Quebec’s carbon market is about to undergo the biggest overhaul since its creation 10 years ago. Consultations on the cap-and-trade system for greenhouse gas emission allowances (SPEDE) will take place next summer, and a draft regulatory amendment should follow towards the end of the year.
“The objective of the approach is to ensure that the SPEDE remains an effective tool that will contribute to achieving the target of reducing greenhouse gas emissions by 2030 and achieving carbon neutrality by 2050” , writes the Ministry of the Environment in a notice published Tuesday and intended for participants in the carbon market.
The approach concerns certain fundamental aspects of the SPEDE. This will be the first reform to dust off the regulations from top to bottom. Since the Quebec carbon market is joint to that of California, the two governments will work together in the process.
Among the subjects “potentially addressed”, the ministry cites offset credits. These credits, from activities not covered by the carbon market, such as forestry, come mostly from the Californian system. By buying it, major Quebec emitters have injected tens of millions of dollars into state forestry projects: a “capital flight” that Quebec would obviously like to curb.
Another subject that appears in the notice published on Tuesday is that of annual caps on emission rights. For the moment, these are determined until 2030. What ceilings will then allow to place the province on the trajectory of carbon neutrality in 2050? The question might be answered during the update process.
Carbon capture and storage will also be a topic that could be addressed in the review, according to the notice. These technologies, which are still mostly at the experimental stage, can capture CO2 escaping from the chimneys of a factory. The carbon market, however, does not specify how the carbon must be sequestered so that an emitter can remove it from its balance sheet.
A fourth subject is among the aspects potentially addressed: that of emission rights “banked and accumulated” by participants in the linked market. Remember that observers consider that California has put into circulation too many emission rights, which reduces the pressure to reduce greenhouse gases.
This important review process comes after the government of François Legault announced last August the tightening of free allocations of emission units granted to polluters. These will gradually decrease from January 2024, which should give the mechanism more bite.
Forestry offset credits issued by California are the subject of criticism in the United States. As wrote The duty at the beginning of February, scientists estimate that the climatic benefits of these instruments are overestimated. From 2013 to 2020, major Quebec emitters have purchased carbon to offset 16.2 million tonnes of CO2.
The Quebec Ministry of the Environment plans to announce more details on upcoming consultations in the spring. Industry players should have the opportunity to speak out in the summer and fall of this year.