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The Carbon Market

The Québec Cap and Trade System for Greenhouse Gas Emissions Allowances

Public consultation on the Draft regulation to amend the Regulation respecting a cap-and-trade system for greenhouse gas emission allowances.

A brief look at the Québec Cap&Trade system (PDF, 448 KB)

Technical Overview - Regulation respecting a cap-and-trade system for greenhouse gas emission allowances
(PDF, 1,4 MB)

The Québec Carbon Market: Its Strongpoints and Advantages (PDF, 1,4 MB)

Regulation

Draft regulation to amend the Regulation respecting a cap-and-trade system for greenhouse gas emission allowances

Regulation respecting a cap-and-trade system for greenhouse gas emission allowances

Determination of annual caps on greenhouse gas emissions relating to the cap-and-trade system for greenhouse gas emission allowances for the 2013-2020 period - Order in council (2012-12-12)

Regulation respecting the delegation of management of certain parts of a cap-and-trade system for greenhouse gas emission allowances (2012-12-12)

Agreement between the Gouvernement du Québec and the California Air Resources Board concerning the harmonization and integration of cap-and-trade programs for reducing greenhouse gas emissions— Ratification (2013-12-04)

Documentation

Frequently asked questions about the C&T system (French, PDF, 412 KB)

Useful links


A brief look at the Québec system

The government initially set a global GHG emission ceiling for all targeted emitters. The ceiling will gradually drop over time and achieve absolute reductions in GHG.

Regulated businesses are required to cover their GHG emissions as of January 1, 2013. The government may award them a number of free emission units or “allocations” that take account of the historical level of their emissions and production. The number of free allocated units will gradually drop by between 1 and 2 percent each year, beginning in 2015.

However, starting in 2015 the number of free units allocated per unit of production will diminish by around 1% to 2%.
Businesses whose GHG emissions are higher than the number of units allocated will have to modernize by adopting clean technologies, or else buy emission allowances* at government auctions or on the carbon market.

As for businesses whose GHG emissions are below their allocation, they will be able to sell their excess carbon credits to other businesses on the carbon market.
Unlike traditional regulations, where emitters are obliged to adhere to a strict standard, a GHG emissions cap-and-trade system offers businesses flexibility in planning their short, medium and long term investments. Businesses needing more emission allowances can buy them on the market until they are ready to modernize or replace their equipment.

The most efficient businesses, those that have significantly reduced their GHG emissions, will be able to sell their surplus emission rights on the carbon market, thus enabling them to partially recover their invested funds or assist with new equipment optimization projects.


*For the purposes of the Québec system, the term emission allowances can refer to an emission unit, an offset credit, or an early reduction credit.


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Cap-and-trade system compliance periods in Québec

A compliance period is a period at the end of which a regulated emitter must return to the Government a number of emission allowances equal to the total audited GHG emissions that it declared for that period.

Québec’s cap-and-trade system for greenhouse gas emission allowances initially foresees three compliance periods.

The first compliance period began on January 1, 2013, following a transition phase of several months in 2012 during which emitters and participants were able to register for the system and familiarize themselves with the way it works without, however, being required to meet a GHG emission target ceiling.

During first compliance period, around 80 establishments, mainly in the industrial and electricity generation, with annual GHG emission equal to or greater than the annual threshold of 25,000 metric tons of equivalent CO2 equivalent, are subject to the system. This initial period will end on December 31, 2014. Exceptionally, this first period will last two years, whereas the other two periods will each extend over three years.

During the second compliance period, which begins January 1, 2015, business operators in Québec that distribute fuel (e.g., gasoline, diesel fuel, propane, natural gas and fuel oil, with some exceptions) or import it for their own consumption and whose annual GHG emissions attributed to the use of fuel distributed and consumed in Québec equal or exceed an annual threshold of 25,000 metric tons of CO2 equivalent will also be subject to the system. This second period will end on December 31, 2017.

The third compliance period, whose procedures will be identical to the second, will begin on January 1, 2018 and end on December 31, 2020.

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Regulatory information

On December 14, 2011 the Government of Québec adopted the Regulation respecting a cap-and-trade system for greenhouse gas emission allowances. Québec thus became the first Canadian partner to adopt its own regulation, placing it shoulder to shoulder with California, which adopted its regulation on October 20, 2011, on the starting line of the future carbon market.

On December 12, 2012 the Government of Québec adopted the Regulation to amend the Regulation respecting a cap-and-trade system for greenhouse gas emission allowances. The purpose of the amendment is to harmonize Québec’s system with California’s, and those of future partners like Ontario and British Columbia. It also sets out the rules under which Québec will issue offset credits, whose purpose is to recognize GHG emission reductions by businesses operating in sectors that are not covered by the cap-and-trade system.

The Government of Québec also adopted in December 2012 the Regulation respecting the delegation of management of certain parts of a cap-and-trade system for greenhouse gas emission allowances whose purpose is to delegate the management of certain parts of the cap-and-trade system for greenhouse gas emission to the Western Climate Initiative, Inc. and determined, by Order in Council, the annual caps on greenhouse gas emission units for greenhouse gas emission allowances for the 2013-2020 period.

On November 13, 2013, the Government of Québec enacted the Regulation to amend the Regulation respecting a cap-and-trade system for greenhouse gas emission allowances in order to list the fuel and combustible distributors to be covered in 2015. The regulation also adds sectors of activity and new benchmark units to better represent the Québec businesses at issue and ensure conformity with the Regulation respecting mandatory reporting of certain emissions of contaminants into the atmosphere. The amended regulation makes a number of adjustments to complete the harmonization of Québec and California regulations and enable the markets to link up.

On November 13, 2013, the Government of Québec also enacted the Regulation to amend the Regulation to amend the Regulation respecting a cap-and-trade system for greenhouse gas emission allowances to match market link-up dates between Québec and California.

On November 13, 2013, the Government of Québec ratified the National Assembly’s approval of the Agreement between the Gouvernement du Québec and the California Air Resources Board concerning the harmonization and integration of cap-and-trade programs for reducing greenhouse gas emissions, by Order in Council 1181-2013. This Order in Council has been published in the Gazette officielle du Québec of December 4, 2013.

On July 23, 2014, the Government of Québec published a Draft regulation to amend the Regulation respecting a cap-and-trade system for greenhouse gas emission allowances in the Gazette officielle du Québec, in view of a 60-day public consultation. The draft regulation introduces changes aimed at harmonization with recent California regulatory amendments and proposes broadening the scope of the offset credit protocol. More precisely, this involves the addition of ozone depleting refrigerants to the protocol.

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