June 9, 2015 - From the June, 2015 issue

Québec Minister Charged with ‘Fight Against Climate Change’ Touts Cap & Trade

David Heurtel is Québec’s first Minister of Sustainable Development, Environment, and the Fight Against Climate Change. After over a year of overseeing this comprehensive mission, Heurtel spoke with MIR about the growing movement of subnational entities collaborating across countries in order to build an international green economy. In particular, he comments on the thriving cap-and-trade relationship between Québec and California that accommodates the needs of the two very different regions, as well as lessons learned about how to implement a successful cap-and-trade system. He also explains why in Québec, environmental action transcends politics.


David Heurtel

“Most of the Green Fund—two thirds, by law—which is funded in part by the revenues from the Québec carbon market, is dedicated to transportation investments. Part of it is going to be electrification of transportation and public transit.” —David Heurtel

You’ve served as Québec’s Minister of Sustainable Development, Environment, and the Fight Against Climate Change in Québec for a year now. Describe for our readers the responsibilities subsumed under that very long official title.

David Heurtel: For the first time in Québec, there’s a minister with “the fight against climate change” in its title. Premier of Québec Couillard made that decision. That puts the fight against climate change right up there as a top priority. 

But I am also responsible for the regulatory framework that goes along with protecting the environment that you would typically expect from a minister of the environment: making sure we have the highest standards to protect the quality of water, land, and air. 

On top of that, there’s sustainable development. In Québec, we have a law that specifically addresses that issue. It outlines 16 principles that I have to make sure are applied throughout our laws and regulations, and by our ministries and different government agencies. It’s a pretty vast portfolio. 

Again, “the fight against climate change” is a very important piece of the puzzle that’s at the forefront of Québec’s action in protecting the environment.

We reported more than a year ago on Québec’s adoption of cap and trade and its working relationship with California. Of special interest to our readers: Québec appears to have adopted cap and trade in a much less politically partisan way than other Canadian provinces or California. Elaborate on the political climate that enabled adoption, and that explains the “fight against climate change” in your ministerial title.

It goes back to 2007, when the previous liberal government, led by Premier Jean Charest, clearly set out to have Québec be a leader in the fight against climate change. That administration started out by adopting Québec’s first climate action plan, which in turn invested about $1.5 billion up until 2012 in different mitigation and adaptation measures regarding electrification of transportation, public transit, energy efficiency standards, development of clean tech, and research and development. 

The argument behind all that was that we have to do something, and the costs of doing nothing were definitely going to outweigh the investments required to adequately put together a strategy to fight climate change. Québec was the first jurisdiction in North America to go all in. 

Politically speaking, it was about being very proactive. Québec already got 98 percent of its energy from renewable sources, relying almost entirely on hydroelectricity. Québec has three percent of all of Earth’s natural water, for example, and we have a very large territory. That has created a society that is very concerned about the environment. 

And the politics of climate change.

We have a territory that’s twice the size of Texas, and we’re seeing the impacts of climate change on our health and on our infrastructure. We’re seeing it with flooding, with temperature extremes, and with coastal erosion. 

We’ve been seeing these effects for the past 15 years. I think it’s gone beyond the question of politics and is more about us needing to do something. That’s why Québec was decidedly proactive on this issue. That’s why, today, you see Québec as being one of the leaders on this issue throughout the world, along with California. We decided to stick to it. 

Remember, with the Western Climate Initiative, there were originally 11 members. For very valid reasons—economic upheaval and political change in the US, especially in the US Congress—only a few players remain. They are Québec and California. Thank goodness, because now we’re seeing that other players want to work with us.

Please elaborate more on WCI. How easy or hard was it to for Québec to collaborate across the border with California to further this agenda and, as you suggest, survive electoral changes in governing parties?

There was great flexibility and openness. I think both parties came to the table with an open mind, knowing that this was not going to be an easy task.

What was the most difficult challenge?

I think it was getting to understand both states’ realities—economic realities, environmental realities, regulatory realities, and political realities. We had to ask: How do we harmonize? How do we make sure that the system can work? 

Again, we were both driven by a shared commitment. When this started, it was Premier Charest from Québec with Governor Schwarzenegger. Now it’s Premier Couillard and Governor Brown. In both periods, you had strong leadership and commitment to the underlying objective. That objective was: We need to do something about climate change, and we believe that this carbon market system is the way to go. 

There was strong leadership and a strong belief in that, which is why there was a lot of long work to harmonize. This started in 2006 and 2007. Both markets were officially linked January 1, 2014. The first auction was in November of 2014.

Minister Heurtel, Québec has just been through one round of the cap-and-trade auction. Could you comment on the process and its success? 

Québec, on its own, did four auctions in 2013-2014. We did one mock auction with California in August of 2014, to see if the system could work and to ensure we had worked out all the kinks. It did. 

The auction system is run through WCI, Inc. It’s a very transparent and independent process with a minimum and maximum price set. That way, we can make sure there are no market extremes like we saw in the beginning of the European system. 

We’ve built in a lot of different safeguards within the market so the auctions don’t get out of control. Companies receive free allowances to allow them to transition into the carbon market system without being hurt competitively. There are a lot of different formulas, depending on your type of industry and the emission reduction goals. 

The system sets a base price for each auction. In the last one, it was around $12 a ton. It’s really exciting that in the last two common auctions that we did with California, all of the carbon credits were sold either at or above the base price. There were credits available not only for 2015, but also for 2017, which sold out, as well. We sold out over 85 million of those credits.

That tells you two things: First, there’s trust in the market and confidence in the system. Second, since those allowances were sold at or above base price, it shows that the system is actually working.

Is there enough confidence in Québec to pursue related strategies such as approving greenhouse-gas emission standards for cars and trucks, as well as promulgating low carbon fuel standards?

