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Changes in Cap-and-Trade System (CATS) Prices in Recent Months

Changes in cap-and-trade system (CATS) prices in recent months

Prices for emission units rose steadily throughout 2023, reaching historic highs. From the beginning to the end of 2023, a 42% appreciation was recorded on the secondary market, with prices rising from US$28.08 to nearly US$40.10. This significant increase is mainly the result of speculation related to upcoming regulatory changes in CATS regulations in Québec and California.

The auction floor price for 2024 was announced on December 1, 2023, and is US$24.04 (compared to US$22.21 for 2023). This is a 5% increase over inflation, as prescribed by CATS regulations.

Despite slight fluctuations, the upward price trend has continued in 2024, hitting a peak of US$41.90 in early February.

External macroeconomic factors (e.g., interest and inflation rates), although still present, have a reduced impact on the secondary market.

On the day of the February 14, 2024 auction, prices were around US$40.97.



On March 13, 2024, an unexpected correction of -5.85% was observed on the secondary market, leading to a price of US$35.84. The price has since stabilized. This event is thought to be linked, in part, to market fears following the March 11 legislative session in California, but also and above all to a reallocation of positions by certain major investors present on the market, among other factors. For some reporting issuers, this brief correction was also an opportunity to raise financing at a lower cost.

February 2024 auction results

The first auction of the year was held on February 14, 2024. The final sale price of emission units for the current vintage was set at US$41.76 (CAN$56.61), while the price of emission units for the future vintage was set at US$41.00 (CAN$55.58). The ratios of accepted offers to the number of units put up for sale are 172% for the current vintage and 258% for the future vintage.

These ratios indicate relatively strong market demand for emission units, particularly for the future vintage.

Detailed results are available on the Ministère de l’Environnement website (in French).

Assessment of CATS operating parameters: consultations closed

Joint consultations between Québec’s Ministère de l’Environnement, de la Lutte contre les changements climatiques, de la Faune et des Parcs (MELCCFP) and the California Air Resources Board (CARB) regarding potential adjustments to their respective CATS ended in January 2024.

The objective of this review is to ensure the long-term relevance of the cap-and-trade system, so that it remains an effective tool for achieving Québec’s 2030 greenhouse gas emission reduction target and carbon neutrality by 2050. A similar review was held in California, Québec’s partner in the Western Climate Initiative’s (WCI) carbon market.

In the second half of 2023, consultation workshops were held, facilitated by the Government of Québec alone or jointly with California. Details of all the consultations are available on the Government of Québec website (in French).

The comment period for the last workshop on greenhouse gas storage and new green energies used ended on January 16, 2024.

The proposed adjustments could affect the supply of available emission allowances, which would have an impact on joint market prices.

A draft regulation is expected in the spring of 2024 with a view to passing a regulation or another legislative instrument in the summer of 2024.