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Ontario's First Cap and Trade Auction Scheduled for March 22, 2017

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Aird & Berlis article on Ontario Cap and Trade Auction, March 22, 2017On February 6, 2017, the Mondaq Business Briefing posted an article written by David Stevens, Partner with Aird & Berlis LLP, in regards to the forthcoming Ontario Cap and Trade Auction of GHG Allowances.  The full post can be viewed here; the article content is also provided for you below.

The Ontario Ministry of the Environment and Climate Change has released an Auction Notice for the Ontario Cap and Trade Program Auction of Greenhouse Gas Allowances to be held on March 22, 2017. This is the first public auction to be held. It follows a "practice auction" that was held earlier in January 2017 to help registered participants in the Cap and Trade program prepare for the official auctions.

As required by the Cap and Trade Program Regulation, the Auction Notice includes details about the upcoming auction, including:

  • Timing: The March 2017 Ontario Auction #1 is scheduled to take place on March 22, 2017 from 1:00 p.m. Eastern Time (ET) until 4:00 p.m. ET (the auction bidding window). Registered participants in the Cap and Trade program can access the online Auction Platform at that time.

  • Allowances Offered for Sale: Allowances offered during an auction are created under the Ontario Cap and Trade program. Allowances offered are for the current vintage budget year (2017) or future vintage budget year (2020), where 'vintage' refers to the year for which they are created. There will be approximately 25 million current vintage allowances offered (Current Auction), along with approximately 3 million 2020 vintage allowances (Advance Auction).

  • Auction Reserve Prices: The Auction Reserve Price is the minimum price at which allowances offered in the Current Auction and Advance Auction will be sold. Bids submitted with a bid price below the Auction Reserve Price will not be accepted. The Ontario Auction Reserve Price will be determined as the higher of the most-recently published California and Québec Annual Auction Reserve Price after applying the exchange rate established for the auction. Presently, the California Reserve Price is higher, at a value of US $13.57 (applicable to both Current and Advance Allowances). The actual Auction Reserve Prices that will apply will be displayed on the Auction Platform prior to the opening of the auction bidding window.

  • Auction Application Requirements and Instructions and Schedule: There are detailed requirements for parties to apply to participate in the auction process, and to establish the required accounts (see here). The deadline to apply to participate in the first auction is February 21, 2017.

  • Auction Procedures: Participants will be able to submit bids manually and upload bid schedules in a pre-defined Excel template in the Auction Platform during the scheduled 3-hour auction bidding window. Bidders submit bids in a single-round, sealed-bid auction format. Bid quantities can only be submitted in multiples of 1,000 allowances.

The Auction Summary Results Report will be released to the public on April 3, 2017. At the same time, the auction results will be available to qualified bidders. It will be interesting to compare the results in Ontario with the auction results seen for California and Quebec (discussed in earlier posts, here and here).

For more information in regards to Ontario's Cap and Trade Program, please contact Marnie Freer.