California regulators proposed rules this week that will allow cross-border carbon trading so that Quebec can participate in the cap-and-trade program.
It broadens the market for companies that trade emissions permits to both California and Quebec. British Columbia is expected to join in a few months.
The California Air Resources Board will vote on the rules June 28, and if approved, the first linked auction of allowances for Quebec and California companies would take place in November.
California has been trying to create a regional system through the Western Climate Initiative, but most of those states have dropped out since the GOP took over in 2010.
Mary Nichols, Chair of the California Air Resources Board, plans to visit Australia to explore a linkage with its cap-and-trade program, which begins in 2015. "Linking provides more options to California businesses and lays the groundwork for other partners to join with us," she says.
South Korea and Mexico recently passed laws to create carbon trading and have expressed interest in linking to regional programs.
The broader a cap-and-trade program is, the more effective it is. One of the main sticking points for these programs is industry's objection that it puts them at a disadvantage if competitors in other countries don't have to follow the same rules.
In the next five years, "we will have a much larger fabric of states and provinces working together," says Nichols.
"The cap and trade system is acknowledged as one of the most efficient and least costly economic tools available to reduce GHG emissions," says Quebec's minister for sustainable development, Pierre Arcand.
California's program officially begins in 2013. It sets industry-wide limits on greenhouse gas (GHG) emissions for the first time in the US.
Companies that exceed industry emissions limits can buy carbon allowances from cleaner companies that can meet those limits, and they can also buy carbon offsets. Emission limits become more stringent each year through 2020.
The program covers 85% of California's GHG emissions and is a key component of AB32, California's 2006 landmark climate change legislation, which attempts to fill the yawning gap left by the lack of federal policy. Under the law, California must reduce GHG emissions to 1990 levels by 2020.