Emissions Trading:

Quebec's Olivier discusses market challenges facing Western Climate Initiative

With so much of the focus coming out of Canada on shale gas and oil sands exploration, how do provinces like Quebec balance the country's aggressive energy goals with its provincial-level climate initiatives? During today's OnPoint, Alain Olivier, director of the Quebec Government Office in Washington, D.C., discusses the latest progress on the Western Climate Initiative and explains how Quebec plans to handle offsets once it links its trading system with California's.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Alain Olivier, director of the Quebec Government Office here in Washington DC. Alain, thank you for coming on the show.

Alain Olivier: Thanks, Monica.

Monica Trauzzi: Alain, so much of the focus coming out of Canada right now on shale gas and oil sands exploration, how does Quebec balance the goals of an emissions reduction plan with these very aggressive goals and targets for oil and gas exploration?

Alain Olivier: Well, you know, Quebec, like Manitoba and other provinces in Canada, are essentially green energy producers. And we export. We've been exporting for years to states in New England, to New York State, essentially clean renewable green energy through transmission lines. The similarity there is, is that there's a cross-border dimension to the issue in terms of transmission. That is also the case for pipelines in Western Canada. We're confident that Quebec helps states in the North East achieve their greenhouse gas emissions reductions and that's why we've had good relations with them and we've been complementing their energy portfolio for several years now.

Monica Trauzzi: Do you separate yourself sort of from what's happening in the western part of your country and ...

Alain Olivier: I wouldn't present it that way. It's just that we're in different market segments, you know? We're selling to other power utilities. We're selling onto the grid. We're not in the fossil fuel industry, so we're just in different market segments dealing with different customers and we're plying to different needs, you know?

Monica Trauzzi: What have you done in terms of economic incentives to get industry to address emissions and move towards those goals?

Alain Olivier: Well, already -- and that allows me to talk about the Western Climate Initiative that we're going to start implementing with California starting January 1 next year. In fact, at the outset, if things go according to plan, a substantial chunk of the emissions permits will be distributed free to either power producers or to the industrial sector. So that, those permits, the producers can then trade on the secondary market and that, through the money they'll receive through those trades will compensate them for the adaptation that they have to undertake, you know, within their own plans, within their own industry. So, that's an example of an incentive we provide through the WCI that's going to be launched in a few months.

Monica Trauzzi: In the discussion leading up to the launch of the WCI there are some concerns that Quebec might essentially eat up all the offsets and raise prices. What role do you think Quebec will play in that once it's linked up with California?

Alain Olivier: Great question. I think we don't have all the answers at this stage. For sure at the beginning it's likely that most of the trading will take place within the -- in fact, between actors in the domestic markets, so within California and within Quebec. The offset issue may present itself at a later date, but that's not one that we've resolved so far, but we're aware of it.

Monica Trauzzi: There are so many similarities between the U.S. and Canada in terms of what's happening on the state and regional levels and how fragmented those efforts can be compared to what's happening on the federal level. Do you believe that that sort of fragmented nature poses a threat to a unified carbon market?

Alain Olivier: No, I don't and I think that in recent years we've collectively invested a lot of time and hope in developing -- in hoping to develop markets at the national level or having major legislation at the national level. They were not successful. I was on a panel at Georgetown this morning and we discussed the fact that regional initiatives, whether it's RGGI on the East Coast or what we're doing with California or North America 2050, it's these regional initiatives that will lead to the -- eventually to a federal carbon market, rather than the other way around. And that was, unfortunately, the strategy that was taken in 2008, 2009. So I don't think it's fragmentation. I think rather it's an example of state, local, provincial governments building a consensus regionally that will become national and will allow for the implementation of a national carbon market. And, hopefully, an international carbon market as well.

Monica Trauzzi: So, you wouldn't say that Ottawa is irrelevant at this point in that discussion?

Alain Olivier: No, I wouldn't, I wouldn't at all. We work in close collaboration with our Canadian federal partners. It's just that with the energy profile we have been Quebec, where 97 percent of our electricity is renewable, we've pretty much built our strategy, economic sustainable development strategy on what we can do in reducing greenhouse gas emissions. So, we're going to continue on that path and Canada provides the flexibility that you may have different regional models and it works nonetheless.

Monica Trauzzi: So, you mentioned RGGI. How strongly are you pushing for RGGI to become part of the WCI at some point?

Alain Olivier: Good question. Although Quebec is on the East Coast, we decided at the outset in 2008 to join the WCI because it's a broader-based carbon market. It doesn't just focus on the power sector, it also covers industry and longer-term transportation. And that's where -- transportation is where most of -- over 40 percent of our emissions come from. So it made sense to join WCI at that point. RGGI, as I mentioned, focuses more on the power sector where we're already 97 percent renewable through the Hydra. So, we're hopeful. Our first objective is to get the WCI trading platform up and running. And we're hopeful that this conversation between regional systems will get to take place down the road.

Monica Trauzzi: And how effective of a trading platform do you think it's going to be from the get-go? From day one are we going to -- is it going to be effective?

Alain Olivier: Well, in fact, we've been -- we're working with California now to develop, you know, to have the same standards for the platform, the same recognition criteria and it's in the plan to have the same approach as RGGI had in 2007, to have auctions before the system begins. So that way, you get industry involved and well acquainted with the mechanisms so that January 1 is, you know, the system is already functional.

Monica Trauzzi: All right, it will be very interesting to watch. I thank you for coming on the show.

Alain Olivier: Okay, well, thanks Monica for the opportunity.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]

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