SACRAMENTO - California's cap and trade program marked a major milestone today when the Air Resources Board voted to approve a date of January 1, 2014 to officially link California's cap-and-trade program with that of the Canadian Province of Québec.

"The Board's action today broadens the environmental impact of California's cap-and-trade program and helps fight climate change by reducing greenhouse gases,"said Air Resources Board Chairman Mary D. Nichols. "California retains absolute control over its own program, and the larger carbon market overall provides additional options for California businesses.

California and Québec have worked together over the past four years to develop their respective cap-and-trade programs to provide for potential linkage. That joint effort and experience help ensure that the two programs will complement one another and provide covered facilities in both jurisdictions with the benefits of a larger program.

The linkage agreement also provides an opportunity to closely monitor and fine tune these first two programs, setting the stage for similar arrangements with other jurisdictions that are committed to reducing greenhouse gases.

Governor Brown recently supported the Board's action when he formally indicated that the Québec program is as stringent as California's, a finding required by legislation passed last year. The Governor's decision to move forward was supported by a legal analysis of the linkage with Québec by Attorney General Kamala Harris.

In his letter, the Governor also noted that now "CARB and the Québec Ministry of Environment will test and evaluate their auction platforms and trading systems to ensure that they are fully compatible and ready to be implemented, and that linkage can be accomplished without disruption to California's program."

How it works:

•  Each jurisdiction will accept the other’s carbon allowances and approved offsets for compliance under their respective cap-and-trade program
• The two jurisdictions will share the Compliance Instrument Tracking System Service
• for tracking allowances and approved offsets
• California and Québec will share the online auction platform
• Jurisdictions will share market monitoring services and information
• Both will be supported by WCI, Inc. for basic administrative functions
• Both will maintain control over their respective programs

Benefits to California:

• Expands environmental impact of greenhouse gas emissions reduction effort
•  Larger pool of available allowances and approved offsets
• Provides additional opportunities for investment in the carbon market
• Provides a template for possible future linkage with other programs.

Next Steps:

Air Resources Board staff will work closely with their Québec counterparts between now and the implementation date to complete harmonization of program technology, processes and procedures in preparation for the first linked cap-and-trade auction.

No date is yet set for the first California- Québec joint auction.