On May 12, 2009, Line Beauchamp, Quebec Minister of Sustainable Development, Environment and Parks, tabled Bill 42 entitled An Act to amend the Environment Quality Act and other legislative provisions in relation to climate change. The Bill, which is designed to reduce greenhouse gas (“GHG”) emissions, provides for the insertion of new provisions in the Quebec Environment Quality Act1 in a division entitled “Cap-and-trade system.” When the Bill was tabled, Minister Beauchamp noted that such an amendment to the Act was necessary to ensure the implementation of Quebec’s commitments to the Western Climate Initiative (WCI).
The provisions proposed in Bill 42 lay the foundation for the future cap-and-trade system and allow the Quebec Government to make orders setting reduction targets for GHG emissions and caps on emission units and to adopt regulations to ensure the implementation of the cap-and-trade system.
INVENTORY AND REGISTER OF GHG EMISSIONS
Pursuant to Bill 42, every GHG emitter determined by regulation must report its GHG emissions to the Minister and provide the Minister with any information or documents required by regulation, subject to the conditions, within the time and at the intervals required. All emitters determined by regulation must also pay the fee determined by regulation for registration of its GHG emissions in the public register. Bill 42 requires the Minister to maintain such a register, which will contain inter alia the nature and declared quantity of each emitter’s emissions. It should also be noted that the term “emitter” includes not only the person or municipality that emits GHGs, but also anyone who distributes a product whose production or use entails the emission of GHGs.
REDUCTION TARGETS
As mentioned above, Bill 42 provides that the Government will set by order a GHG reduction target for each period it determines. The reduction target will be established using 1990 emissions as the baseline. The Government may break that target down into specific reduction or limitation targets for certain sectors of activity. Bill 42 also provides the factors which the Government will consider when setting GHG reduction targets.
Section 8 of Bill 42 mentions that the GHG emission reduction objective of 10 million metric tons (Mt CO2 eq.) per annum set by Order in Council 407-2007 is deemed to be a target set under section 46.3. This target will in all likelihood be the initial reduction target.
CAP-AND-TRADE SYSTEM
In order to achieve the targets set, Bill 42 lays the foundation for a cap-and-trade system. The Bill provides that every emitter determined by regulation must cover its GHG emissions with an equivalent number of emission allowances.
Section 46.5 of the Act (section 1 of Bill 42) states that “emission allowances” will include emission units, offset credits, early reduction credits and any other emission allowance determined by regulation. Therefore, emitters will be allowed to use various types of emission allowances to cover their GHG emissions. Section 46.5 mentions that each emission allowance is equal to one metric ton of GHG expressed in CO2 equivalents.
The cap on emission units that may be granted by the Minister for each period will be set by order according to the targets set. The Government may break the cap down into specific caps for the sectors of activity it determines. Subject to the conditions determined by regulation:
- Available emission units may either be allocated by the Minister without charge to emitters required to cover their GHG emissions or sold at auction or by agreement to persons or municipalities determined by regulation;
- Offset credits may be granted by the Minister to emitters who have reduced their GHG emissions or to persons or municipalities who avoid causing emissions or who capture, store or eliminate GHG;
- Early GHG emission reduction credits may be granted by the Minister to emitters who have, during a period, voluntarily reduced their emissions before the date on which they were legally required to cover them;
- The Minister may grant any other type of emission allowance determined by regulation.
In addition, Bill 42 provides that emitters may trade emission units. Emitters who do not use all their allowances to cover their GHG emissions during a given period may also bank them for use or trade during a later period, subject to the conditions determined by regulation.
To provide for emission allowance accounting and tracking, the Minister will maintain a public register of emission allowances containing the names of holders of emission allowances, the number and type of emission allowances credited to the account of each holder and any other information determined by regulation.
Bill 42 also provides that the Minister may enter into an agreement to delegate to a person or body the management of the register of emissions or of all or part of the cap-and-trade system. Notice of such an agreement must be published in the Gazette officielle du Québec. The Minister may also enter into an agreement with any government, department or international organization for the harmonization and integration of cap-and-trade systems.
GREEN FUND
The Bill states that all sums collected under the new provisions and paid into the Green Fund will be used to finance various measures relating to climate change and global warming.
COMING INTO FORCE
The Bill provides that not all the provisions will come into force on the same date. The provisions concerning the GHG emissions report will come into force on a different date than the other provisions including those concerning the cap-and-trade system.
According to the press release published on May 12, 2009 announcing the tabling of Bill 42, “[Translation] the first phase of the WCI system will begin in January 2010, when large GHG emitters will be required to report their emissions on an annual basis. Then, in 2012, a cap on emissions will be introduced for heavy industry and electricity generation in order to begin the first GHG reductions and the first emission allowance trades.”
