Climate change has no boundaries. It affects everyone in our global community. Actions taken in one place – like increasing emissions at an old power plant – have a negative impact on those living half a planet away. For this reason, effective solutions to climate change must also have no boundaries.
We have watched as international climate negotiations have stuttered and stalled, yet we remain hopeful, seeing progress now building from the ground up rather than the top down. On Friday, an unprecedented collaboration took shape when the Quebec and California formally agreed to link their cap-and-trade programs, demonstrating that states and provinces can successfully work together to magnify the strength of their efforts.
For more than a decade, California has been taking the lead in the United States in developing a comprehensive approach to addressing climate change. When I served as governora, I was proud to sign the first legislation in the nation to reduce global warming by reducing tailpipe emissions, a standard that has since been adopted nationally under President Obama. We also established the California Climate Action Registry (the greenhouse gas monitoring registry) and the first statewide Renewable Portfolio Standard. Collectively, these efforts were the foundation for AB 32 (the California Global Warming Solutions Act). AB 32 codified a far-reaching framework to address all major sources of greenhouse gas emissions and implemented a cap-and-trade program that will eventually cover emissions in 85 per cent of the California’s economy, the eighth largest in the world.
Not only will these reforms set California on the path to lower greenhouse gas emissions, but they will also provide the core incentives to build a 21st century clean energy economy. Just recently, a report showed that the pace of green job growth in California continues faster than the economy overall and that California continues to garner 60 per cent of all venture capital investment in the U.S. and 40 per cent of such investment worldwide. And all of this while per capita emissions of greenhouse gases has declined over the past five years, showing that fighting climate change and growing a new clean economy are not only compatible, but mutually supportive.
Quebec has much in common with California. It too is a leader in green technology and willing to adopt ambitious environmental goals, even when they are somewhat at odds with the political winds in the rest of the country. Efforts made in recent years have enabled Quebec to become a true leader in the fight against climate change. Today, Quebec displays some of the best results in North America with respect to greenhouse gas (GHG) emissions. Up to now, the plan with $1.6-billion budget has led to the realization of more than 2,000 projects. The new plan, announced in March, 2012, will call for investments of nearly $2.7-billion by 2020.
The province has initially established a carbon reduction goal of 20 per cent and will try to target a goal of 25 per cent below 1990 emission levels by 2020. This is among the most ambitious commitments in the world. And because Quebec has virtually no emissions from electricity, the reductions will be all the more difficult to achieve since there are fewer low-hanging fruits to be plucked. Quebec has enacted its own clean vehicle and fuel standards, is building its own regulatory framework, and also sees the new clean energy and technology economy as the way forward
A carbon market will offer businesses greater flexibility to attain the reduction target. Indeed, they will have the choice of investing in green technologies or of obtaining permits on the market. The association with other partners such as California will broaden the array of possibilities to reduce GHG emissions at lower cost.
Despite their obvious differences in language and culture, California and Quebec both recognize that putting a price on carbon and letting the market find cost-effective and innovative solutions is the wisest approach both environmentally and economically to address the serious threat of global climate change. Each has designed cap-and-trade programs that rely on a common approach and that use common infrastructure. Soon these two jurisdictions will jointly hold an auction of carbon allowances and will begin mutually overseeing this new marketplace. With the establishment of a carbon market, Quebec and California will take their places in a rapidly emerging market. According to the World Bank, the value of transactions worldwide increased from $11-billion to $142-billion between 2005 and 2010.
The strength of this partnership is not limited to the two jurisdictions alone, however. Its real strength is that the partnership creates a path for future partners to follow. Already, other U.S. states and Canadian provinces are watching carefully and beginning to talk about joining this movement. In addition, there are now discussions with Australia, the cap-and-trade program in the Northeast U.S., and the European Union.
One of the great values of federalism is that it allows sub-national units to experiment and develop policy prototypes on a scale that can be evaluated and fine-tuned before being adopted by countries or regions as a whole. As more and more states, provinces, regions, and individual nations begin taking action on their own and as these jurisdictions begin to connect, companies will begin to mount pressure for a single, consistent, and certain system so they are not faced with a myriad, patchwork of regulations. We can foresee a day in the not-too-distant future when governments, businesses, and the environmental community join together to drive national and international action on climate change from the ground up. And this will be the true significance and legacy of the historic linkage agreement between California and Quebec.
Jean Charest was premier of Quebec from 2003 to 2012. He recently joined McCarthy Tétrault as a Partner in the Business Law Group. Gray Davis served as the governor of California and is a board member of the Climate Action Reserve, the non-profit successor to the California Climate Action Registry.