California, Quebec, and Ontario cemented plans Sept. 22 to launch North America’s largest carbon allowance market next year.
The agreement officially links three individual cap-and-trade programs, creating “an expanded and dynamic carbon market, which will drive down greenhouse gas emissions,” California Gov. Jerry Brown (D) said in a written statement.
Ontario’s integration with the existing California-Quebec market has been planned for some time. The agreement establishes the framework and terms for the new, larger market and outlines a process for other states and provincial governments to join the market.“The linkage expands the allowance market significantly,” California Air Resources Board spokesman Stanley Young told Bloomberg BNA in an email. “Ontario’s market is roughly 40 percent to 50 percent the size of California’s carbon market. Quebec’s is 15 percent of California’s.”
Ontario Premier Kathleen Wynne, Quebec Premier Philippe Couillard, and Brown signed the agreement at a meeting in Quebec City.
“The expanded market coverage starts to represent a meaningful fraction of overall North American carbon emissions,” Chris Busch, an analyst at Energy Innovation, a San Francisco-based energy and environment policy research company, told Bloomberg BNA in an email. “This is very important and part of a rising tide of climate change commitments in North America to counter the backsliding happening in Washington D.C.”
In a statement, Wynne said: “We are stronger together and by linking our three carbon markets we will achieve even great reductions at the lowest cost.”
Large Sources Targeted
The California Air Resources Board oversees the state’s multi-sector greenhouse gas emissions cap-and-trade program requiring oil refineries, power plants, natural gas and transportation fuel distributors, and other large sources of emissions to meet declining annual emissions caps. Covered entities comply by either reducing emissions to meet the caps or purchasing allowances, or permits. Quebec linked its cap-and-trade program with California’s in 2014.
Both the Quebec and Ontario programs are modeled after California’s. All three conform to the template the Western Climate Initiative developed to harmonize individual programs and create a regional trading system.
Each program caps emissions of large industrial sources, power and fuel suppliers and applies to the same seven greenhouse gases: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, and nitrogen trifluoride.
Linking the programs allows the exchange of carbon allowances and offset credits among participants of all three trading programs, making it easier to find trading partners and lowering overall cost of compliance, saod Erica Morehouse, an attorney at the Environmental Defense Fund, in a written statement.
A status report indicating “all systems are go” for the Jan. 1 launch will be delivered to Brown’s office Nov. 1, CARB’s Young said.