Emissions:

Quebec environment minister Blanchet previews carbon auction with California

As California moves forward with a Jan. 1 linkage date to the Quebec carbon market, what hurdles still exist as they prepare for the first joint auction? During today's OnPoint, Yves-François Blanchet, Quebec's minster for sustainable development and the environment, discusses the impact linking systems will have on broader efforts to expand the use of market-based mechanisms to address climate change. Blanchet also explains how Quebec's participation could affect trading prices.

Transcript

Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Yves-François Blanchet, Quebec's minister for a Sustainable Development and the Environment. Minister, thank you for joining me today.

Yves-François Blanchet: It is a pleasure.

Monica Trauzzi: Minister, California has taken the step to link carbon markets with Quebec effective January 1, 2014. How critical of a step is this to expanding the use of market-based mechanisms to address climate change?

Yves-François Blanchet: For those jurisdictions, I hope you will forgive my English, which is far from being perfect, for those jurisdictions who believe that cap-and-trade system is the best way to reduce our emissions, this step taken by both Quebec and California is very important. It does, we expect, we believe, we strongly believe that it will have an effect, it will reduce, it will engage industries into this necessary action, and it will also bring, we hope so, more states, more jurisdictions, to join in this initiative, which would, and we have to hope for it, and we have to go toward it, that we would eventually link with some other states and jurisdictions even outside of America.

Monica Trauzzi: It's been a long time coming. I mean, we've seen several dates come and go in terms of when this linkage was actually going to happen. What are the potential hurdles that you've identified that still exist between now and January 1 that could come in the way?

Yves-François Blanchet: I don't see many of them, because in Quebec, it was pretty easy. Both the main parties at the National Assembly favored this initiative, so there's an, I would say an absolute consensus about this project in Quebec. In California, it was a little more complicated, and the Governor has to publish a finding, which was released a few weeks ago, and was positive. The only effect of that was very small changes in the harmonization of the regulations, and also six months, a delay of six months, and I must humbly admit that too we can use those six months in order to be as ready as possible when the day, when the first, January 1, 2014, will actually come.

Monica Trauzzi: So let's talk about offsets. That's been a major point here. Where does your work on offsets stand at the moment? What progress has been made on eligibility?

Yves-François Blanchet: Eligibility for offsets has been concentrated in Quebec on manure, on waste issues, and on those gases which affect the ozone layer. This is the main sources that will be acknowledged for credits. California will have its own ways, own sources. And we consider the possibility of Quebec being at first a little bit more of a buying market, because we are performing very well already. Ninety-seven percent of our energy is coming from idle electricity, which does not provide us with this tool for reducing our emissions. We will have to work mainly on transportation, which will come to action which will play a part in this market only from like 2014.

Monica Trauzzi: How do you anticipate Quebec's participation will impact trading prices? Will there be an impact?

Yves-François Blanchet: It should be, one of the fears that we could have had is the fact that in Europe, there was no low level, no floor price, as we did. And because the economy was not doing so well in Europe, the price of the credits went very low, to a level to which, as we saw this morning, Germany got back into producing electricity from coal, which is a pretty sad statement by itself. But it does show that there is a necessary link between economy and this. This would reduce gas emissions. If the economy does not follow, there might be problem. But in our deal with California, we set a floor price at $10, and already the second option in California did see a price. We saw a price at more than $13, $13.70, something like that, which is a demonstration that the price of the credits might remain quite high. And since Quebec would, might be more of a buying market at first, we will have the effect of maintaining such a price. And it is important for the industries that will be part of the process, that the price of the credits remain at a good level.

Monica Trauzzi: The Western Climate Initiative has been criticized by some because it's now much smaller than initially anticipated when it first started. Do you think that WCI continues to be a financially viable route for California to pursue?

Yves-François Blanchet: Actually, what has, some of the players in the United States have got out of the WCI because of some changes after the elections, with some Republican elected people. In Canada, the interest is still the same. But of course, the situation of economy in both countries is not an incentive towards such initiatives. The effect at the end of the day will be that the promotion of this project will go from bottom up. It will go from a deal between California and Quebec. And together, we are close to one-seventh of the whole population of Canada and United States. It's quite significant. And some of the players might look at us and say, "This is the right way to do things." And in due course, and we have committed ourselves, both California and us, we have committed ourselves to bring some new players around the table and within this cap and trade market.

Monica Trauzzi: Let's talk about some of the other projects that Quebec is working on. You've taken steps in Quebec to impose a five-year moratorium on hydraulic fracturing. Where does the effort stand now, and what is your strategy behind that move?

Yves-François Blanchet: Actually, what I wanted to do, as you probably know, a few years ago, and for quite a long time, there was serious discontent in the population about the way this issue was handled. And the people of the Saint Lawrence Valley did not trust neither the companies or the government back then. And eventually, there was an environmental evaluation which was set forward by the previous government, which was not, let's say it was not seen as being clear enough. What we said is that we will take some 78 different studies. We will give them to Public Audiences Office, which is part of the Quebec system, and which is a model that seems to attract interest from other jurisdictions also. And we just, we did transfer the studies. This will be completed by the end of this year, by November. In the meantime, it wouldn't be logical to allow those companies to keep spending. So we said, "You cannot do that." But it is not a five-year moratorium. It is a moratorium until the National Assembly does set the rules. And this should come within 18 months, something like that. The five years is the limit, the extent, the first extent of the moratorium. In five years, if the government hasn't done anything, then the moratorium will be raised.

Monica Trauzzi: What is your view on hydraulic fracturing? Is it safe?

Yves-François Blanchet: What I do is avoiding acting according to my personal views. My responsibility, you know, in a previous life, I was president of the network in Quebec, and I must say, and I said to the people of those groups, which I respect very much, that I'm not an activist anymore. I am a minister, and my responsibility is to place the government of Quebec in the position to make the right decisions. So I will leave to the science, to the development of knowledge, the initiative in this topic. And at the end of the process, they will give me some recommendations about what should or should not be done. And at this moment, I will make a decision through our government. But in the meantime, I don't want my personal opinion to interfere.

Monica Trauzzi: One final item. New York is moving forward with a $2 billion transmission line that would run from Quebec to New York City. Do you believe that it's of mutual benefit to Quebec and the power plant operators here in the states?

Yves-François Blanchet: Actually, what I can say is only from my side of this issue, but if it is a business opportunity for Hydro-Quebec, they will and they do look into it. But the deal and the way this is done on your side of the border, I will not emit opinions about that. But we do provide clean energy. We do provide an energy which by itself helps states to reduce their gas emissions.

Monica Trauzzi: All right, Minister. We'll end it right there. Thank you for coming on the show.

Yves-François Blanchet: It's been a pleasure.

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

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