Ontario and Quebec do cap-and-trade

It took some doing, but I finally found a copy of the Quebec–Ontario cap-and-trade deal (PDF) on the website of Quebec Premier Jean Charest. Here’s the text, if you’re looking for it yourself. My commentary’s beneath.


Provincial – Territorial
Cap and Trade Initiative
Memorandum of Understanding

WHEREAS the Intergovernmental Panel on Climate Change (IPCC) recently concluded that warming of the climate system is unequivocal and that most of the observed increase in global average temperatures is due to human activities; and

WHEREAS strong, immediate and sustained action is an absolute requirement to minimize the risks posed by climate change; and

WHEREAS early action to reduce greenhouse gas emissions is now understood to be less costly than the severe economic impacts associated with inaction; and

WHEREAS reliance on intensity-based targets does not provide for sufficient certainty of real reductions in greenhouse gas emissions; and

WHEREAS collaboration among provinces, territories and states of the United States and Mexico engaged in developing and implementing climate change policies provides a consistent approach to achieving absolute greenhouse gas emissions reductions; and

WHEREAS Ontario, Québec and other provinces and territories have joined The Climate Registry; and

WHEREAS cap and trade systems are a flexible, market-based mechanism that can facilitate the reduction in greenhouse gas emissions and provide opportunities for lowering the global costs of greenhouse gas emissions reductions; and

WHEREAS greenhouse gas cap and trade systems can facilitate the transition to a low carbon economy and encourage technological innovation, economic growth and job creation; and

WHEREAS the ability to link to other jurisdictional greenhouse gas cap and trade systems can provide greenhouse gas emission reductions at lower cost, allow for larger trading volumes and improved liquidity and improve the pace of innovation; and

WHEREAS harmonizing reporting requirements with other jurisdictions will facilitate the joining of new partners and linkages with other cap and trade systems; and

WHEREAS Ontario and Québec agree that like-minded provinces and territories are invited to sign this Memorandum of Understanding and work together collaboratively on this cap and trade initiative.

NOW THEREFORE, the signatories to this Memorandum of Understanding agree to collaborate on a Provincial and Territorial Greenhouse Gas Cap and Trade Initiative including the design and implementation of a cap and trade system in conjunction with broader regional trading systems already under development to reduce greenhouse gas emissions in their jurisdiction respectively. This collaboration shall include, but is not limited to:

  • Working co-operatively and with other provinces, territories and states on the design and implementation of a joint regional market-based multi-sector greenhouse gas cap and trade system, based on real reductions that could be implemented as early as January 1, 2010;
  • Facilitating participation and linkages with broader North American and international trading systems, to the extent permitted by applicable provincial, territorial, state and federal laws;
  • Providing an intergovernmental forum for collaboration between provinces and territories dedicated to developing and implementing a greenhouse gas cap and trade system in addition to other greenhouse gas emissions reductions policies
  • Recognizing early action in reducing greenhouse gas emissions based on the internationally accepted base year of 1990 for entities owning or controlling covered facilities or sources that have an established and credible record of emissions reductions for those facilities or sources;
  • Harmonizing greenhouse gas reporting requirements with other jurisdictions to facilitate the joining of new partners and linkages with other cap and trade systems so that regulated sectors do not face duplicative reporting requirements.

The signatories to this Memorandum of Understanding agree to direct their respective staff and appropriate agencies to meet as soon as is practicable to develop a work plan to deliver this initiative.

The signatories to this Memorandum of Understanding agree that other provinces and territories may join this initiative by signing a copy of this Memorandum of Understanding and provide a copy of it to all other signatories.


Given that it’s not an actual cap-and-trade deal, but rather a deal to make a deal soon, it strikes me as pretty thorough. Aside from the stuff obviously meant to tweak the federal government’s nose (like the part about using 1990 as a base year, which matters not at all in comparison to the percentage you’re promising to cut from that point), the commitment to absolute rather than intensity-based targets is significant, and so’s the commitment to link up with other carbon trading systems, which should lead to money finding its way to the most economically efficient emissions cuts, over time.

That much “real” stuff in the accord, and the 2010 target date for getting this thing going, suggests that both Dalton McGuinty and Charest grasp that this is a policy initiative that will reward swift innovation. You want to be ahead of this curve. Charest said as much, apparently:

Quebec Premier Jean Charest warned the federal government is missing the boat on a worldwide term.

“Ottawa won’t have a choice,” Charest said. “Ultimately, between you and me, the day the Americans elect a new government, the new government gets elected and says from now there will be a ceiling and such and such level and the trading will work this, don’t kid yourself,” he said.

“It’s not Canada which will say to Europe, ‘No, no, we’re doing our own system.’ Come on. They will be isolated at that moment.”

Naturally, the feds are frothing, but pretty ineffectually. It’s true that all the details, including the pivotal ones of how permits are to be distributed and whether there will be a “safety valve” price for unlimited permits from governments, have yet to be worked out. But it doesn’t seem fair to criticize a deal-to-make-a-deal for not actually being a deal. The extent of the desperation for material is suggested in this CBC story:

In the House of Commons on Monday, NDP Leader Jack Layton said the two Liberal premiers are filling a “vacuum of leadership” on the issue of cutting greenhouse gas emissions.

In response, Prime Minister Stephen Harper criticized the plan for not establishing a regulatory mechanism and suggested the new Montreal Climate Exchange will have to fill that void.

Canada’s first carbon trading market, a joint venture between the Montreal Exchange and Chicago Climate Exchange, was launched last Friday.

They’re going to leave the details to a privately operated market and that’s a problem? Remind me — who are the conservatives, again?


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