Where do efforts behind linking California's and Quebec's carbon markets stand? During today's OnPoint, Alain Olivier, director of the Quebec Government Office in Washington, D.C., discusses the latest progress on Quebec's carbon trading system and his expectations for linking systems with California as early as August of this year.
Monica Trauzzi: Hello, and welcome to On Point. I'm Monica Trauzzi. Joining me today is Alain Olivier, director of the Quebec Government Office in Washington, DC. Alain, it's great to have you back on the show.
Alain Olivier: Nice to be back.
Monica Trauzzi: Alain, let's start with an update. What is the latest on Quebec's carbon trading system, which has now been officially authorized to begin?
Alain Olivier: Yes. Well, last December, WCI had a meeting in Quebec City, where Mary Nichols and Secretary Matt Rodriguez met with Quebec officials, including Minister Yves-François Blanchet, and there was an important regulation that was enacted that day, the day after, that paves the way for Quebec now to link with California, but also with any other jurisdictions that may become members of WCI down the road. And now the next steps, as far as we're concerned, is there's going to be some time in the first part of 2013 an agreement between Quebec and California allowing for linkage, and then, the joint auction, as such. And we're always aiming for August for that joint auction.
Monica Trauzzi: OK. But there are lots of moving parts here.
Alain Olivier: Of course.
Monica Trauzzi: Are you confident that that August date will happen? And ...
Alain Olivier: Yes. Yes, we are. We are, and we're going to be testing the - just the normal functioning of the market in Quebec. California has already done that last November. But we're going to be doing more like a mock auction sometime in the spring to test how the market responds. And then for the next steps, it's going to be the agreement, and then the linkage, and then the joint action, so ...
Monica Trauzzi: What are your expectations for pricing once that linkage happens? Could we see the price go up from that 10.70 that's was, that's been set?
Alain Olivier: That's the floor price.
Monica Trauzzi: Yeah.
Alain Olivier: You know, the projections for 2013 of the prices are - it's quite a broad array of prices. So we're looking at between 19.00 and 34.00, so that's a broad range. And up to 2020, higher prices at 31.00 to 55.00 dollars. You know, at this stage, because there are a lot of allowances out there, and there's just ten percent that's auction, we can't have the same expectations of high prices as we will in two years when half of the allowances will be auctioned. So we were happy for our part that the November auction in California went well. I think our California partners were as well. But I think that the price at that auction doesn't, doesn't reflect what will be, you know, the future trends, and what our outlook is for the future.
Monica Trauzzi: I know that your colleagues are still working on the offsets issue. Is there any further clarity on how that may pan out?
Alain Olivier: Well, you know, there are three areas that we're going to be looking at in, for our part. First of all, waste management in the agricultural sector, the landfills, and the refrigerating foam that we're seeking to retire. California also covers refrigerating gases, which we don't at this stage. And the thing that's interesting is, you know, as far as eligibility, these offset projects don't just need to be in Quebec. They can also be anywhere in Canada. And it's the same thing for California, where it's going to be U.S.-wide. Right now, we have protocols that are moving in the direction of harmonization, but we're, we're not quite there yet.
Monica Trauzzi: What are the biggest unanswered questions that you have, or some of the issues that you might be looking at as California is going through its process, heading into this August sort of deadline that you've established?
Alain Olivier: Well, things have been going - things have been going well. We've been extremely impressed by the commitment that Mary Nichols and Governor Brown have shown to the project. For sure, when there's some form of opposition in the business community, you always have to take that seriously, to think whether you're, you know, whether the design of the project makes sense. And, you know, because in Quebec there's already a carbon levy on fossil fuel consumption and purchases, our estimates is that the hurdle that needs to be cleared is not that high, that even if, you know, business has apprehensions at the outset, that they can clear it quite easily for this year and next, and we're foreseeing that for 2015, a business would only have to have additional energy efficiency gains of the order of two percent. One of the big criticisms that's come out in the debate on the platform is, well, you just have two jurisdictions that are part of it, so does it make sense? And for us, from the time I've, you know, looked at this in D.C., heard from a lot of people, people are looking for ways to deal with climate issues, and they're on the sidelines looking at how the Western Climate Initiative comes together. And we're confident that once they see it's a success, that it's not a burden on business, that it brings in money to both the state and the province, that we'll have additional, you know, members. And that creates a larger critical mass of partners.
Monica Trauzzi: So you think this will open doors for linkage with other systems? Are you just talking about within the U.S., or also international partners? I know there have been discussions with Australia that California's been engaging in. So is this a - is this a global thing that you're talking about?
Alain Olivier: Well, you know, we, you have to, to take small steps, so one member after another member. The whole philosophy behind the Western Climate Initiative in 2006, when Governor Schwarzenegger launched it, with others, and we joined afterwards, was, OK, we have to do something to meet big climate goals in terms of big emissions reductions. And we think our first objective, and the WCI was designed on that basis, is to lead to a North American carbon market. So the goal is to influence US and Canadian federal policy to make that happens. And the rest of the world, you know, when you spoke about Australia, but China, India, a lot of countries in Southeast Asia, Europe's been doing that for a number of years, so when you look outside the Beltway, there are many important economies that are looking at the carbon market route to deal with the issue.
Monica Trauzzi: All right. A lot to watch here. Thank you for coming on the show. Nice to see you again.
Alain Olivier: Thank you, Monica.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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