WCI market: Auction clears all 73.4m CO2 units at $12.52

Published 22:22 on August 25, 2015  /  Last updated at 23:19 on August 25, 2015  /  Americas, Canada, US  /  No Comments

Front-year vintage WCI allowances cleared at $12.52 (C$16.39) in last week’s joint California-Quebec quarterly auction, selling for 3.5% above the floor price of $12.10 and finishing firmly above the previous auction’s settlement price of $12.29 in May.

Front-year vintage WCI allowances cleared at $12.52 (C$16.39) in last week’s joint California-Quebec quarterly auction, selling for 3.5% above the floor price of $12.10 and finishing firmly above the previous auction’s settlement price of $12.29 in May.

All 73.4 million Vintage 2015 allowances on offer were purchased during the auction, which showed a bid-to-cover ratio of 1.28, according to figures provided by the two governments. Compliance buyers comprised 95.2% of the buyers, a 1.6% increase from the previous auction.

Compliance entities – specifically publicly-owned utilities – narrowed the supply of the current vintage by consigning about 1.5 million fewer allowances compared with the May auction.

California law requires the state’s investor-owned utilities to consign their entire allocation of allowances for sale in the quarterly auctions, but public utilities can immediately deposit a portion of their allotment as compliance instruments.

The sale of Vintage 2018 units met with significantly more interest than May’s undersubscribed auction, with all 10.4 million allowances clearing at $12.30 (C$16.10) on a bid-to-cover of 1.78.

Compliance buyers constituted 93.6% of the purchases, compared with 91.6% in May. Auction data also indicates the buying was concentrated among fewer entities than during the previous event.

Last week’s allowance auction was the fourth joint effort between California and Quebec and the third to include California’s transportation fuels sector.

The auction generated C$205 million in revenue for Quebec, bringing the province’s total take from the auctions up to C$755. California, which represents about 85% of market, will publish its final settlement proceeds on September 1.

Brokers contend the WCI is oversupplied and enables compliance entities to comfortably meet their needs by bidding into low-priced auctions while relying only incidentally on ICE to clean-up their positions.

Trading typically picks up on the secondary market in the period immediately following quarterly auctions as compliance buyers clean up their positions.

By Robert Mullin – news@carbon-pulse.com

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