A joint Quebec-California cap-and-trade auction has yielded less-than-stellar results, just three weeks ahead of Ontario’s first auction and a year before the province plans to link its own system with that market.
Ontario is set to hold an auction on March 22 in its new cap-and-trade system, which limits how much pollution companies can emit.
Businesses covered under cap and trade will buy permits or allowances through quarterly government-run auctions or from other companies that come in under their limits.
The latest Quebec-California auction â€” the 10th one held since their respective carbon markets were linked on January 1, 2014 â€” saw just 18 per cent of the current allowances sold, according to results released Wednesday.
Their previous auction saw a promising upswing with 88 per cent of the available credits sold, after results before that of 35 per cent and 11 per cent.
A spokesman for the Ministry of the Environment said since 2014 about three quarters of the credits offered at auction have been sold.
“With a market system, there will be fluctuations both in price and purchasing uptake,” Gary Wheeler said in a statement.
“The most important measure of success is reductions of greenhouse gas emissions and individual auction results are not indicative of the overall strength of the market.”
Ontario hopes to raise $1.9 billion a year from its cap-and-trade system â€” $8 billion by the end of 2020 â€” and promises to spend all of it on programs that reduce emissions and help businesses and consumers adapt to a low-carbon economy.
Most large emitters will receive allowances for free until 2020, which the government says is meant to prevent them from moving to jurisdictions without carbon pricing.
Though the first auction isn’t until later this month, cap and trade has already increased the cost of gasoline by about 4.3 cents per litre and boosted the cost of natural gas home heating by up to $6.70 a month.
Auditor general Bonnie Lysyk has said households will also pay another $75 per year by 2019 in indirect costs on goods and services.
Both Lysyk and the environmental commissioner have said that Ontario’s cap-and-trade program won’t actually limit greenhouse gas emissions through to 2020 because it will often be cheaper for Ontario polluters to purchase California allowances.
Ontario businesses will pay approximately $466 million for Quebec and California allowances by the end of 2020, Lysyk predicted.
Allison Jones, The Canadian Press