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California, RGGI, Quebec: The Followers

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The European Emission Trading System and Its Followers

Part of the book series: SpringerBriefs in Environmental Science ((BRIEFSENVIRONMENTAL))

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Abstract

Following the structure adopted in Chaps. 1, this chapter investigates the legal and economic features of three selected ETSs: the Californian Cap and Trade System, the RGGI (the Regional Greenhouse Gas Initiative, encompassing several north-east and mid-Atlantic States of the USA) and the Quebec Cap and Trade System. While several other ETSs are developing or planned around the world, after the collapse of the Australian ETS project the two US-based ETSs and the Quebec ETS represent the main schemes currently in place among the followers of the EU ETS. The in-depth analysis of their design provides the basis for the comparative analysis between them and the EU ETS performed in the following chapter and for understanding the possibilities and options for linking ETSs in the future that is investigated in the final chapter.

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Notes

  1. 1.

    Such a target corresponds to 427 million tonnes of CO2 equivalent by 2020 instead of the business as usual that would be 507 million tonnes of CO2 equivalent.

  2. 2.

    As it is well known, the Californian initiative is placed in a US Federal context, which is characterised by the absence of international commitments, since the USA has never ratified the KP, and therefore, it is not bound by its Annex B compulsory GHG emission reduction targets. However, this situation might change in the near future, if the US–China Joint Announcement on Climate Change delivered in Beijing in November 2014 will result in concrete legislative measures and actions at US Federal level. According to such an announcement: “The United States intends to achieve an economy-wide target of reducing its emissions by 26–28 % below its 2005 level in 2025 and to make best efforts to reduce its emissions by 28 %”.

  3. 3.

    Please note that according to subarticle 2 of the ETS Regulation: “First Deliverer of Electricity or “First Deliverer” means the owner or operator of an electricity generating facility in California or an electricity importer”.

  4. 4.

    In detail, the following sectors are covered since the starting of the California ETS (i.e. from the 1st compliance period): cement production; cogeneration; glass production; hydrogen production; iron and steel production; lime manufacturing; nitric acid production; petroleum and natural gas systems and petroleum refining; pulp and paper manufacturing; self-generation of electricity; or stationary combustion; first deliverers of electricity, namely electricity generating facilities located in California or electricity importers; carbon dioxide suppliers.

    From 2015 onwards (since the starting of the 2nd compliance period), the following sectors will be added to the scope of the ETS: suppliers of Natural Gas: an entity that distributes or uses natural gas in California being a public utility gas corporation operating in California or a publicly owned natural gas utility operating in California; suppliers of distillate fuel oil; suppliers of LPG: the operator of a refinery that produces LPG in California or that fractionates natural gas liquids to produce LPG or a consignee of LPG into California.

  5. 5.

    Please note that according to the ETS Regulation subarticle 2 the following definition applies to the term “data year”: “data year means the calendar year in which emissions occurred”.

  6. 6.

    According to subarticle 6 of the California cap and trade regulation, the following caps apply: 1st Compliance period: 2013: 162.8; 2014: 159.7; 2nd Compliance period: 2015: 394.5; 2016: 382.4; 2017: 370.4; 3rd Compliance period: 2018: 358.3; 2019: 346.3; 2020: 334.2. Please note that while the initial cap only includes electricity and large industry (1st compliance period covered entities), the caps set for years 2015 onwards will encompass all the sectors covered by the California ETS.

  7. 7.

    In such a context, subarticle 2 of the cap and trade regulation, providing all the relevant definitions, specifies that: “Positive Emissions Data Verification Statement” means “a verification statement issued by an impartial verification body attesting that the verification body can say with reasonable assurance that the covered emissions data in the submitted emissions data report is free of material misstatement and that the emissions data conforms to the requirements of MRR”.

  8. 8.

