On November 25, 2014, the California Air Resources Board and Quebec’s Ministry of Sustainable Development, Environment and the Fight against Climate Change held the first joint auction of greenhouse gas allowances since the two governments linked carbon markets on January 1, 2014 (the Auction). The joint Quebec-California program allows companies to trade carbon allowances across jurisdictions to comply with greenhouse gas emission limits. For example, a Quebec company could purchase allowances from a certified greenhouse gas emissions reduction project in California to comply with provincial targets, and vice versa. Supporters of the program expect the linkage will improve trade liquidity in both markets.

The Auction, which was oversubscribed, sold out of all 23,070,987 2014 vintage allowances for $12.10 per allowance, an increase of $0.76 over this year’s $11.34 floor price. Another 10,787,000 2017 vintage allowances also sold out at $11.86 per allowance. Each allowance permits the release of 1 metric ton of carbon dioxide. The vintage year refers to the year in which the carbon reduction takes place by the certified greenhouse gas emissions reduction project.

During the Auction, companies submit confidential bids for a specified number of allowances. The highest bidder is awarded permits first, then the second-highest, and so on until all allowances for sale have been accounted for. All bidders then pay the price of the lowest winning bidder. Proponents are optimistic that the Quebec-California program is paving the way for a North American market-based solution to reducing greenhouse gas emissions, with hopes that it will serve as a model for other provinces, states and countries in the future.