The linkage of the California and Quebec cap and trade systems is a modest first step towards a robust North American cap and trade system. Although Quebec is Canada’s largest province by size and has a population of about eight million people (second only to Ontario among provinces), its economy is not nearly as large as that of California: Quebec has a GDP of about $300 billion compared to California’s GDP of about $1.9 trillion. About 80 entities (referred to as “establishments” in Quebec’s program) are subject to Quebec’s cap and trade regulations. In comparison, California’s cap and trade program covers about 350 entities representing 600 facilities. Also, Quebec’s allowable GHG emissions are substantially lower than those of California: Quebec’s cap starts at about 23.2 million tons of GHG emissions (CO2e) in 2013 and ends at about 54.7 million tons in 2020, while California’s cap starts at about 162 million tons of GHG emissions (CO2e) in 2013 and ends at about 334 million tons in 2020. (Note that the increase reflects the addition of transportation fuels and natural gas in 2015; over time, the cap will go down — become more stringent —for all covered sectors.)
Testing the New Model
CARB recognizes that a key aspect of linkage with Quebec is that it may establish a new template for climate change efforts globally. As stated by CARB in its response to comments: “[T]he experience gained now in demonstrating that two separate governments, in two separate countries, with two separate economies, can effectively partner to put a price on carbon and reduce greenhouse gas emissions is invaluable to accelerating national and international efforts to address climate change.”
However, California’s cap and trade program is less than a year old and already several lawsuits have been filed challenging various aspects of the program. So the jury is still out as to whether California’s program will succeed. Moreover, the addition of Quebec will make the cap and trade program more complicated (and mistake prone) without offering a meaningful test run that could be expected of a larger, more complex regional program.
Nonetheless, given the problems with the Kyoto Protocol and the ETS, the need for a successful model is certainly there, and California and Quebec may be the start of such a model. In the interim, California and Quebec will undoubtedly have to iron out a number of issues (ranging from the integrity of offsets to the logistics of operating a linked market in two languages).
