OVERSUPPLY GROWS IN THE WESTERN CLIMATE INITIATIVE CARBON MARKET

The report finds that the Western Climate Initiative (WCI) carbon market, comprising California, Quebec, and Ontario, is experiencing significant oversupply. This surplus, estimated at 270 million metric tons (MMT) through 2020, is driven by economic factors, renewable energy innovation, and the 2009 recession. Because allowances can be banked, this oversupply threatens to undermine the 2030 climate targets by effectively raising future emission caps. The author recommends that WCI jurisdictions adjust future caps downward by an amount equal to the privately held allowances banked by the end of 2020, citing the success of the Regional Greenhouse Gas Initiative (RGGI) in using a similar approach.

• The combined WCI market is estimated to have a cumulative oversupply of 270 million metric tons (MMT) through 2020, with an uncertainty range between 200 and 340 MMT.
• Oversupply was caused by a combination of the 2009 recession, policy-driven decarbonization in the electricity sector, and renewable energy innovations.
• Banked allowances resulting from oversupply could effectively increase WCI caps by 35% between 2021 and 2030, potentially negating cap reductions until 2025 or 2026.
• For California, the oversupply risks the success of the 2030 strategy, as cap-and-trade is the primary driver of reductions, accounting for 38% or more of the reductions in the 2017 Scoping Plan.
• New rules under Assembly Bill 398 (AB 398) will divert approximately 40-42 MMT of California allowances that remained unsold for more than 24 months into the Allowance Price Containment Reserve (APCR).
• The report recommends adjusting 2021-2030 caps downward by the total amount of 2020 and earlier vintage allowances held privately after the 2020 compliance period.
• The proposed cap adjustment strategy was previously implemented in 2014 by the Regional Greenhouse Gas Initiative (RGGI), which lowered caps by 140 MMT to address excess allowances.
• The Allowance Price Containment Reserve (APCR) is unlikely to be triggered before 2020 because current prices are far below the first tier trigger price of $50.69 per allowance.

APA

Busch, C. (2017). OVERSUPPLY GROWS IN THE WESTERN CLIMATE INITIATIVE CARBON MARKET. Energy Innovation. https://energyinnovation.org/wp-content/uploads/WCI-oversupply-grows-February-update.pdf

Chicago

Busch, Chris. OVERSUPPLY GROWS IN THE WESTERN CLIMATE INITIATIVE CARBON MARKET. Energy Innovation, 2017. https://energyinnovation.org/wp-content/uploads/WCI-oversupply-grows-February-update.pdf.

Wikipedia

{{cite report |last1=Busch |first1=Chris |title=OVERSUPPLY GROWS IN THE WESTERN CLIMATE INITIATIVE CARBON MARKET |publisher=Energy Innovation |date=December 2017 |url=https://energyinnovation.org/wp-content/uploads/WCI-oversupply-grows-February-update.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{busch2017oversupply, author = {Busch, Chris}, title = {{OVERSUPPLY GROWS IN THE WESTERN CLIMATE INITIATIVE CARBON MARKET}}, institution = {Energy Innovation}, year = {2017}, month = dec, url = {https://energyinnovation.org/wp-content/uploads/WCI-oversupply-grows-February-update.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }