Photo Credit: Investopedia/MichelaButtignol

Governments of The Three Jurisdictions Issue Joint Statement on Potential to Form Shared Carbon Market

Tuesday, 02 April 2024 10:21.AM

- California, Québec, and Washington agree to explore linkage -

The California Air Resources Board, on behalf of the state of California, the Gouvernement du Québec, and the Department of Ecology, representing the state of Washington, each recognize that fighting climate change requires sustained collaboration by all governments. Today they are officially expressing their interest in the potential formation of a shared carbon market between the three jurisdictions.

California, Québec, and Washington share a common interest in drastically reducing greenhouse gas emissions in response to the global threat to well-being and prosperity posed by climate change. This threat demands significant and immediate collaborative action.

California, Québec, and Washington each operate a carbon market to cost-effectively meet their respective mandates for greenhouse gas emissions reductions. California has been operating a cap-and-trade program since 2012, and Québec has been operating one since 2013. These two markets were linked on Jan. 1, 2014. The state of Washington has been operating its cap-and-invest program since Jan. 1, 2023.

Linking the California-Québec carbon market and the Washington carbon market would enhance the ability of all three jurisdictions to work together to develop and implement cost-effective programs to fight climate change, while allowing each jurisdiction to maintain authority over its own program's design and enforcement.

California, Québec, and Washington are mutually committed to continue cooperating and sharing information to evaluate a potential linkage of their carbon markets and to ensuring a just and equitable transition to a carbon-neutral future that benefits overburdened and disadvantaged communities.

The three jurisdictions are following their respective processes to explore linking carbon markets. If the three jurisdictions enter into an agreement to link, linkage would then be attained through updates to regulations adopted by each jurisdiction.

In a linked market between California, Québec, and Washington, allowances issued by each government could be used by businesses in any of the three jurisdictions to cover their emissions. The three jurisdictions would host joint auctions, and market participants could trade across jurisdictions – so allowance prices would be the same across the jurisdictions. Each government would retain authority over their respective program, but businesses would gain access to a larger pool of allowances.

The jurisdictions have a history of cooperation with each other. They have been sharing best practices regarding program design and implementation through their membership in the Western Climate Initiative, Inc. (WCI, Inc.). WCI, Inc. provides the technical and administrative solutions for supporting the coordinated development and implementation of their respective programs, including the online platforms used for program registration and auctions.

The jurisdictions also provide technical assistance to other subnational governments and countries seeking to implement carbon markets and jointly participate in capacity-building initiatives that foster intergovernmental collaboration on emissions trading systems.

SOURCE: Ministère de l'Environnement, de la Lutte contre les changements climatiques, de la Faune et des Parcs