California-Quebec Cap-and-Trade: Will it Make it to 2030?
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California-Quebec Cap-and-Trade: Will it Make it to 2030?
Pierre-Olivier PineauHEC Montréal, CanadaFebruary 15, 2021 – 10 – 11 am
Outline
1. Carbon pricing and the Western Climate Initiative2. Emissions and caps in California and Quebec3. What to expect in the next 10 years?4. Conclusion
2
Carbon pricing initiatives
3World Bank (2020)
Carbon prices
&Coverage of emissions
4World Bank (2020)Share of GHG Emissions covered
Western Climate Initative (WCI)
• Created in 2007• Initial members:
Arizona, California, New Mexico, Oregon, and Washington
• Initial goal: 15% below 2005 emission levels by 2020
• Many partners and observers have been included, at one point
5
Nova Scotia Population 1 M
WCI (2010)
6WCI (2020)
10.6 t per capitaUS: 16.6
9.2 t per capitaCanada: 19.7
0
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2018
California and Quebec Emissions, 2000-2018
7
Transport
Electricity
Industries
Buildings
AgricultureWaste
California
Québec
High GWP
506 Mt-2.1%
since 1990CA:-1.3%QC: -6%
2030 Targets:CA:-40%
QC: -37.5%
CARB (2020) MELCC (2000)
Mt
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CA+QC Emissions and Cap until 2030
8
Transport
Electricity
Industries
Buildings
Agriculture
California
Québec
CARB (2020) MELCC (2000)
Cap (2015-2030)-14 Mt each year:
-3.1% in 2016 and -5.6% in 2030
History 2000-2018
-0,5%/yr in CA -0,1% in QC
Offsets:8% until 2020
4% 2021-20256% 2026-2030
(Max 369 Mt)
Mt
Key question
9
When will scarcity hit the market?(Will it Make it to 2030?)
When will the box be too small?
January 2020, 57 Pages, €6,450
Membership: starting at US$1,200/year
10
$12,1
$12,7 $12,7
$13,6$13,8
$14,8$15,1
$14,6
$15,7
$17,5$17,0
$17,9
$16,7$16,9
$11,3
$12,1 $12,1
$12,7 $12,7
$13,6 $13,6
$14,5 $14,5
$15,6 $15,6
$16,7 $16,7
$17,7 $17,7
100%100%99%100%100%
95%
11%
32%
80%
17%
91%
100%100%97%
94%
100%100%96%
100%100%100%100%
37%
89%
100%
11/2
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03/2
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07/2
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US$
/ to
nne
de C
O2-
eq.
Results for the 25 first California-Québec auctions
Floor price
Final price
Third compliance period
2018-2020
11
Impact on gasoline:10-15¢/gallon (2-4¢ per litre)
Joint CA+QC Carbon Budget: 2013-2030
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Government createdallowances:
6 034 MtMaximum offsets:
369 Mt
Total: 6 403 Mt
2013-2018 emissionsfrom CA+QC official inventories:
3 087 Mt
CARB (2020)
369
1337
1209
1084
953
1066
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1000
1200
1400
Complianceperiod 12013-14
Complianceperiod 22015-17
Complianceperiod 32018-20
Complianceperiod 42021-23
Complianceperiod 52024-26
Complianceperiod 62027-30
Offsets surrendered
Allowances surrendered
Cap
13
Results of the two first compliance periods
CARB (2020)
4-year compliance
period
3-year compliance periods
Mt
Real coverage
CP1 CP2
CA 33% 76%
QC 23% 74%
Surplus+191
Surplus+8
% offsets
CP1 CP2
4% 5.9%
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CA+QC Emissions scenarios until 2030
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Transport
Electricity
Industries
Buildings
Agriculture
California
Québec
CARB (2020) MELCC (2000)
2 scenarios:
2000-2018 trend continues to 2030
Current measures(CA scoping plan and QC green economy
plan)
Mt
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Emissions Scenario “Current Measures”
CARB (2020)
369
1337
1209
1084
953
1066
0
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400
600
800
1000
1200
1400
Complianceperiod 12013-14
Complianceperiod 22015-17
Complianceperiod 32018-20
Complianceperiod 42021-23
Complianceperiod 52024-26
Complianceperiod 62027-30
Emissions Under Scenario "Current Measures"Offsets surrenderedAllowances surrenderedCap
+8+8
+191+199
-57+142 -94
+48-137
-89
-250-339
The system is short of
89 Mt in 2026,
339 Mt by 2030.
272 Mt of possible
offsets
Mt
369
1337
1209
1084
953
1066
0
200
400
600
800
1000
1200
1400
1600
Complianceperiod 12013-14
Complianceperiod 22015-17
Complianceperiod 32018-20
Complianceperiod 42021-23
Complianceperiod 52024-26
Complianceperiod 62027-30
Emissions Under Scenario "2000-2018 trend"Offsets surrenderedAllowances surrenderedCap
16
Emissions Scenario “2000-2018 trend”
CARB (2020)
+8+8
+191+199
-70+129 -148
-19 -234-253
-446-699 The system
is short of 19 Mt as early as
2023,699 Mt by
2030.
272 Mt of possible
offsets
Mt
65 $
10 $
0 $
20 $
40 $
60 $
80 $
100 $
120 $
2013
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2015
2016
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2018
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2020
2021
2022
2023
2024
2025
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2027
2028
2029
2030
US$
per
tonn
e CO
2-eq
.
Price Ceiling
Average Auction Price
Floor Price
Floor and Ceiling Prices
Floor Price: US$10 in 2013+ 5% + inflation
Price Ceiling: US$65 in 2021+ 5 % + inflation
Inflation estimated at 1.5% after 2021
17
Discussion
• The WCI was over-allocated initially… but not anymore• Banked and still available allowances should take us to 2023… but
we’ll only realize on Nov. 1st 2027 that we’re short. • Auctions should heat up in 2027 (ceiling price at $95)• Everything depends, of course, on actual emission reductions.
18
Conclusion
• The WCI has worked well so far.• Nobody appears really concerned about the cap and prices.• We should probably be, because emission reductions are not at the
level they should be.• Covid-19 and the economic slowdown are of course helping. But is it
the right approach to reduce GHG emissions?
19
Thank Youenergie.hec.ca
Partners of the Chair in Energy Sector Management:
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