Who cares about Kyoto? California and Quebec create their own transnational carbon market

Global warming knows no borders.
Global warming knows no borders.
Image: Terry Andrewartha/BBC
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Efforts to create a national carbon market in the US to cut greenhouse gas emissions may be deader than bipartisanship in Washington. But California today took another step to globalize its cap-and-trade program by signing an agreement with the Canadian province of Quebec to integrate their two carbon markets as of January 2014.

The deal is another sign that any efforts to fight climate change are likely to be spearheaded by cities and states rather than nation-states, given the utter failure to reach a global consensus on how to cut greenhouse gas emissions.

California launched its carbon trading market in November 2012 to comply with a state law that requires greenhouse gas emissions to fall to 1990 levels by 2020. The market currently covers power plants, oil refineries and other industrial polluters that must reduce their carbon emissions by a set amount each year or buy credits from those that have exceeded their reduction quotas.

Every year the carbon vice tightens as the emissions limits fall and companies are forced to devise new ways to cut their greenhouse gas spew or purchase more and more credits. The idea is that eventually even those polluters that prefer to buy their way out of the cap will be forced to clean up their act to be competitive with less carbon-instensive rivals.

Quebec instituted a similar market to cut emissions 20% below 1990 levels by 2020. But with a population of just eight million it’s a rather tiny market. By joining 38 million Californians, Quebec hopes to give its industrial polluters more options to offset their emissions. For California, the transnational carbon market is just the first step in leapfrogging borders that have proven to be barriers to attacking global warming.

The California legislature authorized the governor to link the state’s carbon market to others. And in a 2012 report, the agency responsible for overseeing the cap-and-trade program recommended approving a regulation allowing California to integrate its market with Quebec’s.

“Climate change is a global problem that requires action by states, provinces, and nations,” stated the report. “The proposed regulation furthers California‘s effort to address climate change through coordinated sub-national efforts.”

It’s a trend embraced elsewhere. But as the recent election in Australia shows, politics can derail such good intentions. Australia was set to convert its carbon tax to a cap-and-trade program in July 2014 and then link that market to the European carbon market. In September, however, a conservative government took power in Australia, vowing to scuttle the carbon tax.