The Quebec government earned more than $1.5 billion from the carbon market last year. A record amount which will allow it to finance its budget for Tuesday.
Never has the cap-and-trade system for emissions rights (SPEDE) generated so much revenue in one year in Quebec. The four auctions held in 2023-2024 on the carbon market revealed a windfall of one and a half billion in the government’s coffers, or 200 million more than what it anticipated last year. “The government has been conservative in its estimates,” notes Professor Pierre-Olivier Pineau, holder of the Chair of Energy Sector Management at HEC Montréal, in an interview with The duty.
If Quebec can count on this new pot, it is in particular thanks to the growing value of the units made available on the carbon market. They sold for less than $40 a year ago; their value soared beyond $50 during the February 2024 auction, which generated revenues of $418 million.
In its tenth full year of activities, SPEDE generates revenues almost six times higher than when it was launched.
In recent years, almost all of the sums unearthed from the carbon market have been paid into the Green Economy Plan (PEV), which finances the main government measures to combat climate change. In its 2023-2024 budget, Quebec had also deposited $1.4 billion, mainly from the SPEDE.
The duty was unable to confirm how much of the new carbon market revenue will appear in Tuesday’s budget. However, in an email, the Ministry of the Environment, the Fight against Climate Change, Wildlife and Parks recalled that, “by law, all revenues from the carbon market must be paid to the Electrification and Climate Change Fund [anciennement le Fonds vert]which itself is entirely allocated to financing measures to combat climate change.”
Since the publication of the Plan for a Green Economy 2030, “100% of carbon market revenues have therefore been dedicated to financing the measures of the EPI implementation plans,” added communications advisor to the ministry Frédéric Fournier.
Like every year, Minister Charette’s green plan will be updated this spring. In May 2023, it had a budget of nine billion dollars over five years.
Priority to public transport?
In interview with The duty a few days before the budget, the deputy director of government relations for the Équiterre organization, Alizée Cauchon, is encouraging the Legault government to take advantage of this windfall to increase funding for public transportation. “What we want is for the service offering to be increased to 7% annually. Then we could seek this increase via sources that are more stable, such as the carbon market,” she underlines.
“There is a funding crisis for public transportation services which requires a massive reinjection of funds,” adds the head of the Climate-Energy campaign at Greenpeace Canada, Patrick Bonin. “It must lead to an increase in supply, not just to return to previous levels and avoid cuts. »
In addition to the billion and a half that it received from the carbon market in 2023-2024, Quebec has at its disposal all of the surpluses accumulated in the Electrification and Climate Change Fund (FECC) in recent years. In its last annual report, which dates from March 2023, it reported a surplus of $1.7 billion in its coffers.
It was impossible to confirm this week whether these sums had already been spent. As of the November 2023 economic update, Quebec had withdrawn nearly $300 million from the fund to increase support for adaptation to climate change, in the context of the forest fires of the previous summer.
Go further
On the other end of the phone, Pierre-Olivier Pineau insists that Quebec seek new sources of environmental revenue, beyond the carbon market. “In fact, the real tool is constraint,” he maintains, recalling the importance of eco-taxation to discourage polluting emissions.
“For me, a billion and a half more in the kitty could even be problematic,” says the energy policy expert. “In the sense that, if it makes us buy electric cars – and we have a good part of that billion that goes into electric cars – we fall into a paradigm of solo driving and urban sprawl. And that is very bad for the fight against climate change in the long term. »
According to Patrick Bonin, only a bonus-malus policy will really allow Quebec to achieve its climate objectives. “We must discourage the purchase of new, very energy-intensive vehicles. That would allow us to have a program that is self-financing: therefore, the penalty would be used to pay the bonus – the rebate – on energy-efficient vehicles,” he says.
Despite its budget of 9 billion over five years, the government green plan only makes it possible to achieve 60% of the climate targets for 2030, recalls Mr. Bonin. By applying “the polluter pays principle”, the government would give itself the tools to reduce the gap towards climate transition, he said.
Since 2013, the carbon market has required industry to buy emission rights to “cover” the tonnes of GHGs it emits into the air. One way to obtain these rights is through the carbon market auction, which takes place four times a year. Given the increase in the price to pollute, and even if the number of units is reduced annually to allow a reduction in emissions, revenues from these auctions have continued to increase.
The Legault government also intends to fundamentally reform the SPEDE over the coming months. An opportunity to notably review the quantity of emission rights put on sale annually.