Carbon market

Changes in CATS prices over the past three months  

The uncertain global macroeconomic outlook continues to impact carbon market emission unit prices, with prices fluctuating throughout much of September and October. Prices rose by 5% in mid-September (US$27.82) over the beginning of the month (US$26.51) and by 10% at the end of October (US$29.71) compared to the beginning of the month (US$27.11). With no particular major events impacting the market, prices continued to be influenced by external factors, mainly stock markets.

At the same time, California reiterated its desire this fall to accelerate its climate ambitions. It aims to become carbon neutral by 2045 and achieve a GHG reduction target of 48% below 1990 levels according to the latest version of its GHG reduction plan published in November 2022. This reduction plan is expected to be approved by the end of 2022 and does not include changes to the Cap & Trade system (“CATS”).
California’s announcement, coupled with a stock market contraction, resulted in minor price fluctuations on the secondary market in November.

The U.S. midterm elections also had little effect on prices in the secondary market, where uncertainty about a divided Congress and its ability to retain the gains of the U.S. Inflation Reduction Act (“IRA”) appears to have eased.

November 2022 auction results

The fourth and last auction of 2022 was held on November 16, 2022. The final sale price of emission units for the current vintage has been set at USD$26.80 (CAD$35.62), while the price of emission units for the future vintage has been set at USD$26.00 (CAD$34.55). The ratio of accepted offers to the number of units sold at the time of the sale was 180% for the units of the current vintage and 235% for units of the future vintage. These ratios indicate relatively strong market demand for emission allowances, particularly for future vintages.

Canadian government recognizes CATS as being equivalent to the federal system until 2030

At the end of November, the Government of Canada announced that it would recognize some provincial carbon pricing mechanisms as equivalent to the federal carbon pricing system (OBPS), including the Québec system. As a result, the CATS has been recognized as equivalent to the federal carbon pricing system. This recognition is valid until 2030.

Publication of a draft regulation amending the Mandatory Reporting of Certain Emissions of Contaminants into the Atmosphere (“RDOCECA”)

In order to align with certain changes to the Regulation respecting a cap-and-trade system for greenhouse gas emission allowances (“RSEPDE”), the RDOCECA draft regulation also needs to be amended.

This alignment is intended to allow issuers to register early with the CATS or extend their participation in the CATS if they wish.

Other proposed amendments include:
  • An amendment to protocol QC.30 regarding specific information to be reported for fuel distributors (in relation to the certifications that the declaration must contain, in particular those that must be signed by industrial issuers or voluntary members, and more specifically, by persons authorized to sign these declarations)
  • An amendment to protocol QC.1 regarding methods for estimating missing data
  • Greater flexibility regarding the visits required as part of a greenhouse gas reporting audit
  • An update of the greenhouse gas emission factors associated with the importation of electricity
The draft regulation is available on the Quebec government website.

The 30-day public comment period to leave comments for Ministère de l’Environnement, de la Lutte contre les Changement Climatique de la Faune et des Parcs ended on December 10, 2022. The amendments are due to come into effect on January 1, 2023.

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