On December 14, 2011, the Regulation respecting the cap and trade system for greenhouse gas emission allowances was adopted to implement a GHG emission allowances cap and trade system based on the rules established by the Western Climate Initiative (“WCI”) . the system is scheduled to officially start on January 1, 2013 at the same time as the system being set up by the WCI. Québec, California, British Columbia, Manitoba and Ontario are all WCI members. On that date, 75 large emitters in Québec in the industrial and electricity sectors whose annual GHG emissions equal or exceed the annual threshold of 25,000 tons of carbon dioxide (CO2) equivalent per year will be subject to the cap and required to reduce their GHG emissions.
A second compliance period will begin on January 1, 2015 and will apply to operators of businesses that import or distribute fuels in Québec that are used in the transportation and building sectors where their combustion generates 25,000 tons of CO2 equivalent or more per year. According to the information provided by the Ministry of Sustainable Development, Environment and Parks, the system to be put in place will provide companies sufficient flexibility to plan their short, medium and long-term investments in order to meet emission standards and to buy emission allowances on the market until they are ready to modernize or replace certain equipment. Those companies that will have reduced their GHG emissions below the prescribed regulatory requirement, thereby creating an allocation of emission units that is higher than what they actually emitted, shall be able to sell their excess units in the system. During the course of 2012, participants will be able to register with the system and take part in pilot options. The adoption by Québec of the Regulation constitutes the first of two main steps towards implementing a regional North-American carbon market. The second step involves concluding of a series of recognition agreements between the different WCI partners to link their systems together. The Regulation and additional information can be consulted at: http://www.mddep.gouv.qc.ca/changements/carbone/Systeme-plafonnement-droits-GES-en.htm.