Quebec took a step forward in moving towards a cap-and-trade system with the tabling of Bill 42, An Act to amend the Environment Quality Act and other legislative provisions in relation to climate change (the “Bill”) on May 12, 2009. The Bill is set for adoption by the end of June, with the implementation of regulations by the fall of this year, making the province the first jurisdiction in North America to enforce a cap-and-trade system.1

The proposed legislation sets out a plan to reduce greenhouse gas (“GHG”) emissions with the enforcement of GHG reduction targets on companies who emit GHG’s (“Emitters”). Emitters failing to meet the reductions targets, which will be measured against an 1990 emissions baseline, will be required to pay a fine.2

Emitters will also be required to register their GHG emission levels, along with other relevant information, on a public registry. This would help to serve as a basis for calculating emission allowances.3 Emissions allowances will be then granted in the form of emission units, offset credits, early reduction credits and any other emission allowances to be determined by regulations.4

Emitters polluting at levels lower than their predetermined emissions cap will be able to trade their emissions credits on the Montréal Climate Exchange (MCeX), which was launched last year.5 In addition, Quebec Environment Minister, Line Beauchamp stated that the proposed legislation would account for current investments in reducing GHGs when it the time comes to issue emissions allowances.6

Implementation of the cap-and-trade system will take place in two phases. The first phase of emission caps will be enforced during the period of 2012 to 2015 and only target electricityproducing companies and industries that produce more than 25,000 tonnes of GHG emissions annually. The second phase will target a broader number of sectors, including transportation and home and commercial heating companies.7

With the announcement of the proposed legislation, Quebec became the second province in Canada to adopt a cap-and-system, with British Columbia enacting legislation in 2008.8 The Ontario government has stated that it plans to introduce similar legislation within coming weeks, with Manitoba following closely behind. These four provinces, in addition to seven American states, are members of the Western Climate Initiative, which is striving to create a regional cap-and-trade system by 2012.9

In addition, the premiers of Quebec and Ontario have been involved in a series of ongoing joint cabinet meetings to discuss the implementation of a carbon-exchange register that could potentially serve as a basis for creating a national program. Along with Quebec’s proposed legislation, this has focused attention on the Canadian federal government’s plans to reduce GHG emissions.10

David McLachlin, president of the National Round Table on the Environment and Economy has commented on the need for Canada to “transition into a national system” that would create a unified carbon market, linking Canada to the United States.11 While feedback in response to Quebec’s proposed cap-and-trade system from Federal Environment Minister Jim Prentice has been positive, he cautioned the need to determine the extent to which provincial efforts to harmonize are consistent with the proposed carbon regimes in the US and other countries.12