California and Quebec are hoping to hold the first joint carbon auction in November if a test in August is successful, the regulators of the two cap-and-trade programmes announced on Tuesday in a statement.
The two programmes officially linked in January, making carbon allowances fungible in either carbon market. The two programmes have held separate auction since linking.
California regulator Air Resources Board (ARB) and the Quebec Ministry of Sustainable Development, Environment and the Fight Against Climate Change said the application process will begin in the last week of July, and the bidding window for the practice auction will be open one day during the first week of August. Auction participants in either programme can take part in the test.
The auction will test the new auction platform and allow participants to get familiar with new features, the regulators said in the statement. The ARB and Quebec will evaluate the practice auction to determine whether the two entities can hold a joint auction in November, which would be the final auction before the programme expands to include fuel suppliers in 2015.
The ARB had hoped to start joint auctions in 2014 ( see EDCM 28 March 2014 ).
A source at an investor-owned utility (IOU) told ICIS last week he hoped a decision on joint auctions would come prior to the 4 June consignment deadline because it could alter its strategy on how many allowances to consign ( see EDCM 28 May 2014 ). IOUs must consign at auction the allowances they receive for free to ensure ratepayers are not impacted by the programme.
Joint auctions are regarded as an important step because they could foster additional demand. Market participants said they could also bring more liquidity to the secondary market as more California and Quebec entities look to buy allowances outside of the auctions.
Quebec entities are primarily buying carbon allowances at auctions. Dan X. McGraw