Brown announces formal carbon trading with Ontario

Source: Debra Kahn, E&E News reporter • Posted: Tuesday, September 26, 2017

California is expanding its economywide carbon-trading program by joining forces with the Canadian province of Ontario.

Gov. Jerry Brown (D) lauded the partnership Friday in Quebec City alongside the premiers of Ontario and Quebec. Quebec has been holding joint auctions of carbon credits with California since 2014. California has long been planning to link in 2018 with Ontario, which began holding its own auctions earlier this year.

Adding Ontario to California and Quebec’s joint quarterly auctions will expand the size of their common carbon market by about 30 percent.

“Climate change, if left unchecked, will profoundly disrupt the economies of the world and cause untold human suffering,” Brown said Friday. “That’s the reason why California and Quebec are joining with Ontario to create an expanded and dynamic carbon market, which will drive down greenhouse gas emissions.”

Demand for Ontario’s permits has been higher than in California and Quebec’s recent auctions, raising the possibility that Ontario’s participation could lift prices in the wider market. This month’s Ontario auction saw all its allowances for current and future years sell out, with prices comfortably above the minimum.

The agreement among the three jurisdictions provides for the establishment of joint electronic auctions and the exchange of allowances among market participants. It dissolves California’s existing bilateral agreement with Quebec and allows other jurisdictions to join in the future, via an amendment process. The agreement also provides for parties to exit it with 12 months’ notice.

Other neighboring jurisdictions are also working on programs that could link up. Washington has a statewide program that may allow businesses to use California credits for compliance, and Oregon lawmakers plan to take up a bill next year that would set up a cap-and-trade system by 2021.

In Canada — where Prime Minister Justin Trudeau has set a 2018 deadline for provinces to set up carbon-pricing policies — Nova Scotia is designing a cap-and-trade program but does not envision linking to other jurisdictions.

Ontario officials had been wary of legal uncertainties dogging California’s program, including a lawsuit from industry and a question of whether the state had authority to continue the market after 2020. But the court case was resolved in June, and in July the state Legislature extended the program through 2030, settling the outstanding issues and increasing demand in California’s latest auction.

“We are stronger together and by linking our three carbon markets we will achieve even greater reductions at the lowest cost,” Ontario Premier Kathleen Wynne said in a statement. “I look forward to continuing to work with Governor Brown and [Quebec] Premier [Philippe] Couillard on our common goals, including advocating for the adoption of carbon markets and emissions cap programs across North America and around the world.”

Environmentalists praised the link. “Hopefully, other states and provinces will take Ontario’s lead,” said Erica Morehouse, attorney with the Environmental Defense Fund, in a statement.