Start of a new compliance period for the C&T System

The new 2021–2023 compliance period for the Cap and Trade System (C&T) applicable in Québec began on January 1, 2021. Over the past three months, the price of emission units on the market has increased by US$0.49 (+2.8%), from US$17.33 on October 19, 2020, to US$17.82 on January 19, 2021. The rise in prices can mainly be explained by:
  • the floor price increase for 2021 (now at CAN$17.36 in Québec and US$17.71 in California);
  • the result of the U.S. elections perceived as favourable to environmental policies, as well as the recent victory of two Democratic senators in Georgia, fostering positive sentiment for the carbon market in California;
  • the activity of speculators, who are always present in the market.
Prices nevertheless remain close to the floor price, hampered mainly by the uncertainty and the economic slowdown caused by the second wave of COVID-19 in California and Québec. That said, the pandemic’s effect on carbon market prices is much more moderate than that observed in the first wave.

WCI market new

On December 23, 2020, the U.S. Department of Justice asked an appellate court to overturn decisions made earlier in the year that concluded that the linkage between the California and Québec C&T markets didn’t violate the U.S. Constitution. However, on January 4, 2021, the Federal Court granted WCI Inc. and the state of California a filing extension, pushing the timeline of the case well into President-elect Joe Biden’s tenure. It’s expected that this legal action will be withdrawn in the coming months.