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Changes in Cap and Trade System (CATS) prices in recent months

The upward trend continues on the secondary market, with an average price of US$28.65 per emission unit in Q1 2023, US$30.89 in Q2 and US$35.24 in Q3 2023. On December 1, 2023, the price of emission units on the secondary market was US$38.81 (CAN$52.42), or US$16.60 (75%) above the 2023 floor price of US$22.21.  

There were no major events of note on the secondary market. Its main influencing factor was the ongoing consultation process by the governments of Québec and California on potential joint regulatory reviews. Consultations began in June 2023 and are expected to wrap up in mid-December 2023.   

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

November 2023 auction results

The final auction of 2023 was held on November 15, 2023. The final sale price of emission units for the current vintage was set at US$38.73 (CAN$53.16), while the price of emission units for the future vintage was set at US$37.40 (CAN$51.33). The ratios of accepted offers to the number of units put up for sale at the time of the auction were 165% (current vintage) and 227% (future vintage).  

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

Assessment of CATS operating parameters: ongoing consultations

Joint consultations are ongoing 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 Cap and Trade Systems.  

The objective is to ensure the long-term relevance of CATS and to make sure it remains an effective tool for achieving the 2030 target for greenhouse gas emissions reduction and ensuring carbon neutrality by 2050. A similar process is also underway in California, Québec’s partner in the Western Climate Initiative’s (WCI) carbon market.  

In the fall of 2023, two more consultation sessions were held, the first led by the Government of Québec and the second held jointly by the two jurisdictions.  

In October, the MELCCFP addressed the offset rules by surveying participants on potential changes to offset caps and their role post-2030. The documents presented are available on the Government of Québec’s website (French). The comment period closed on November 30, 2023.  

Subsequently, in November, California and Québec held joint discussions on market mechanisms, notably on the issue of reducing emission caps. California modelled reduction scenarios ranging from 40% to 55% by 2030 and Québec modelled reduction scenarios of 17 million auctioned units, both as a standalone scenario and in combination with changes to the offset program. The documents presented are available on the Government of Québec’s website (French). The comment period closed on December 15, 2023.  

A final consultation session on storing greenhouse gas (GHG) emissions and on new green energies was held in early December 2023. At the time of writing this newsletter, few details were available.  

Other elements have already been addressed by the Government of Québec, such as the publication of market data and the length of compliance periods. Details of all the consultations are available on the Government of Québec website (French).  

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

2024 auctions

The Government of Québec has released information on 2024 government auctions, including the floor price level and all four scheduled auction dates.  

The 2024 minimum auction price was set at US$24.04. The first auction of the year will be held on February 14, 2024.