Scoping Study of the Potential Linkage of New Brunswick and Nova Scotia to the Western Climate Initiative
Should New Brunswick and Nova Scotia consider joining the emission trading systems linking Quebec, California and Ontario? There are potential advantages to joining the Western Climate Initiative (WCI). Available evidence suggests that further emission reductions can be achieved in the two Maritime provinces in a more cost-effective manner than in Central Canada meaning that Quebec and Ontario firms could purchase emission allowances from NB & NS (in addition to California). But there are risks, the most important of which is that other sources of low-cost emission reductions could be brought into the WCI, including Mexico’s potential involvement, as well as California’s interest in international offsets. If such new supply of low-cost emissions reductions is not carefully coordinated with greater emission reduction effort across all partner jurisdictions, these potential developments might reduce carbon prices and render the relative advantage of NB & NS less attractive. Of course, any low-cost international allowances and offset credits would also be available to NB & NS should they join the WCI. But recent developments in California, notably the recently proposed Senate Bill No. 775 (2017), suggest some appetite in California to raise prices on its carbon market, with important ramifications for all partners. While detailed analysis of the implications of California’s proposed Senate Bill 775 are beyond the scope of this paper, it is likely that any further rise in the WCI’s carbon price floor will increase the prospects of seeing carbon finance flow from Quebec and Ontario to the Maritimes rather than California. Additional analysis, particularly further provincial level climate and energy economic modelling, would shed more light on the implications of NB & NS joining the WCI.
The complete study is available here.