(Updates with reserve price information)
Carbon prices in Ontario’s cap-and-trade system will start at C$16 ($12.66) next year and soar to C$95 by the end of next decade, analysts at ICF International predicted in a report, but the scheme alone will be insufficient to help the Canadian province meet its emission reduction targets.
The latest North American regional carbon market, slated to start in Jan. 2017 and link to systems in California and Quebec under the WCI programme, is expected to cap emissions from covered sectors estimated at around 142 million tonnes and reduce them by around 4% annually.
If correct, ICF’s predicted price will be roughly in line with WCI’s auction reserve price for next year, which acts as a soft floor for the programme.
This year’s sales feature a reserve price of $12.73, which translated into C$17.64 at the last WCI allowance auction in February.
The reserve price rises annually at the inflation rate plus 5%, meaning that, as Ontario’s market is expected to over-supplied for the first few years, the analysts could be banking on a partial recovery of the Canadian dollar against its US counterpart.
ICF also estimated in its report, which was prepared for the Ontario Energy Association and reported by the Globe & Mail newspaper on Wednesday, that the province’s scheme will achieve less than half of Ontario’s goal to cut emissions by 37% below 1990 levels by 2030.
It forecasts that the scheme will only contribute to cutting GHG emissions by 15-20 million tonnes annually by 2030, leaving the province some 40 million tonnes short of its goal.
And with carbon prices forecast to be around C$20 by 2020, the analysts said it’s not expected to significantly boost efforts to meet Ontario’s 2020 goal to cut by 15%, a target it is on track to miss.
“There’s not a lot that can be really done to impact emissions between now and 2020, given that we forecast a very modest price signal in the range of $20 a tonne of CO2. It doesn’t change the energy price enough to change consumer behaviour,” ICF’s Duncan Rotherham told the paper.
The report said the province would need a broader climate policy package with extra measures, something that Environment Minister Glen Murray’s office said is in the works.
The government, which has taken flak for its plan to give away CO2 allowances for free to manufacturers during the first four years of the carbon market, is aiming to spend a portion of the scheme’s auction revenues on “strategic investments” including additional energy efficiency measures and efforts to get more electric cars on the road, the paper reported.
By Stian Reklev and Mike Szabo – firstname.lastname@example.org