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Ontario carbon auction sells out

13 Jun 2017 21:16 (+01:00 GMT)
Ontario carbon auction sells out

Washington, 13 June (Argus) — Ontario sold all of the current vintage carbon allowances offered at its latest auction, continuing a strong start for the province's cap-and-trade program.

The auction, held 6 June, sold all of the nearly 25.3mn vintage 2017 allowances available and attracted greater interest from voluntary participants, according to results released today, which may indicate growing confidence in the market.

"With the primary purpose to reduce greenhouse gas emissions, Ontario's carbon market is operating successfully after its second auction," Ontario environment and climate change minister Glen Murray said.

All of the vintage 2017 allowances sold at C$18.72 ($14.16), 42¢ above the auction price floor. Companies regulated under the province's cap-and-trade program accounted for 96pc of the purchases, a slight decrease from the first auction held in March.

The vintage 2020 portion of the auction was again undersubscribed, with 54 pc of the 3.1mn future vintages purchased at a four-cent discount to the current vintages.

Nicolas Girod of the carbon market advisory firm ClearBlue Markets attributed the vintage 2020 results to a lack of familiarity with a new program. Unlike the California and Quebec carbon market, Ontario's vintage 2017 and 2020 allowances do not fall under separate compliance periods.

"At the end of the day, they are the same," Girod said.

The estimated C$504mn ($381mn) in revenue generated by the auction will go to projects in Ontario that reduce greenhouse gases, including school energy efficiency initiatives, electric vehicle charging infrastructure, and clean energy grants.

Ontario's cap-and-trade program began on 1 January and is designed to help the province reach its target of cutting GHG emissions 15pc below 1990 levels by 2020. The regulation covers facilities that emit 25,000t/yr or more of GHGs and fuel suppliers that sell more than 200 liters/yr of fuel. Murray has said the province is on track to link its cap-and-trade program with California's and Quebec's programs next year under the Western Climate Initiative.

Ontario will hold its next auction on 6 September.