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Subnational Climate Leaders Will Get Their Day In The Paris Sun

Kelley Hamrick, Gloria Gonzalez

National negotiators will seek to reach an international climate deal during the United Nations Framework Convention on Climate Change talks in Paris in December. But states and provinces already taking action – including by launching or planning to join carbon trading programs – have earned a seat at the international table.

11 May, 2015 | Christiana Figueres has made a promise.

Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC), has promised officials from the US state of California, the Canadian province of Québec and other subnational jurisdictions that they will not be shunted off to a side event during the upcoming UNFCCC negotiations in Paris in December. Instead, they will have a place on the main agenda – a reflection of the leadership that officials in these subnational jurisdictions have shown in addressing climate change while the international talks have progressed at a snail’s pace.

“Two years ago when we were talking about carbon markets, people were talking about the eventual end of the carbon market,” David Heurtel, Minster of Sustainable Development, Environment and the Fight against Climate Change in Québec, said at the Navigating the American Carbon World conference in Los Angeles last week.

But “the noise that we made [during the Lima climate talks in 2014] was so overwhelmingly heard that now there is absolutely no choice but to hear what we have to say and take into consideration what we’re doing,” he added.

Though subnational, these jurisdictions can have a disproportionally large effect on the global climate: California constitutes the 7th largest economy of the world and the provinces of Québec and Ontario – which recently announced it would join the California-Québec carbon market–collectively cover 62% of Canada’s entire population.

The participation of the provinces is especially noteworthy considering the Canadian federal government’s climate policy. Canada pulled out of the Kyoto Protocol in 2011 after increasing emissions rather than meeting its reduction targets. More recently, the country failed to submit its Intended Nationally Determined Contribution (INDC) ahead of the United Nations’ March 31st deadline.

In light of this inaction by the federal government, the Premiers of Ontario and Québec issued a joint statement on climate change addressed to Canadian Prime Minister Stephen Harper’s government late last month: “We strongly believe that good environmental policy is good economic policy. But so far, almost all of the progress Canada has made on climate change is the result of provincial action. Once Ontario’s new system is implemented, more than 75% of Canada’s population will be covered by carbon pricing.”

The provincial leaders invited the federal government to participate in developing an ambitious contribution from Canada ahead of the Paris talks, with the country’s INDC now expected in June.

Earning a Seat at the Table

Leadership isn’t the only reason for the inclusion of subnationals on the Paris agenda. Central to their visibility has also been the success of their programs. The California and Québec cap-and-trade programs, which have been in place since 2013, have reported both economic gains and emissions reductions through the first two years of compliance.

California’s program, a result of the state’s 2006 Global Warming Solutions Act, came online with a goal of reducing greenhouse gas (GHG) emissions to 1990 levels by 2020. In the two years since the compliance market was implemented, California’s Gross Domestic Product (GDP) grew by 2% while emissions of capped sectors dropped by 3.8%, according to a report by the Environmental Defense Fund. The success spurred California Governor Jerry Brown last week to issue a new executive order to lower the state’s GHG emissions 40% below 1990 levels by 2030.

“We’re demonstrating in California that we can take the steps to reduce carbon emissions while advancing our economy at the same time,” he said. “We know where we have to go and we look to (carbon market participants) to help us get there.”

More than 92% of compliance offset transactions in North America in 2014 were directed toward California’s cap-and-trade market, which allows compliance entities to use carbon offsets from five eligible project types – forestry, urban forestry, livestock methane, coal mine methane and ozone-depleting substances – to satisfy up to 8% of their compliance obligations. The average price of California-compliant offsets was $9/tonnes of carbon dioxide equivalent (tCO2e), making offsetting a cost-effective compliance option compared to California allowances, which cleared at auction at prices in the range of $11.3/tCO2e to $11.9/tCO2e in 2014, according to a recent analysis by Ecosystem Marketplace.

