Authored by Leo Pyman, TeamCain

The cap-and-trade system gives companies flexibility in planning their short, medium and long term investments. It lets companies buy emission allowances on the market until they are ready to bring their equipment up to date. Companies that have reduced their GHG emissions below the regulatory requirement could find themselves with an allocation of emission units and by selling those excess units, they could either recover part of their investments or use the proceeds to engage in further optimization.

Québec recently announced that they will adopt the Regulation respecting the cap-and-trade system for greenhouse gas emission allowances, which is based on the rules established by the Western Climate Initiative (WCI). The capping and reduction of GHG emissions will start officially on January 1, 2013.

"Cap-and-trade systems for emission allowances are recognized as one of the most effective and least costly economic tools for reducing greenhouse gas (GHG) emissions. By adopting this regulation, Québec acquires the means to achieve the transition toward a green, sustainable and prosperous economy," stated Québec's Minister of Sustainable Development, Environment and Parks, Pierre Arcand.

The first year of implementation will begin January 1, 2012 and will be a transition year. This will allow emitters and participants to familiarize themselves with how the system works. Over the course of the year, emitters will also be able to make any adjustments that may be necessary to meet their requirements. Starting on January 1, 2013 those in the industrial and electricity sectors whose annual GHG emissions equal or exceed 25 000 tons or more of CO2 equivalent per year will be subject to the capping and reduction of their GHG emissions.

This is just an example of one of the steps that will be taken toward the emergence of a regional North American carbon market.
 
For more information, including links to the text of the regulation, please click here.