Around the world, there are regulated and voluntary carbon markets. The two markets can coexist in parallel, because they do not involve the same types of players.
In North America, there has been a proliferation of local initiatives.
A regulated market is established by a jurisdiction which regulates emissions allowances for example while a voluntary market is not subject to any law or regulation, other than normal contract law, and only the principle of supply and demand governs this market.
Steps leading to the creation of a regulated carbon market in Quebec
- In 2008, Quebec joined the Western Climate Initiative (WCI).
The Western Climate Initiative is a group of American States and Canadian provinces that recognize the need to act now to fight against climate change.
To develop a common approach to the fight against climate change, a framework for implementation of the regional program was discussed and adopted in 2010. The WCI program aims to reduce GHG emissions to 20% below 2005 levels by 2020. To achieve this, members must reduce their emissions by reducing their dependence on fossil fuels.
The key tool to achieve the objectives of the program is to implement a cap-and-trade system of greenhouse gas emissions within the territory of WCI members. The cap-and-trade mechanism is considered as an effective means of reducing air pollution.
WCI laid the foundation for the proper functioning of a regulated North American market, but does not have any coercive measures. Each government is responsible for the implementation of a system on its territory.
To achieve the goals of the WCI, Quebec has adopted a set of measures for the creation of a system of Cap and Trade (SPEDE).
- In 2011, Quebec adopted the Regulation respecting the cap-and-trade of greenhouse gas emissions. Quebec became the second member of the WCI to adopt such a mechanism after California (adopted in 2010).
Although SPEDE is inspired by the WCI program, it is important to understand that the rules are independent of other states and provinces. However, the regulations provide links between different regions. For the province of Quebec, becoming a member of the WCI and implementing the cap-and-trade system were all actions undertaken according to the provincial GHG reduction targets.
This is why the Quebec GHG reduction target is different from other members of the WCI.