Ontario, Quebec and Mexico get cozy over cap and trade, carbon pricing

Mere days ago, QP Briefing asked an oh-so-bold question: Will Ontario ultimately link its cap-and-trade system with Mexico?

That question may not be as far-fetched as it was on, uh, Monday.

First of all, Ontario will commence its cap-and-trade system this January, and link it with similar carbon-pricing programs in California and Quebec in 2018. Mexico, meanwhile, is launching a carbon market pilot project this November, with an eye on a national emissions trading system for 2018.

And on Wednesday, it was announced Ontario had signed a joint climate change declaration with Quebec and Mexico. Among other pro-cap-and-trade statements, the declaration says the three governments are in agreement "on the need to act with other partners in a coherent and integrated manner in the fight against climate change, including the use of carbon market instruments, with the goal of reducing greenhouse gas emissions while maintaining a fair and competitive economy."

It also says the trio “wish to deepen their collaboration by conducting cooperation activities on carbon markets with the objective of reducing greenhouse gas emissions.”

“The partners intend to share information and best practices on the implementation of their respective strategies and programs to mitigate greenhouse gas emissions and to adapt to the impacts of climate change,” adds the joint declaration. “The partners are determined to jointly promote the expansion of carbon market instruments for greenhouse gas emissions reduction in North America.”

Cap and trade involves creating a carbon market, by establishing a steadily-decreasing limit on greenhouse gas pollution and requiring certain businesses to buy carbon-burning credits equal to their emissions. Firms can sell or trade the allowances they don’t need to companies that do. Ontario’s Liberal government estimates it will raise approximately $1.9 billion a year from selling emission permits under its carbon-pricing regime.

Cap and trade is also the backbone of the province’s climate change strategy, as the Liberal government is shooting for a 15-per-cent cut below 1990 emission levels by 2020. The province's climate change action plan, and up to $8.3 billion in GHG-reducing initiatives it contains, will be solely funded by cap and trade.

Furthermore, Ontario plans to link its cap-and-trade system with programs already operating in California and Quebec, who have held joint carbon credit auctions since November 2014. Adding Mexico to that carbon market – which has significantly cooled this year, leaving California and Quebec without hundreds of millions of dollars in revenue, and raising questions about Ontario’s cap-and-trade dreams – would turn it into an even bigger endeavour.

So will Ontario and Mexico unite their cap-and-trade systems at some point? Well, at the very least, they want to spread cap-and-trade love all over the continent.

“This milestone declaration will boost cooperation between our three regions and drive the reduction of carbon emissions across North America,” said Premier Kathleen Wynne in a statement. Wynne is in Mexico this week for the Climate Summit of the Americas, the inaugural edition of which was held last year in Toronto.

“I look forward to working together on common goals including advancing carbon markets and cap and trade programs across North America," added the premier.

To contact the reporter on this story:
gzochodne@qpbriefing.com
905-926-8026
Twitter: @geoffzochodne