All Current Allowances Sold at Ontario’s Second Carbon Credit Auction

On June 14, 2017, the results from Ontario’s second Cap and Trade Program Auction of Greenhouse Gas Allowances were released. All available current allowances were sold at the June 6, 2017 auction, along with more than half of the future allowances available for sale.

The recent auction was the second time that participants in Ontario’s Cap and Trade Program were able to purchase allowances. As we reported earlier, the first auction resulted in the sale of all available 2017 credits, along with almost 1 million 2020 vintage credits. The prices paid were marginally above the Auction Reserve Price. The total proceeds from the first auction were around $472 million.

The results from the June 6, 2017 auction were even stronger than the first auction. In the second auction, all of the 25 million allowances related to the current year (2017) were sold, along with around 1.7 million 2020 vintage allowances (of the 3 million made available for purchase). The “Auction Reserve Price” (the minimum price at which allowances would be sold) was $18.30 (slightly higher than at the first auction) and the “Settlement Price” for current allowances was $18.72 (more than 3% higher than at the first auction).

As we have discussed (see here, here and here), the Ontario government plans to fund its Climate Change Action Plan with the proceeds from the sale of allowances. The proceeds from the second auction total more than $500 million, meaning that almost $1 billion has been raised from the first two auctions. The Ministry of the Environment and Climate Change news release announcing the results of the second auction emphasizes that all auction proceed (earlier forecast at around $1.8 billion per year) will be invested in programs under the Climate Change Action Plan to reduce emissions.

Ontario will hold four Cap and Trade Program Auctions of Greenhouse Gas Allowances during 2017. The next auction date has not been published, but it is expected to happen around September.