    Since the compliance periods are 2013–2014, 2015–2017 and 2018–2020, the triennial surrender will occur 1 November 2015, 2018 and 2021, respectively. More in detail, the following schedule applies with regard to the percentage of compliance obligations due: First compliance period: 1 November 2014 30 % of 2013 covered emissions and 1 November 2015 70 % of 2013 and 100 % of 2014 covered emissions. Second compliance period: 1 November 2016 30 % of 2015 covered emissions; 1 November 2017 30 % of 2016 covered emissions; 1 November 2018 70 % of 2015 and 2016 and 100 % of 2017 covered emissions. Third compliance period: 1 November 2019 30 % of 2018 covered emissions; 1 November 2020 30 % of 2019 covered emissions; 1 November 2021 70 % of 2018 and 2019 and 100 % of 2020 covered emissions.

  9. 9.

    The following sectors are subject to a high risk of carbon leakage: oil and gas extraction, paper mills, chemical, glass and cement manufacturing, iron and steel mills. Sectors under medium risk include petroleum refineries and food, gypsum product, mineral wool and steel shape manufacturing. Finally, sectors with low risk are pharmaceutical, medicine, aircraft manufacturing and support activities for all transportation.

  10. 10.

    The bid guarantee must be cash or in the form of an irrevocable letter of credit issued by a financial institution with a US banking license or a bond issued by a financial institution with a US banking license. The amount of the bid guarantee must be greater than or equal to the maximum value of the bids to be submitted.

  11. 11.

    The term “vintage year” refers to the first calendar year for which the allowance may be used for compliance.

  12. 12.

    In 2012 and 2013, the Californian GDP grew by 3.5 and 3.6 %, respectively (JP Morgan Chase & Co. 2014).

  13. 13.

    The definition of “CO 2 Budget Trading Program” is provided in section XX-1.2 of the Model Rule, stating that it is: “A multi-state CO 2 air pollution control and emissions reduction program established pursuant to this Part and corresponding regulations in other states as a means of reducing emissions of CO 2 from CO 2 budget sources”.

  14. 14.

    As already mentioned above with regard to the California cap and trade programme, the RGGI cap and trade scheme could be affected, in the medium–long term, by the (announced) new US approach towards climate change policies and measures, as contained in the November 2014 US–China Joint Declaration.

  15. 15.

    The Model Rule, section XX-8-5(3) with regard to the compliance certification states: “The CO 2 authorized account representative shall submit to the REGULATORY AGENCY or its agent a compliance certification in support of each quarterly report based on reasonable inquiry of those persons with primary responsibility for ensuring that all of the unit’s emissions are correctly and fully monitored. The certification shall state that: (i) The monitoring data submitted were recorded in accordance with the applicable requirements of this Subpart and 40 CFR part 75, including the quality assurance procedures and specifications (….)”.

  16. 16.

    The compliance certification report must have the following content: identification of the source and each CO2 budget unit at the source; the serial numbers of the CO2 allowances that are to be deducted from the source’s compliance account for the control period, including the ones of any offset allowance used to this end; a compliance certification where the AAR shall certify, “whether the source and each CO 2 budget unit at the source for which the compliance certification is submitted was operated during the calendar years covered by the report in compliance with the requirements of the CO 2 Budget Trading Program”; whether all CO 2 emissions from the units at the source were monitored or accounted and reported in the quarterly monitoring reports.

  17. 17.

    The documents subject to the record-keeping requirement are the following: the account certificate of representation for the AAR; all emissions monitoring information; copies of all reports, compliance certifications and other submissions and all records made or required under the CO2 Budget Trading Program; copies of all documents used to complete a CO2 budget permit application and any other submission to demonstrate compliance with the requirements of the CO2 Budget Trading Program.

  18. 18.

    According to Model Rule section XX-1.2, “recordation” is the movement of CO2 allowances by the Regulatory Agency or its agent from one COATS account to another for purposes of allocation, transfer or deduction for compliance.

  19. 19.

    “Non-offset” allowances are RGGI allowances not generated by offset project, differently from “offset” allowances, which are project-based.

  20. 20.

    Award is the determination by the Regulatory Agency of the number of CO2 offset allowances to be recorded in the general account of a project sponsor pursuant to Model Rule section XX-10.7. Award is a type of allocation.

  21. 21.

