Jacques Papy is a Professor of Business Law at the Faculty of Political Science and Law at the Université du Québec at Montréal. His research focuses on various legal aspects of the implementation of the carbon market in Quebec and Canada.
He presented his work , at our Chair’s Friday Lunch Meeting on April 6th, on the Western Climate Initiative Carbon Link Agreement signed by California, Ontario and Quebec in September 2017. In particular, the legal issues of the agreement for Quebec’s GHG cap and trade system as well as its articulation with Canada’s federal carbon pricing program.
What are the key issues of the Pan-Canadian Framework on Clean Growth and Climate Change?
The Pan-Canadian Framework on Clean Growth and Climate Change will enter into force in this year. Its significance is wide and it includes carbon pricing policies as well as complementary emissions reduction measures, and also measures to foster climate change adaptation. Carbon pricing measures represent the core of the framework. Precisely, a carbon pricing trajectory from 10 $CA to 50 $CA per ton is targeted between 2018 and 2022.
The key point of these measures is to recognise the variety of carbon pricing modalities already set up by several provinces and to implement “a safety net” to those who are not conform to the trajectory of the predicted price. However, the pricing measures of the Pan-Canadian Framework rise important issues on technical, constitutional and political nature.
The implementation of a pricing equivalency between a carbon tax, a program based on emissions intensity objectives and a cap and trade system will not be easily achieved and it presents several technical challenges.
Moreover, carbon pricing measures have the risk of being stuck in the continuing debate between the federal government and provinces about their respective constitutional jurisdiction, against climate change. Finally, regulatory uncertainty could be extended by the divisions of the Canadian political actors related to a carbon pricing approach.
For instance, the Canadian conservative party has shown its disagreement with the predicted carbon pricing measures in the Pan-Canadian Framework. If the party comes to power in the coming federal elections in autumn 2019, these measures could be seriously questioned, since its leader, Andrew Sheer, has announced the abolition of the federal carbon pricing, as his first action as head of government.
According to you, could the structure of agreements between carbon markets within the WCI be implemented to other regions? If yes, could it be achieved within the Paris Agreement framework ?
The first agreement allowing the linking of carbon markets within the WCI was signed in 2013 between Quebec and California. In September 2017, with the linking of Ontario, it was replaced by a second agreement which mainly re-used the terms formerly defined – with the first agreement. They have been structured in order to maximize the benefits of a carbon market linking within a flexible framework.
Thus, the 2017 agreement includes measures that concern the environmental integrity protection of the regional targets for GHG emissions reduction, the mutual recognition of emissions rights and also the development of an institutional regional capacity.
Therefore, I think that the structure of these agreements could serve as a reference and it could be transferred to different regions.
It is nevertheless important to know the limits of this system. Indeed, for 10 years, these agreements have been formalizing a very flexible collaborative method, between a small number of partners and concerns the harmonization of their cap and trade systems. These agreements are not the result of a direct contract negotiation. Consequently, transposing these agreements is tricky, and limited to small groups ready to be engaged in a cooperative effort.
Moreover, it is true that the WCI operates in parallel with the current international ambition to tackle climate change, gathering many different actors from many sectors. Indeed, the WCI is always mentioned as a successful mechanism. And California, Quebec and Ontario are actively promoting the framework on the international stage. However, it is too early to talk about that kind of linking community, especially in the context of the Paris agreement. Before, actors of the COP 21 have to solve legal questions about mitigation and adopt the « rulebook » mentioned in article 6.
We will have a clearer view after the COP 24 summit at the end of this yea
You have recently presented your work at the CEC, what kind of collaboration could you consider with us ?
I have been following the Chair’s activity for many years now, especially researches dealing with carbon pricing and energy transitions. This talented team, and the ambition to attract young researchers are making this place very inspiring and attractive.
I truly believe in the dialogue between economists and law experts as they are both fundamental for the economic and environmental regulation.
The CEC is a great platform to achieve this dialogue and on the long run, some collaborations are possible especially regarding carbon markets connections and their role to achieve the Paris agreement.