Głowacki Law Firm

California and Québec Cap-and-Trade Programs Linking – Implications for Linkages’ Design
Wednesday, 04 July 2012 06:50


Interesting comparisons for the two North American cap-and-trade programs can be found in the document released by California Air Resources Board titled ‘Proposed Amendments to the California Cap on Greenhouse Gas Emissions and Market-Based Compliance Mechanisms to Allow for the Use of Compliance Instruments Issued by Linked Jurisdictions, Staff Report: Initial Statement of Reasons’ of 9 May 2012.

 

The basic parameters indicated in the said document (available at www.arb.ca.gov) in brief are as follows:

 

Baseline year – 1990


Like California, Quebec requires the authorities to establish a 2020 GHG emissions level for Québec relative to a 1990 emissions baseline.

 

Emissions thresholds for inclusion

 

Emissions thresholds for inclusion are identical for both programs. Québec and California each adopted two levels of emissions thresholds: 25,000 MTCO2e and 10,000 MTCO2e. At the level of 25,000 MTCO2e emissions per year or greater, each jurisdiction requires reporting entities to meet rigorous reporting requirements (e.g., annual reporting, specific reporting methods, third party verification, accuracy requirements).

Québec‘s program, similar to California covers the same 7 GHGs listed in AB 32; carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), and nitrogen trifluoride (NF3).

As a result for determining if the 25,000 MTCO2e threshold is met, Québec includes emissions from all six Kyoto Protocol gases, plus nitrogen trifluoride (NF3), but excludes any CO2 emissions from combustion and fermentation of biomass and biofuels. California includes CO2, CH4, and N2O emissions from sources explicitly specified in the GHG reporting regulation.

 

Currently, Québec does not cover biomethane and geothermal emissions in its GHG reporting regulation because there is no presence of these sources in the province. Although these emissions are required to be reported under the California reporting regulation, both are exempt from California‘s cap-and-trade program. In addition, Québec‘s reporting regulation does not cover CO2 suppliers, but oil and gas production sources are required to report. Beginning in 2015, all fuels are covered under the cap.

 

Facilities with 10,000 to 25,000 MTCO2e of annual emissions are also required to report their emissions under both programs, to monitor for leakage of facilities that are close to the cap-and-trade threshold requirements.

 

Auctions

 

California and Québec regulators assume that one feature that must be identical in both programs is the quarterly auction. This will enable joint auctions in the regional cap-and-trade program. Provisions that must be identical in policy and practice cover requirements regarding eligibility for auction participation, publication of auction-related information, process for tie breaks in an auction, settlement for an auction, purchase limits by auction participant type, bidding process, dates for auctions, and financial requirements. A single auction provider and a single compliance instrument tracking system that will facilitate a joint auction for California and Québec are also envisioned.

 

Holding limits

 

The two programs are proposing the same holding limits.

 



 

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