California and Quebec confirmed on Tuesday the reserve price for next year’s WCI quarterly auctions will be $12.73/t (C$12.82), up from $12.10 this year.

Market participants have long anticipated next year’s reserve price as WCI rules require the value to increase by 5% plus the rate of inflation each year.

However based on the values, polluting in Quebec will be notably cheaper than in California next year, as the current USD/CAD exchange rate is significantly different from the historical one used (1.09%) for Tuesday’s price conversion.

Using today’s exchange rate of $1=C$1.3358, it would mean Quebec’s auctions should have a reserve price of C$17.01 – translating into a 25% discount compared to California.

The states will jointly auction 280.1 million 2016 vintage allowances and 40.3 million 2018 vintage allowances across the four 2016 sales, the governments said in a statement.

The sales will be held on Feb. 17, May 18, Aug. 16, and Nov. 15.

Separately, California set out the parameters governing its 2016 price containment reserve sales, which acts as a safety value if allowance prices increase by too much.

The sales are to be held roughly six weeks after the joint auctions, and offer three tranches of 40.6 million units at prices ranging between $47.54 and $59.43.

No price containment reserve sales have taken place to date due to no bidders showing interest.

By Ben Garside – ben@carbon-pulse.com