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California, the most populous U.S. state has positioned itself as a lender on climate-change action in the absence of federal leadership on the issue.JENNA SCHOENEFELD/The New York Times

Quebec says it would push ahead with its own carbon market if the U.S. government is successful in killing the emissions trading system it has in place with the state of California.

The United States on Wednesday sued California and other state entities for entering a greenhouse gas emissions trading program with the province, saying the state had no right to conduct foreign policy and strike what amounts to an international agreement to fight air pollution.

It is the latest feud between the administration of President Donald Trump and California over the state’s aggressive approach toward combatting air pollution and climate change. And it sparked a quick reaction in Canada’s political capitals.

“We are satisfied with the carbon market. If ever California left, we would continue alone,” Quebec Premier François Legault told reporters in Quebec City. “We would prefer if California stayed and if even other states joined. I know certain governors are thinking about it. But we’re not going to start debating what Mr. Trump says.”

Asked about the legal challenge in Ottawa on Wednesday, Prime Minister Justin Trudeau said his government intends to look into the matter and commended Quebec’s environmental actions. “Quebec has long demonstrated leadership in the fight against climate change, like B.C., in Canada. And we’re going to make sure that we are continuing to fight climate change across this country in ways that we can,” he said.

In the lawsuit, the Trump administration argues that the U.S. Constitution prohibits states from making treaties or pacts with foreign powers. The U.S. Justice Department said California, state officials, the California Air Resources Board and the Sacramento-based Western Climate Initiative Inc., a non-profit administration company, entered a complex cap-and-trade emissions-curbing climate program with Quebec without congressional approval.

“The state of California has veered outside of its proper constitutional lane to enter into an international emissions agreement. The power to enter into such agreements is reserved to the federal government, which must be able to speak with one voice in the area of U.S. foreign policy,” assistant attorney-general Jeffrey Bossert Clark said in a statement Wednesday.

Environmental lawyers said that California’s Republican and Democratic governors, who designed the cap-and-trade system and authorized its linkage with Quebec’s market, were on “solid legal and constitutional ground.”

Quebec launched its cap-and-trade system for emission allowances on its own in 2013 and linked the system with California a year later to create the largest carbon market in North America. The system, which aims to use a flexible market mechanism to encourage the implementation of clean technologies, is the first one in the world to have been designed and operated by subnational governments of different countries, according to Quebec’s environment department.

Under Quebec’s scheme, large carbon emitters must purchase pollution credits above and beyond free allowances granted by the province. The government holds auctions of credits on its own but also jointly with California, through the Western Climate Initiative. That means increases in carbon emissions in Quebec can be offset by reductions in California and vice versa.

Quebec’s program is considered tough enough by the Trudeau government to exempt the province from its federal carbon tax, which is opposed by several provinces, including Alberta and Ontario. Mr. Legault said Wednesday he believes a carbon exchange is “more intelligent and more efficient” than a carbon tax and urged other provinces to consider the system.

There’s no reason to think a Quebec-only carbon market won’t work, said Pierre-Olivier Pineau, an energy policy specialist at Montreal’s HEC business school. “Technically, it’s completely doable,” he said, adding Quebec could also strike a new pact with Nova Scotia, which is on the board of the Western Climate Initiative but runs its own internal cap-and-trade market.

California, the most populous state and one of the top-10 largest economies in the world, has positioned itself as a leader on climate-change action in the absence of federal leadership on the issue. Mr. Trump questions the science behind climate change and has eased regulations on the oil, gas and coal industries.

With reports from Reuters

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