    The project types eligible to generate offset allowances are the following ones: landfill methane capture and destruction; reduction in emissions of sulphur hexafluoride (SF6); sequestration of carbon due to reforestation, improved forest management or avoided conversion; reduction or avoidance of CO2 emissions from natural gas, oil or propane end-use combustion due to end-use energy efficiency; and avoided methane emissions from agricultural manure management operations.

  22. 22.

    The current surplus of allowances is expected to be depleted over the remainder of the decade as a consequence of the proposed interim adjustments for banked CO2 allowances (see http://www.rggi.org/docs/PressReleases/PR011314_AuctionNotice for further details on the proposed intervention).

  23. 23.

    With regard to the US SO2 ETS market see Ellerman and Joskov (2008).

  24. 24.

    This measure is estimated to have generated electricity bill savings of US$1.3 billion for residential, commercial and industrial consumers across the participating States. Savings in non-electric energy supply (natural gas, heating oil) amount to an additional US$174 million.

  25. 25.

    In 2011, overall emissions were 33 % below the programme cap (RGGI 2012).

  26. 26.

    See Decree 1187–2009 in Quebec Official Gazette Part 2, number 49 of 9 December 2009.

  27. 27.

    Appendix A of the GHG Regulation lists the sectors included in the cap and trade scheme: mining, quarrying and oil and natural gas extraction; electric power generation, transmission and distribution; natural gas distribution; steam and air-conditioning production for industrial purposes; manufacturing; and pipeline transportation of natural gas.

  28. 28.

    The following Caps are spelled out in Order 1185–2012: for the year 2013, 23.20 million emission units; for the year 2014, 23.20 million emission units; for the year 2015, 65.30 million emission units; for the year 2016, 63.19 million emission units; for the year 2017, 61.08 million emission units; for the year 2018, 58.96 million emission units; for the year 2019, 56.85 million emission units; and for the year 2020, 54.74 million emission units.

  29. 29.

    For further details, see sections 8–18 of the GHG Regulation.

  30. 30.

    The Standard Council of Canada and the American National Standard Institute are accrediting bodies.

  31. 31.

    section 21 of the GHG Regulation states that: “On 1st November following expiry of a compliance period or, if that day is not a business day, on the first following business day, every emitter must have at least as many emission allowances in its compliance account as its verified emissions for every covered establishment during the compliance period or, where applicable, during the years following the last compliance period for which emissions coverage was required”.

  32. 32.

    For the amount of the monetary sanctions, see sections 71–73 of the Cap and Trade Regulation.

  33. 33.

    More details on the Protocols sector coverage, participation requirements and procedural rules can be found at http://www.mddelcc.gouv.qc.ca/changements/carbone/documentation-en.htm#regulations.

  34. 34.

    Provided they meet the requirements spelled out in Appendix C, Parts I and II of the Regulation these are: aluminium; lime; cement; chemical and petrochemical industry; metallurgy; mining and pelletising; pulp and paper; petroleum refining; glass containers, electrodes, gypsum products; and some agro-food establishments.

  35. 35.

    The financial guarantee requirements to be met are spelled out in section 48 of the Regulation.

  36. 36.

    The overall amount sold before linking can be computed summing up allowances separately sold at Auction 8 in California (see Table 2.1) with those sold at Auction 4 in Quebec (see Table 2.5).

  37. 37.

    http://www.mddelcc.gouv.qc.ca/changements/plan_action/pacc2020-en.pdf.

  38. 38.

    http://www.mddelcc.gouv.qc.ca/changements/carbone/revenus-en.htm.

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Authors and Affiliations

  1. University of Siena, Siena, Italy

    Simone Borghesi, Massimiliano Montini & Alessandra Barreca

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  1. Simone Borghesi
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  2. Massimiliano Montini
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  3. Alessandra Barreca
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Correspondence to Simone Borghesi .

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Borghesi, S., Montini, M., Barreca, A. (2016). California, RGGI, Quebec: The Followers. In: The European Emission Trading System and Its Followers. SpringerBriefs in Environmental Science. Springer, Cham. https://doi.org/10.1007/978-3-319-31186-9_2

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