Quebec Delays WCI Carbon Market Scheme

The California Air Resources Board (CARB), who works closely with the Western Climate Initiative (WCI), announced on June 29th that it would delay by one year the carbon emissions cap-and-trade scheme that was scheduled to commence January 2012. Regulators stated that the system will still launch January 2012, but the year will only consist of industries reporting their greenhouse gas (GHG) emissions sans penalization for exceeding the limits. Reasons for the delay are that a trial court in San Francisco concluded that CARB did not sufficiently evaluate alternatives for the cap-and-trade program and approved the Scoping Plan before waiting for public feedback; furthermore, CARB did not fully comply with the California Environmental Quality Act (CEQA) requirements before the approbation of the Scoping Plan, even though the plan itself complied with Assembly Bill 32. The CARB Chair, Mary Nichols, said the delay was needed in order to test the model and to ensure the program’s success. The transition year is considered necessary for the companies to familiarize themselves with the system and to smoothly enter the market on the official date.

Quebec, also a member of the WCI, decided to follow in California’s footsteps and announced on July 6th that it would delay the compliance obligations of this carbon market until January 2013 as well.  Both the President of the Conseil du Patronat du Québec and the Quebec Chamber of Commerce supported this decision, as they were concerned about the effect that early implementation of the program could have on the competitiveness of Quebec companies in each industrial sector.

Quebec’s WCI objective is to reduce GHG emissions by 20% below 1990 levels by 2020; this would target industries, such as the electricity sector, refineries, and cement plants, that emit more than 25,000 tons of CO2 per year. The transportation sector will be subject to regulation beginning in 2015, providing companies within this sector a bit more time to prepare; however, given that the first hard compliance start date has just been delayed by a year, it is probably worth taking the timeline for the transportation sector with a grain of salt. Exempt from this system will be the agriculture, forestry, and waste management sectors.

Despite postponing the launch date, Quebec and California are still the first two confirmed WCI members to participate in this carbon market and are hoping to lead the way for the initiative’s other partners. By taking part in this system, Quebec will create new business opportunities as companies within the province develop clean technologies that will help them, and others, limit carbon emissions. Indeed, the province is confident that specialized job positions will open in response to the cap-and-trade regulations. Of note is that such innovation would probably not have surfaced had the WCI members implemented a carbon tax instead. Although such a tax might be easier to apply, the strategy behind a carbon market is the assumption that governments will gradually decrease the amount of permits available within the market as an incentive for companies to find more ways to reduce their emissions. As a security measure, in order to prevent some companies from leaving the province because of the new regulations, Quebec will give them free emission allowances every year.

Already, during the past decade, Quebec has made significant emission reductions in the transportation and forestry industries, and is poised to serve as a leader for other Canadian provinces. Its participation will strengthen its international competitive advantage and relationship with the American WCI partners. It is vital that the Quebec government and the WCI work closely together to achieve the common goals of reducing GHG emissions and combating climate change. The development of a fair and realistically structured carbon market, and the provision of a support system and resource centre through the partner states and provinces of the WCI, is a worthwhile initiative to achieve these goals.