately 26.9 million allowances for C$504.2 million. The province sold 25.3 million 2017 allowances at C$18.72/tonne and 1.67 million 2020 allowances for C$18.30/tonne.

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.