Overallocation in the California-Québec carbon market: a non-constraining cap until 2030

The Western Climate Initiative cap-and-trade program is presented as a substantial contributor to reach the climate targets set by the governments in California and Québec, by constraining emissions through declining caps. Some doubts have however been cast on the effectiveness of this program. Using a supply–demand model and published data for the third compliance period (2018–2020), we estimate five scenarios for future emissions and changes in the program’s features, and we analyse the resulting price path for compliance instruments. Our key contribution rests in the identification of the key drivers of the existing overallocation. Caps were set too high, and less emissions are actually covered compared to what is officially announced (76