California on track to link CO2 scheme with Quebec in 2013

Oct 2 (Reuters Point Carbon) - California is on track to link its forthcoming emissions trading scheme to Quebec's in 2013, pushing the state one step closer to its goal of connecting to a wider carbon market, the state's chief air regulator said on Monday.

Mary Nichols, chairperson of the California Air Resources Board (ARB), said that California Governor Jerry Brown will sign off on rules that would enable linkages for the state's CO2 market after review by the attorney general.

The governor must within 45 days find that the other jurisdiction has adopted a greenhouse gas reduction program that is equivalent or stricter than California's program and that any linking failure will not impose significant liability on the state.

"We are preparing the package for the governor to sign off on linkage, which should happen sometime this year," Nichols told a carbon market conference in Washington.

She added that linkage to and joint auctions with Quebec's market would take place next year.

The two jurisdictions, both members of the Western Climate Initiative - a regional cap-and-trade system, had planned to link their markets before their 2013 launch dates but delayed the links to await approval by California's governor.

Quebec's GHG reduction target is 20 percent below 1990 levels by 2020, which is more ambitious than California's goal of 1990 levels by 2020.

The addition of Quebec would increase the size of the overall market by 20 percent, increasing liquidity and giving California businesses more opportunities to reduce emissions.

Nichols told the conference that California's carbon market, which covers 85 percent of the state's economy, will benefit from links to other emerging cap-and-trade schemes by making it less expensive for emitters to comply with emission restrictions.

"We have come to agree it would be better to be part of a larger system," she said.

But a panel of experts advising ARB recently said that the upside of linking California and Quebec would be negligible, and suggested waiting until 2015 to formally connect the two markets.

"Delaying linkage until both California and Quebec markets are well-functioning is likely to reduce cost and increase benefits," California's Emissions Market Assessment Committee said in a report released on September 24.

"This is unlikely to be the case at least until the second phase of the program in California is implemented in 2015," the committee said.

Meanwhile, Australia's climate change secretary, Mark Dreyfus, said on Sunday that Australia and California would set up a forum to share experiences on climate policy, including how best to build carbon markets.

Nichols will travel to Australia to further the talks and speak at a carbon markets conference on October 24.

She said California is also in talks about potential links with the northeast's cap-and-trade scheme called the Regional Greenhouse Gas Initiative (RGGI) and with the more than half dozen Chinese provinces that plan to implement emissions trading systems.

Nichols said she is also hopeful that some of the WCI partners that withdrew from the emissions trading scheme may rejoin the market after November's general elections.

For example, former Democratic Congressman Jay Inslee, a long-time advocate of cap and trade, would be likely to revisit Washington state's participating in the WCI if he is elected as governor this November.

"I think the possibility of them rejoining are a little better (post-election). If we succeed in demonstrating this is a program that can achieve good results I think others will be interested," she said.

Source: Reuters (Reporting by Valerie Volcovici)