On November 25, 2014, the California Air Resources Board and
Quebec's Ministry of Sustainable Development, Environment and
the Fight against Climate Change held the first joint auction of
greenhouse gas allowances since the two governments linked carbon
markets on January 1, 2014 (the Auction). The joint
Quebec-California program allows companies to trade carbon
allowances across jurisdictions to comply with greenhouse gas
emission limits. For example, a Quebec company could purchase
allowances from a certified greenhouse gas emissions reduction
project in California to comply with provincial targets, and vice
versa. Supporters of the program expect the linkage will improve
trade liquidity in both markets.
The Auction, which was oversubscribed, sold out of all
23,070,987 2014 vintage allowances for $12.10 per allowance, an
increase of $0.76 over this year's $11.34 floor price. Another
10,787,000 2017 vintage allowances also sold out at $11.86 per
allowance. Each allowance permits the release of 1 metric ton of
carbon dioxide. The vintage year refers to the year in which the
carbon reduction takes place by the certified greenhouse gas
emissions reduction project.
During the Auction, companies submit confidential bids for a
specified number of allowances. The highest bidder is awarded
permits first, then the second-highest, and so on until all
allowances for sale have been accounted for. All bidders then pay
the price of the lowest winning bidder. Proponents are optimistic
that the Quebec-California program is paving the way for a North
American market-based solution to reducing greenhouse gas
emissions, with hopes that it will serve as a model for other
provinces, states and countries in the future.
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