That’s what we need to be looking at. In Québec (and I’m sure it’s similar for California), 44 percent of our greenhouse-gas emissions come from the transportation sector. We definitely are going to have to look at other measures, because while the carbon market is the heart of our climate-change strategy, we need to build around that. 

That’s why we signed a collaboration agreement with California at the last Conference of the Parties in Lima, where we agreed to collaborate further on the development of electric vehicles. 

The transportation sector is definitely where we need to work further and develop more measures to complete our strategy, which is already built around the carbon market.

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We published an interview with the then-new mayor of Montreal about four months ago, and he seems to be as equally committed to electric cars as was his predecessor from another party. Is that typical?

I think we understand that, especially for major cities like Montreal where we already have pollution and traffic issues, we have to find better solutions. We have to find better ways of dealing with the challenges around transportation in and around the island of Montreal. 

There’s a commitment there to do more. That’s why most of the Green Fund—two thirds, by law—which is funded in part by the revenues from the Québec carbon market, is dedicated to transportation investments. 

Part of it is going to be electrification of transportation and public transit. We are also looking very seriously at how we can further regulation to better structure an economy that relies less on fossil fuel-based transport.

You recently expressed support for Ontario when that province announced it would also adopt cap and trade. Paraphrasing former California Governor Schwarzenegger, it appears that the Province of Ontario is back in the game.

We were very excited about that announcement. We worked a lot with Ontario—Premier Wynne’s government and Minister Glen Murray. Ontario was still a member of WCI, but obviously had taken a step back after the ’08 economic crisis. 

So we’re very excited about Ontario’s decision to come back and play a very active role joining the carbon market that we’ve set up with California.

Ontario sent a message to the rest of Canada. A lot of the opponents to the carbon markets were saying, “Québec is all alone. There’s Québec on one end of the continent and California at the other end. California has a much larger economy and a much larger population than Québec.” There were a lot of attacks and a lot of dissenters for us going at it alone. 

But now with Ontario coming in, 62 percent of Canada’s population and 54 percent of Canada’s economy are now working together with a carbon market system. That will be linked to California, which is the eighth-largest economy in the world. When you look at the economies of Québec, Ontario, and that whole area—the Great Lakes, the Saint Lawrence—you’re talking about the fourth-most-important economic zone in North America. A very important piece not only of Canada, but also of North America’s economy, is now coming together around the idea that the carbon market is important.

Consistent with your reply, the governor of Québec this month hosted representatives from across the Canadian provinces and territories for a summit on the fight against climate change. What are the takeaways from that meeting?

There are several takeaways. 

Ontario’s announcement came on April 13. The next day in Québec City, all the premiers of the provinces and territories came together. There was a Québec Declaration after the summit, and all of these premiers agreed that putting a price on carbon was a key component in a proactive climate change strategy. 

Also, we had a very special guest at the summit: Christiana Figueres, who is the UN Secretary in charge of the whole climate change issue. Leading up to the Paris conference in December, she was there the entire day. She saw this energy, and saw the infra-national governments playing such an important role in driving this issue, not only in Canada but throughout North America and the world. As a result, she committed before all these premiers to make sure that infra-national governments would have their day during the COP in Paris in December. That did not occur in Lima last December. 

You’re seeing the momentum generated by what Québec and California have done—two federated states from two different countries coming together, and now getting Ontario to join. There are other interested provinces and US states—Washington and Oregon are showing some interest. The nine Regional Greenhouse Gas Initiative (RGGI) states began a dialogue with WCI. 

Since President Obama’s action plan and the new EPA regulations, other states favor establishing market mechanisms to establish a carbon price. 

Looking internationally, the six largest cities in China already have a carbon market system. China’s saying that on January 1, 2016, it’ll cover the entire country. South Korea’s on board as of January 1, 2015. There’s momentum. 

The summit showed that at the provincial and territorial level, there’s real action. 

The big takeaway from the summit was an agreement that we needed to work together more and bring forth all our strategies. You need different strategies depending on your economy, population, and energy sources. But again, carbon pricing is part of the solution.

Your ministry and title includes sustainable development. Elaborate on that agenda.

It’s very important, in developing this whole climate change/protection of the environment agenda, to do so in a way that promotes sustainable development. 

What are the three pillars of sustainable development? Protecting the environment, of course. But it also includes social development and economic development. Sustainable development involves trying to get a balance between those three pillars. 

We’re trying to better integrate principles of sustainable development into our thinking, at the earliest possible moment of the governmental decision process—whether it’s investing public funds in certain types of projects, or crafting regulations and laws.

As we close this interview, an example would be welcome.

Let’s say you’re looking at a highway. Five years ago, you would decide, “We’re going to build 10 lanes from Point A to Point B.” You would do an environmental impact assessment, but only to make sure that the highway’s location wouldn’t destroy too much. At the end of the day, you’re going to build the highway. 

Now, we need to integrate these sustainable development principles from our climate change strategy into the decision-making process in a much more preemptive way. We need to ask, “Do we really need this highway? How does that pertain to promoting the use of carbon-based vehicles versus development of electrical vehicles or public transit?” You can see all the questions that it entails. 

The revenues from the carbon market force these questions. The carbon market will generate $3 billion between 2013 and 2020 into the Green Fund, which will be dedicated in part to investing in public transit, electrification, energy efficiency, cleantech, and R&D. So there has to be coherence. It has to make sense. You can’t invest on one side with regard to a climate-change strategy, and on the other side invest without applying all these principles, even though the money is not necessarily coming from the Green Fund. 

You have to make sure that these principles—sustainable development and climate change principles—get in the machinery of government, and come up right at the beginning of the decision-making process. We need to make sure that across the board, we have a coherent and comprehensive way of spending the people’s money.

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