U.S., Canadian Provinces Launch First Cap-and-Trade Auction to Battle Climate Change

February 21, 2018, by Sebastien Malo

NEW YORK (Thomson Reuters Foundation) – The U.S. state of California and two Canadian provinces kicked off a cross-border auction of greenhouse gas emission credits on Wednesday, their first joint effort to buy and sell in the “cap and trade” market to fight global warming, experts said.

The auction comes less than two months after the U.S. local and Canadian regional governments merged their trading markets for cap and trade, a system designed to limit carbon emissions by putting a price tag on pollutants produced.

In a cap and trade market, those who produce low levels of greenhouse gases earn credits which they can sell to those who produce high emissions and exceed government-mandated limits.

Carbon dioxide emissions are one of the major drivers of human-caused climate change.

The auction by California, Quebec and Ontario represented a “big test” for the new cross-border market, said Erick Lachapelle, associate professor of political science at the University of Montreal and a specialist in energy and environmental politics.

“It shows that this is workable. We can expand. We can link carbon markets across borders,” Lachapelle told the Thomson Reuters Foundation by phone.

The merging of Ontario’s cap and trade program with the previously linked California and Quebec markets created the world’s second largest carbon emissions market, officials have said.

More than 110 million emission permits were being sold at the joint auction, authorities in Quebec said.

North America’s joint cap-and-trade systems, set up over the last six years, have face some questions over how much carbon emissions they actually hold back, Lachapelle said.

For now, the European Union is considered the world’s largest carbon emission market, but China’s market is rapidly growing, experts say.

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