Quarterly update for the price forecast

This quarterly price forecast update represents Veyt’s CCA allowance price trajectory out to 2045 based on our view on supply (availability of allowances) and demand (GHG emissions covered under the California-Quebec joint program). Since the last update, we have made slight adjustments to the internal functionality of the price forecasting model and revised regulatory timelines for supply changes.

Uncertainty ahead

Despite the repeal of federal-level climate initiatives and growing macroeconomic uncertainty from the evolving tariff situation, we still maintain the Supply Option 1: successful policy adherence scenario as the Veyt base case. Despite the Trump administration’s efforts to scrap federal climate initiatives via executive orders, it is too early to discount all federal subsidies, grants, and tax incentives when modelling sectoral decarbonization in the California ETS. So far, Trump has signed executive orders that repeal federal EV subsidies and halt the approval or new wind projects. The majority-Republican congress is also now reviewing the Inflation Reduction Act (IRA), the law from which many of these clean technology subsidies originate.

It is too early to incorporate the potential implications stemming from the Trump administration’s global tariffs into the quarter 2 update – particularly those on Canadian power imports and the automotive industry. The tariffs, nevertheless, could reduce the supply of clean electricity from Quebec into many RGGI member states, slow the EV transition, and increase inflation.

Although the delays from CARB on the ETS reform process persist, the agency has reiterated their efforts to complete the reform process this year. At this point in time, it is still premature to assume that a 2026 implementation of the updated supply caps is no longer feasible. Regulators have until October to finalize the updates to the ETS before having to send out the 2026 pre-allocation quantities to compliance entities. This still leaves a window of opportunity for CARB to release the Initial Statement of Reasons (ISOR), completed a 45 day public feedback period, and published its Final Regulation Order before October.

The uncertainty instilled in the market from the executive order, “Protecting American Energy from State Overreach”, has led to an 11% decrease CCA prices in recent weeks. Despite the threat the order imposes to the California ETS, the likelihood the Trump administration successfully ends the program is unlikely. More on how the Trump administration’s pro-tariff, anti-climate agenda may impact the cap-and-trade system can be found .

Reform process delays become more profound

The regulatory process underway in California and Quebec aimed at updating the joint ETS has faced a series of delays over the past year. The first iteration of our price forecast incorporated the two supply scenarios under consideration by the California Air Resources Board (CARB) as well as the reduction pathway being considered by Quebec – details on the proposed supply reductions can be found .

Prior to the quarterly update, our internal forecasting model ran on the assumption that the program is successfully extended beyond 2030 before a hard stop in 2045. The 2045 end date reflected California’s net-zero target for that year. Our update maintains the assumption that the program is successfully extended, but now additionally assumes that California and Quebec will maintain a cap on emissions in the years following its 2045 target. Extending the functionality of the model to run beyond 2045 allows us to produce more accurate long-term market hedging behavior which then influences a smoother allowance price progression in the final years of the forecast.

Prices near USD 300/t by 2045 if EV targets are not met

The updates incorporated into the model result in the CCA allowance price reaching USD 42.00/t by 2030 in our base case scenario – down 6% from our initial forecast. In the long term, allowance prices reach USD 61.00/t by 2035 and USD 110/t in 2045 – up 3% and 9% from the previous iteration, respectively.

In our Supply Option 2: successful policy adherence scenario, allowance prices follow a similar pattern in the short term– reaching USD 48.00/t in 2030 (down 5%) and USD 65/t in 2035 (up 3%). The changes in price begin to become apparent in the long term, with allowance prices reaching USD 106/t in 2045, down 21% from the previous update.

The deltas in the updated allowance prices are more profound in the scenarios where the electric vehicle (EV) sales targets for 2035 are not met and the gas boiler ban from 2030 is not adhered to. In both scenarios, the updated allowance prices are higher than the previous iteration in every year. For Supply Option 1, the CCA allowance price increased by 16% in 2035 and 34% in 2045, to USD 129/t and USD 280/t, respectively.

The wider deltas in the later years of the forecast in these scenarios is due to the change in hedging behavior with the assumption that a cap on emissions is maintained following the net-zero target. The higher levels of emissions that result from a slower rate of decarbonization, an ambitious GHG reduction target for 2045, and a presumed reduction target post-2045 increases demand more profoundly towards the end of the forecast.