First Ontario Carbon Allowances Trade on ICE

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Article courtesy of Carbon Pulse – click logo for similar stories

Exchange operator ICE saw its first Ontario Carbon Allowance (OCA) trades on Feb. 1, it told Carbon Pulse, with six deals done on the day.

All six trades were on the vintage 2017 (V2017) futures for Dec-17 delivery – the only OCA contract available on ICE – and were for 5 lots, or 5,000 tonnes, each.

Five of the trades went through at C$18.05/tonne ($13.83), while one was done at C$18.04, an ICE spokesman said.

ICE declined to provide further info including the identity of the counterparties, but US-headquartered offset project developer ClimeCo Corporation later said it was involved in the first trade, which went through at C$18.05.  The company did not indicate what side of the transaction it was on.

“ClimeCo is excited to have been a part of it … We seize on every opportunity to take a pioneering role [and] we believe our clients benefit from our experience,” the company in a Feb. 8 press release.

A trader said the first OCA trade prices marked a slight premium on the equivalent California Carbon Allowance (CCA) contract on ICE.

Atlanta-headquartered ICE launched trade in OCAs on Jan. 30 but saw no activity during the first two days.

The V2017 Dec-17 OCA futures settled at C$18.00 on Jan. 30 and C$17.95 on Jan. 31 – roughly in line with CCA prices.

Traders have reported a significantly wider bid/offer spread on the OCAs compared to CCAs, which is due to the larger number of participants in the more liquid California market.

Ontario launched its cap-and-trade scheme on Jan. 1 and the government will hold its first OCA auction on Mar. 22 following a practice sale last month.

The Canadian province is looking to formally link its market to those in California and Quebec under the WCI programme in the first half of 2018.

ICE currently offers trade only in V2017 Dec-17 OCA futures, compared to a suite of vintages and monthly and quarterly deliveries in its CCA futures.

No exchange-based contracts are currently offered for the Quebec cap-and-trade programme, meaning participants in that market rely on ICE’s CCA futures or off-exchange/OTC trade for buying or selling units.

By Mike Szabo – mike@carbon-pulse.com

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