For the carbon market to play its role in combating the climate crisis, it will be necessary to increase the price of pollution and further force companies to reduce their greenhouse gas (GHG) emissions. This is what the Advisory Committee on Climate Change, tasked with advising the Legault government, recommends.
The cap-and-trade system for greenhouse gas emissions (SPEDE), which is due to be “reformed”, will have to impose more overall reductions in GHG emissions over the coming years in order to hope to help Quebec become a “decarbonized” society.
This is the message that emerges from an opinion from the Advisory Committee on Climate Change, which was submitted to Environment Minister Benoit Charette and which was made public on Wednesday.
Since 2013, the SPEDE, better known as the carbon market, has determined the pricing of GHG emissions in Quebec as part of a market linked to that of California. It governs emissions from the industrial, transportation, building and electricity sectors, which represent more than three-quarters of Quebec’s GHG emissions. It is based on the general idea that setting a price on carbon can encourage emitters to reduce their emissions.
However, ten years after its establishment, the committee insists on the need to “increase its leverage in favor of the in-depth decarbonization of Quebec society.” To do this, it would be necessary to reduce emissions caps, in order to “eliminate” the surpluses that, at present, allow companies subject to the committee to “bank units to comply with their future obligations.” The committee reports a total of 17 million units of surplus emissions over the period from 2013 to 2020.
The committee of experts also advocates an increase in the price of emission rights by suggesting an expansion of the sectors covered by the SPEDE, but also a reduction in “free allocations”, a mechanism which allows industrial companies to “considerably” reduce the cost of the pollution they produce.
And in the context where the low price of a tonne of carbon on the market is partly explained by the possibility of negotiating with California, the experts recommend the implementation of mechanisms to “promote a greater reduction in emissions on Quebec territory”.
“The SPEDE has succeeded in generating significant revenues for the fight against climate change and in establishing a price on carbon, partially reflecting the environmental cost of GHG emissions. The observation is therefore that the SPEDE is fully functional in economic terms, but that tightening up is essential to make the most of this tool in this transition context,” summarizes Charles Séguin, member of the committee and professor in the Department of Economics at UQAM.
During the 40e At the auction of greenhouse gas emission units held on August 14, the price of a tonne of carbon reached $41.50. For comparison, the International Monetary Fund recommends increasing the price to $176 per tonne of GHG by 2030 and $318 in 2050.
“Climate transition”
In addition to this necessary “tightening”, the committee recommends that the government confirm the maintenance of the SPEDE until 2040 and set the ceilings for after 2030 after establishing a Quebec target for reducing GHGs for 2040.
“The current decade is the one in which the Quebec economy must truly take the turn towards climate transition and decarbonization. Beyond 2030, the SPEDE is called upon to play an even more important and binding role, generating reductions and changes in behavior in a context of rapid transition from an energy-intensive and GHG-emitting economy to a decarbonized economy characterized by the exit from fossil fuels,” the committee argues in the document submitted to Minister Charette.
According to Alain Webster, chair of the committee and professor in the Department of Economics at the University of Sherbrooke, “the transition will not only be achieved with carbon pricing, it interacts with all the levers available to the Quebec government to facilitate, support and implement this transition. But this reform will reflect our collective capacity to truly initiate the process of just transition and decarbonization of our society for the benefit of current and future generations.”
While the federal government’s carbon pricing is being contested, notably by the Conservative Party of Canada and certain provinces, the experts of the Quebec committee point out that imposing a price on pollution is “without a doubt one of the most fundamental policies of the action of states resolutely oriented towards decarbonization and the implementation of the Paris Agreement.”
More details to come.