Québec plans cap-and-trade carbon market to link to California's

Under current legislation, Québec must reduce its greenhouse gas (GHG) emissions by 20 percent below 1990 levels by 2020.  The new government is expected at the very least to respect that goal or even increase it to 25% below 1990 emissions.

Québec's carbon market

On December 14, 2011 the Government of Québec adopted the Regulation respecting a cap-and-trade system for greenhouse gas emission allowances.   On June 8, 2012 the Government of Québec published in the Gazette officielle du Québec a draft regulation amending the Regulation respecting a cap-and-trade system for greenhouse gas emission allowances. The purpose of the amendment is to harmonize Québec’s system with California’s, as well as with those of future partners like Ontario and British Columbia. It also sets out the rules under which Québec will issue offset credits, whose purpose is to recognize GHG emission reductions by companies operating in sectors not covered by the cap-and-trade system.

To achieve its emissions reduction goal Québec plans to launch a carbon market.  The market would operate similarly to other cap-and-trade systems such as the EU's which was initiated in 2005 and Calfornia's which is scheduled to begin with its first auction tomorrow (Nov 14).  Initially,  the Québec Government will set a cap on GHG emissions for those emitters that are to be regulated.  Each year the cap will be lowered.  Each year, regulated companies will receive a free  allowance which allows them to emit a certain amount of GHG, based on their historical emissions.  Starting in 2015 the number of free units allocated to each comany site will be reduced by between 1% and 2%.  Companies whose GHG emissions are higher than the number of units allocated will have to modernize by adopting clean technologies, or else buy emission allowances at government auctions or on the carbon market.  Companies whose GHG emissions are below their allocation will be able to sell excess carbon credits on the carbon market.

Implementation

The Québec cap and trade system for GHG emission allowances will begin on January 1, 2013.  About 75 companies, primarily in the industrial and electricity sectors, whose annual GHG emissions equal or exceed an annual threshold of 25  thousand tonnes CO₂e, will be regulated under the cap-and-trade system.

Starting on January 1, 2015 businesses that distribute fuel in Québec will also be regulated.

Link to California's carbon market

The Québec Government also has said that it intends to link to California's cap-and-trade system next year.  California has not yet officially approved the link with Québec.  The addition of Québec would increase the size of the carbon market by over 20 percent, increasing liquidity and giving California and Québec businesses more opportunities to reduce emissions.