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Carbon price impact from Ontario cap-and-trade entry seen limited
September 29, 2016 / 8:16 PM / in a year

Carbon price impact from Ontario cap-and-trade entry seen limited

TORONTO, Sept 29 (Reuters) - Bargain-basement prices for carbon emissions in the cap-and-trade market shared by California and Quebec are unlikely to get much of a lift from Ontario’s pending inclusion in the plan, policymakers for the three jurisdictions said on Thursday.

California posted disappointing results last month from an auction of carbon permits under the plan - permission notes to emit heat-trapping greenhouse gases against a slowing shrinking quota. Critics have said the program suffers from a glut of permits.

The province of Ontario, Canada’s industrial powerhouse, will run its first auction of carbon permits next March and expects to be fully incorporated in the scheme 12 months from now.

“We think adding in Ontario will ... reinvigorate the market to a certain extent,” said Matt Rodriquez, California’s secretary for environmental protection.

“There will be new buyers out there, but we don’t expect to see a tremendous change in where the prices are currently.”

Quebec Environment Minister David Heurtel, commenting on low market prices, said: “A market is always going to have ups and downs, it’s cyclical.”

Rodriquez said he expected the two Canadian provinces to follow California’s lead in removing credits unsold at auction until there is clear evidence of excess demand, which he said set the largest North American carbon market apart from its European Union counterpart.

Ontario Environment Minister Glen Murray said the province would likely need to run two to four auctions before it could officially join the market.

Ontario expects to raise C$478 million ($364 million) from its auctions in fiscal 2016-17, rising to C$1.8 billion to C$1.9 billion a year from 2017-18.

But Murray said collecting revenue - which will be directed into other green government plans - was not the main aim of the scheme.

“Our goal isn’t to get the highest price,” Murray said. “Our goal is to get the most affordable and successful transition to a low carbon economy.”

Ontario’s Liberal government says it is taking steps to prevent companies, including 75 percent of Canada’s heavy industry, from leaving the province for less onerous jurisdictions. It is giving away for free all the allowances mandatory industrial and institutional participants will need until 2020.

Ontario’s inclusion will expand the cap-and-trade market by about 30 percent, or 140 million tonnes of emissions in 2017. Quebec will contribute just over 60 million next year, with about 400 million from California.

$1 = 1.3147 Canadian dollars Editing by Peter Cooney

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