Once upon a time, an international agreement forged through the United Nations Framework Convention on Climate Change (UNFCCC) seemed the surest route to meaningful action on climate change. But the complexities of reaching common ground between nearly 200 distinct national agendas have dimmed the hopes for the sort of “global deal” envisioned in the run-up to the Copenhagen conference in 2009. The UN process has provided a platform for countries to make new emission reduction commitments: Mexico recently announced a promising post-2020 climate commitment, and the US-China announcement last November was a game-changer. Even these critical breakthroughs, however, demonstrate that strong action on climate will be driven from the “bottom up” by national policies, not from the “top down” by an international treaty.
Thankfully, many leaders are blazing a path towards climate progress, working from the ground up and collaborating with others to foster collective action. As I have previously written, cities, states, and provinces are going ahead with some of the most substantial climate commitments to date. Ontario – Canada’s largest province, with 40 percent of the country’s population and nearly one-quarter of its greenhouse gas emissions – has become the latest jurisdiction to chart an ambitious path forward with this morning’s announcement of a comprehensive cap-and-trade program intended to ultimately link with the existing California-Quebec system.
Ontario’s announcement is significant for a number of reasons. First, cap-and-trade will help Ontario meet bold 2020 and 2050 goals for cutting greenhouse gas pollution, which stand at 15 percent below and 80 percent below 1990 levels, respectively. Second, the news is a compelling curtain raiser for the high-profile Premiers Climate Change Summit in Quebec City, which begins on Tuesday and is meant to showcase opportunities for provinces to take individual and collective climate action. Finally, Ontario is poised to build on and leverage cap-and-trade successes from elsewhere, most notably California, where the two-year old program has helped cut pollution and grow the economy. Read More
Bigger is not always better, but a recent cap-and-trade auction in Quebec gave us one example of why it may be the case for a combined California and Quebec carbon market.
The linkage of Quebec and California’s markets has been watched by many around the world, and the start of joint auctions in November 2014 is the final step in full linkage. Last month, however, both jurisdictions were busy conducting their last solo auctions. While the results of the California-only auction were as anticipated, the Quebec-only auction yielded both expected and less expected results.
What was not a surprise was that not all (83%) allowances offered for sale were purchased. Unlike in the California program, Quebec entities do not have to surrender any allowances this coming November. With their first deadline not until November 2015, Quebec entities have been understandably slow to enter and be active in the market. Another positive and not so surprising takeaway from Quebec’s last auction is high demand for 2017 allowances, a strong sign that Quebec companies are confident in this market’s future health.
More surprising to observers in Quebec’s recent auction, however, was that a higher percentage of 2017 vintage allowances sold than 2014 vintage allowances. Current 2014 vintage allowances can be used for compliance at any time, while 2017 vintage allowances can only be used starting in 2017. This longer useful life should make 2014 allowances more valuable and thus in higher demand, but this did not appear to be the case in the recent auction. Read More
For many people across the country, August is the last opportunity to enjoy the final bits of summer relaxation before fall sets in and the weather turns colder. While many people are away on vacation, the California Air Resources Board (CARB) and Ministry of Sustainable Development, Environment and the Fight against Climate Change (MDDELCC) of Quebec have been hard at work.
During the first week of this month, the two regulatory bodies held a practice joint auction for interested stakeholders to prepare for California and Quebec to officially join their quarterly auctions in November. A week and a half later, this past Monday, CARB held a California-only auction, the results of which were released today. Next week, MDDLECC will hold a Quebec-only auction, and finish out a very busy month for these linked cap-and-trade programs.
Amidst this flurry of activity, the results of California’s eighth quarterly auction, released today, show that the carbon market remains steady and strong. For the eighth time in a row, all current 2014 vintage allowances offered for sale were purchased. Current allowances sold at the same price as the last auction, $11.50, and 3.15 million more bids were placed than could be filled, reflecting healthy competition for credits. More 2014 vintage allowances were offered in this auction than in both of the previous auctions this year. This uptick in volume was due to the fact that a greater number of utility-owned allowances were turned over to CARB to be sold in this auction as compared to the previous two. 71 entities registered for this auction, which is similar to registration in previous auctions. This implies that there is sustained interest in the market and suggests that covered entities are actively planning how they will comply with the regulation. Read More
It’s been an invigorating few days for anyone looking for meaningful action to combat climate change, and especially for those following California’s global leadership in those efforts.
As a delegate to Governor Jerry Brown’s Trade and Investment Mission to Mexico, I witnessed first-hand California and Mexico sign a Memorandum of Understanding and formally agree to work together on a range of actions to address climate change.
The agreement between Governor Brown and representatives of Mexico’s Ministry of Environment and Natural Resources (SEMARNAT) and Mexico’s National Forestry Commission lays out areas where California and Mexico agree to cooperate and coordinate efforts on addressing climate change, including:
- Pricing carbon pollution
- Increasing renewable energy use and development
- Addressing short-term climate pollutants
- Cleaning up the transportation sector
- Reducing emissions from deforestation and forest degradation
A Joint Vision for Low-Carbon Prosperity
It makes perfect sense that Mexico is California’s latest climate change and clean energy ally. After all, the relationship between the two jurisdictions runs deep. Mexico is California’s largest trading partner, and our cultures and economic interests have undoubtedly been entwined throughout history. Both have much at stake with climate change, and this latest collaboration embraces a shared environmental vision which recognizes that a low-carbon future goes hand-in-hand with economic prosperity. Read More
A crucial feature of the U.S. EPA’s groundbreaking new Clean Power Plan for existing power plants is the flexibility with which states can pick and choose the emission reduction measures that work best for them. Instead of prescribing a silver bullet solution across all fifty states, the new rule allows each state to tailor its policies, resulting in the most cost-effective solution to climate change.
According to EPA Administrator Gina McCarthy, this flexibility can mean collaborating with others in joint programs: “If states don’t want to go it alone, they can hang out with other states and join up with a multi-state market based program, or make new ones.”
For states thinking about cross-border collaborations to comply with the new rule, they can find a promising example in California.
In an announcement today, the California Air Resources Board (CARB) and the Ministry of Sustainable Development, Environment and the Fight against Climate Change (MDDLECC) of Quebec revealed that the two markets are taking the final step in linking their markets with the initiation of joint auctions. The first will be held in November, following a practice auction to be held in August. The practice auction will allow the program regulators, as well as auction participants, to get comfortable with the updated joint auction platform.
Not only is the Golden State leading the way in transitioning to a low-carbon economy ahead of EPA’s recently-announced power plant standards, but California is forging ahead to show that working across state lines on climate policies is possible – and can be productive. Read More
On Tuesday, the Canadian province of Quebec held its second cap-and-trade allowance auction.
Today, the results are in – and they’re encouraging.
99% of the current vintage year allowances and 84% of the future vintage year allowances offered for sale in this auction were purchased at the floor price of $11.39 CAD. This is a significant increase from Quebec’s first action, which saw the sale of only 34% and 27% of current and future allowances, respectively.
These results reflect growing interest and demand in this burgeoning carbon market after it officially linked with California’s program at the beginning of 2014.
However, the results of Quebec’s auction are a bit different from the results we saw in California's sixth auction last month. Most notably, California’s auction saw higher demand for allowances, driving the settlement prices for both current and future allowances above those seen in Quebec’s auction.
So, why do these differences exist? And what do the Quebec auctions actually tell us? Read More