California and Quebec are forging the first “link” in what could become a chain of sub-national governments partnering to tackle climate change. Pending final approval by the California Air Resources Board (CARB) next month, large carbon polluters in California and Quebec will be able to use allowances and offsets issued by either government to meet their obligations under cap-and-trade programs that begin in January 2013.
This process – known as linkage – is an encouraging step amidst disappointing news that Canada will withdraw from the Kyoto Protocol and the continued failure of the U.S. Congress to take meaningful action on climate change. California and Quebec have spent the last few months working out the mechanics of linkage and closely reviewing one another’s cap-and-trade regulations. In addition to accepting interchangeable allowances and offsets, California and Quebec will hold joint quarterly auctions for allowances and will share a single allowance tracking system that is carefully designed to maintain the integrity and security of the market. The auctions will be a historic step in establishing a price on carbon pollution, and will be a platform on which other jurisdictions can join. Other Canadian provinces, including Ontario, Manitoba and British Columbia, are actively working to develop and implement programs.
The California Air Resources Board released their staff report yesterday that details California’s reasons for linking with Quebec, including the likelihood that the larger market will generate new capital flow into California for energy efficiency and clean energy technologies that cut pollution. Economic modeling shows that it is more likely that on-site reductions will occur in California than in Quebec, creating job opportunities that might include energy efficiency audits at cement plants or installing solar panels on universities. An increase in on-site reductions also creates public health and air quality benefits, as local air pollutants are reduced along with greenhouse gases.
Showing that two separate governments, in two separate countries, with two separate economies, can effectively partner to put a price on carbon is a transformative step for North America. California and Quebec would join 27 European countries – along with Australia, New Zealand, and South Korea – in showing the world how effective cap-and-trade can be.