The Carbon Market

For Québec, establishing a cap and trade system for greenhouse gas (GHG) emission rights will pave the way toward achieving Québec’s GHG reduction target of 20% below 1990 levels by 2020.

Québec joined the Western Climate Initiative (WCI) in April 2008. The WCI is a group of American states and Canadian provinces that have decided to adopt a common approach to addressing climate change, in particular by developing and implementing a North American system for capping and trading GHG emission rights.

What is a GHG emissions cap and trade system?

The government sets a cap on GHG emissions for all regulated emitters. This cap will be lowered as the years go by.

Each year, those companies will receive from the government a free allocation of emission rights (also called “allowances”) corresponding to the amount of GHGs they may emit, based on their historical emissions and level of production.

Going further, the number of free units allocated to companies per unit of production will diminish by around 1% to 2% starting in 2015.

Companies whose GHG emissions are greater than the number of units allocated will have to modernize by adopting clean technologies, or else buy emission rights at government auctions or on the carbon market.

As for companies whose GHG emissions are less than their allocation, they will be able to sell their excess carbon credits to other companies on the carbon market.

Unlike traditional regulation, where emitters are obliged to respect a strict standard, a GHG emissions cap and trade system offers companies flexibility in planning their short, medium and long term investments. Companies that need to can buy emission allowances on the market until they are ready to modernize or replace their equipment. Innovative companies that have lowered their GHG emissions below their annual allocation can sell their excess emission rights, thus allowing them to recover part of their investments or invest in optimizing their facilities still further.

In order to create a common carbon market, each WCI partner must first adopt a regulation establishing a GHG emissions cap and trade system on its territory. After intergovernmental recognition agreements are reached to link the cap and trade systems of all WCI partners, a regional North American carbon market will be born.

Quebec's System

On December 14, 2011 the Government of Québec adopted the Regulation respecting the cap and trade system for greenhouse gas emission allowances. Québec is the first Canadian partner to adopt its regulation, officially placing it on the starting line on January 1, 2012 next to California, which adopted its regulation on October 20, 2011.

Québec’s cap and trade system for GHG emission allowances is a concrete example of Measure 11 in the 2006-2012 Climate Change Action Plan.

To get more information on Quebec's Cap and trade system for greenhouse gas emission allowances.