Meanwhile Québec’s program, which linked to California’s market through the Western Climate Initiative (WCI), will raise an expected C$3 billion between 2013-2020 to be channeled into a green fund to support public transit, research and innovation, among other initaitives.

While Heurtel acknowledged the program been successful, “I think we need to put more emphasis on communicating that. We’ve been collectively talking to each other about this but we’re preaching to the choir. We need to do much more to explain and have real examples.”

Those real examples are something he thinks subnational jurisdictions can bring to Paris later this year. The conversation won’t be just about polar bears and small islands – he can speak to the St. Lawrence River Basin’s decline in water levels, which is predicted to continue to fall over this century due to climate change. He can also highlight success stories in the province, including a company called Biothermica that developed an offset project under California’s coal mine methane protocol and earned $900,000 by selling the offsets.

Joining Forces

The WCI cap-and-trade market’s success has been a bright spot in North America and has attracted interest from other jurisdictions working on their own climate plans. Most notably, Ontario announced its intention to join the cap-and-trade program. Though details of the market mechanism are expected in another six months, the long-term goal is to join the region’s bilateral carbon market.

Glen Murray, Minister of the Environment and Climate Change in Ontario, stressed the role of those “infra-nationals” in influencing Ontario’s recent announcement, highlighting the work done by Governor Brown, former California Governor Arnold Schwarzenegger and Québec Premier Philippe Couillard.

“Ontario would not be here if there wasn’t someone else who had actually stood up,” Murray said.

The province has experienced job and GDP growth despite shutting down all its coal plants (which previously contributed 1/3rd to its energy mix).

“If you want to understand why [carbon pricing] is a good idea, just try to shut down your coal plans without a carbon price – very expensive,” he said.

Minister Murray is optimistic that the new cap-and-trade plan will only bolster the economy. With emissions more than double that of Québec, the Ontario government is estimating C$1.5-C$2 billion annually generated by a similar cap-and-trade program to facilitate the transition to a low-carbon economy.

Outside of Canada, California has also pursued linkages with Mexico and China in the form of Memorandum of Understandings (MOUs). Formalized in late 2013, the MOU between the California Air Resource Board (ARB) and Chinese equivalent called the National Development and Form Commission (NDRC) lays out cooperation between the two agencies on key issues, including: mitigating carbon emissions, strengthening performance standards to control greenhouse gas emissions, designing and implementing carbon emissions trading systems, sharing information on policies and programs to strengthen low-carbon development, and researching clean and efficient energy technologies. Meanwhile, the California-Mexico MOU, signed in 2014, agreed to work together on a range of actions to address climate change, including pricing carbon pollution.

The state has most recently worked with the German state of Baden-Wí¼rttemberg to advance the “Under 2 MOU.” This MOU is designed for subnational states and regions to make commitments prior to Paris to either agree to reduce their GHG emissions 80-95% (a goal for developed countries) or limit to emissions to two metric tons CO2e per capita by 2050 (the target for developing regions) – with the first round of signatories announced later this month.

“Each of these is really aimed at Paris and beyond,” said Ken Alex, Senior Policy Advisor to Governor Brown. “Our hope is to represent a significant chunk of world GDP by the time we get to Paris. Regardless of what happens in Paris, there will be a very significant set of subnationals around the world committed to doing aggressive action.”

While not all 3,000+ subnationals will be able to sit at the table in Paris, officials in California and Québec hope collective initiatives such as their linked programs and MOUs will capture the attention of the international negotiators.

“We need to see Paris as a beginning, not an end,” Heurtel said. “Especially to recognize that the infra-national governments not only have a role to play but actually are the key players.”

Gloria Gonzalez is a News Editor and Program Manager at Ecosystem Marketplace. She can be reached at ggonzalez@ecosystemmarketplace.com. Kelley Hamrick is an Associate in Ecosystem Marketplace’s Carbon Program. She can be reached at khamrick@ecosystemmarketplace.com.

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