Quebec Cap-and-Trade Revenues Exceed $3 Billion as Carbon Market Withstands Ontario Withdrawal

A new infusion of C$215 million has pushed Quebec’s cumulative carbon cap-and-trade revenues above the $3 billion mark, at just the moment when Ontario has cancelled its carbon pricing program and Alberta’s Jason Kenney is vowing to do the same if he wins the provincial election later this year.

The credits in Quebec’s cap-and-trade auction late last month sold for between $20.68 and $20.82 per tonne, CBC reports. All the available “vintage” credits sold out, and their price has been steadily rising.

“When Ontario abruptly withdrew from the market last year, there were concerns demand would dry up,” the national broadcaster explains. “Europe’s carbon market, for instance, suffered from years of low prices, due to an oversupply of credits.”

But “the Western Climate Initiative (WCI)—the name of the cap-and-trade system that allows Quebec and California companies to buy and sell emission credits on each other’s carbon markets—has avoided similar volatility.”

“The market has been really stable,” said University of Quebec at Montreal law professor Jacques Papy. Ontario’s withdrawal “was a major shock to the market. But despite that shock, the market remained really stable.”

Two key decisions contributed to that stability, CBC notes: the participating governments gave themselves authority to set the minimum price for a carbon credit, rather than leaving it up to market forces, and to take unsold credits out of the market rather than letting the supply exceed demand.

“These are two very important design features,” said Équiterre co-founder Steven Guilbeault, now an advisor to the federal government. “I know, from having spoken to politicians and bureaucrats in the European Union, that they’re very envious we did this, and they didn’t.”

Papy added that cap-and-trade was a better choice than a carbon tax for a province like Quebec, where utilities and industry account for a relatively small share of emissions. “If you wanted to have a carbon tax that makes a meaningful difference, it would have to be huge—and that would be very unpopular,” he told CBC. The system also allows the province to assemble capital for low-carbon infrastructure projects.

“When we talk about carbon pricing, what we mean, really, is preparing the economy, and society as well, for a big shift, for a transition to a low-carbon economy,” he said. “That kind of transition cannot be done over five or 10 years. It has to be done over a longer period of time, say, between 20 and 40 years.”