California, Quebec Seek Partners to Grow Carbon Market

Less than a year after establishing North America’s largest carbon market, Quebec and California are aggressively recruiting the province of Ontario and other U.S. states to join, Quebec’s premier said.

Quebec is discussing a regional market with the governors of New England states and leaders in Ontario while California is working with Oregon and Washington in the western U.S., Quebec Premier Philippe Couillard said yesterday in an interview at Bloomberg’s headquarters in New York.

California spent almost a decade searching for other U.S. states to help it establish a regional carbon market before beginning one on its own last year. States including Arizona, Oregon and Washington backed out of a regional initiative in 2011. On Jan. 1, California and Quebec established a joint market that regulates more than 180 million metric tons of greenhouse-gas emissions from industrial plants including power generators, oil refineries and cement factories.

“Having a market with only California and Quebec is not ideal,” Couillard said. “We are working very hard to recruit new partners. If we just add a couple of Western states, a couple of provinces, Ontario, and maybe some New England partners, we think that’s good enough.”

The governors of New England states, particularly Vermont Governor Peter Shumlin, are “very interested” in discussing a partnership with California and Quebec, Couillard said.

Carbon Market

Vermont is part of a regional carbon market that regulates emissions from power plants known as the Regional Greenhouse Gas Initiative, or RGGI. Other states in that market include New York, Maryland and Massachusetts.

Kelly Speakes-Backman, chair of RGGI’s board of directors and a member of the Maryland Public Service Commission, said she hasn’t discussed the possibility of linking markets with either Quebec or California. Maryland is not interested in leaving RGGI to join another, she said.

“To be honest, I haven’t given it a whole lot of thought,” Speakes-Backman said by telephone from Baltimore today. “I met for the first time the minister of environment for Quebec yesterday, and it was really a five-minute conversation that we had. And I’ve personally had no discussions with California.”

Integrating Markets

Vermont has had “preliminary discussions” about integrating RGGI’s market with the one run by California and Quebec, Justin Johnson, deputy secretary of Vermont’s Agency of Natural Resources, said by e-mail today.

“We believe that carbon markets will be stronger if we bring in more players,” Johnson said. “Vermont is not considering leaving RGGI -- rather we are looking to strengthen RGGI even further by exploring the possibilities to integrate our market with others, including Quebec and WCI.”

Quebec’s government has scheduled a joint cabinet meeting with Ontario Premier Kathleen Wynne and her ministers in Toronto in November, during which they’ll discuss climate change and carbon markets, Couillard said. Ontario, the hub of Canada’s automobile industry, is the country’s biggest economy. Quebec ranks second.

Hayley Easto, a spokeswoman for Ontario’s environmental commissioner, didn’t respond to an e-mailed request for comment left after business hours yesterday.

Couillard declined to say when California and Quebec expect to add new partners. He said his government has been dedicating “significant efforts on this on a weekly basis.”

Emissions Targets

Under the cap-and-trade systems created by California and Quebec, allowances permitting the release of a metric ton of carbon dioxide are issued through free allocations and auctions. The pool of allowances shrinks over time to cut pollution.

California’s supply of allowances is designed to contract enough to cut emissions about 15 percent by 2020. Quebec has set a target of cutting greenhouse-gas releases to 20 percent below 1990 levels by the end of the decade.

Quebec expects to generate C$3 billion ($2.7 billion) in revenue from its carbon allowance auctions by 2020, Couillard said yesterday, repeating an earlier government forecast. The money would then be allocated to a so-called “green fund” that the province plans to use to fund the fight against climate change through measures such as energy efficiency and the development of less polluting technologies.

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