Traders are not forecasting a major shift in demand for California carbon allowances (CCAs) as Quebec officially enters the cap-and-trade programme.
California and Quebec’s carbon markets linked on 1 January, but due to its small size, the consensus among traders is the entrance of Quebec would not make a significant difference to allowance prices, which were trading in the $11.85/tonne (€8.53/tCO2e) range on Thursday.
“It is hard to know how much of an impact it will have,” said an executive at an compliance entity. “It may not have an impact until they have the first compliance period (in 2015).”
Traders polled by ICIS said the impact would likely be minimal until the two can hold joint auctions, which is expected to happen in May.
Once the joint auctions go ahead, Quebec companies could bring a small increase in demand, but traders did not believe that higher demand or liquidity can reverse the oversupply of allowances in the market.
As a result, market participants said the link would not cause prices to rise substantially from the $11.34/tonne floor price.
The California’s Air Resource Board (ARB) has previously believed that the link may be the first step to a multi-state carbon policy. Dan X. McGraw