Enforcement and Withdrawal under the California-Quebec (and not Ontario) Cap-and-Trade Linkage Agreement

Abstract

Federal governments in Canada and the United States continue to face challenges in developing and implementing nation-wide carbon pricing mechanisms. In this context, sub-national initiatives continue to define much of climate law and policy in North America, with the California-Quebec-Ontario linkage breaking transnational ground in recent years. Two dimensions of critical importance to the efficacy of any emissions trading regime are enforcement and withdrawal. The California-Quebec-Ontario linkage provides an opportunity to observe these dimensions in action. This paper examines enforcement and withdrawal in this functioning multi-jurisdiction emissions trading regime, finding that enforcement regimes are relatively robust, relying on principles of reciprocation and harmonization. However, these strong enforcement regimes are undermined by the ease with which a jurisdiction (i.e. Ontario) can withdraw without consequence. The paper concludes with reflections on lessons and next steps.

Keywords: climate change, emissions trading, environmental law, carbon emissions, cap-and-trade, linkage

JEL Classification: K13, K32