More details on Quebec's draft cap-and-trade regulation

July 13, 2011

As we previously reported here, Quebec’s draft Regulation respecting a cap-and-trade system for greenhouse gas emission allowances (the Regulation) will come into force on January 1, 2012, subject to amendments. 

The cap-and-trade system (System) will require the registration of “emitters,” which is broadly defined as persons and municipalities who produce more than 25,000 tonnes of CO2 equivalent per year at an establishment, and who i) conduct an enterprise in electric or natural gas utilities, mining, oil and gas exploration, steam and air conditioning supply, manufacturing or gas pipelines; ii) acquire electricity generated outside of Quebec, or iii) manufacture and distribute hydrocarbon fuels in Quebec.

Emitters must verify their emissions during certain compliance periods (the first period commencing January 1, 2013 and ending December 31, 2014), and must cover their emissions above a “cap” with offset credits issued by the Quebec Minister of Sustainable Development, Environment and Parks (Minister), or by a government with whom Quebec has agreed to recognize their offset credits. Emission allowances may be traded with other emitters or participants in the System, or may be purchased from the Minister. Emissions reductions made during the eligibility period from January 1, 2008 to December 31, 2011 may also be used as early reduction credits.

Failure to cover emissions in excess of the cap will lead to an administrative sanction equal to a deduction of 3 emission units or early reduction credits for each missing allowance required to cover the excess. Contravention of the Regulation may result in fines up to $250,000 for a legal person, or any person or municipality operating an enterprise.

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