Québec's Cap and Trade System
The Carbon Pricing Mechanism
Québec's carbon pricing journey began in 2007 with a levy on fossil fuels – the first carbon price in North America – before the full cap-and-trade system launched in 2013. The system covers ~80% of provincial GHG emissions across industry, transport, and buildings.
Since 2014, Québec system is linked with California's cap-and-trade programme, creating one of the world's most robust cross-border carbon markets, jointly managed via WCI, Inc. A minimum auction price – set at CA $38.15 (US $27.94) in 2026 and rising annually – prevents price collapse, provides investor certainty, and guarantees a stable revenue stream.
All revenues ring-fenced exclusively for climate action and flow into the Electrification and Climate Change Fund (ECCF), the financial backbone of Québec's successive climate plans.
Industry in Transition: Businesses decarbonising with the C&T signal
The carbon price has triggered real investment decisions across Québec's industrial base. Several of the province's largest emitters have committed to transformative projects, supported by C&T revenues through complementary programmes:
- Diageo is converting its spirits manufacturing plant to electricity, eliminating the consumption of approximately 21 million m³ of natural gas and reducing emissions by nearly 40,000 tonnes CO2e per year.
- ArcelorMittal is implementing a flotation system to improve iron ore quality at its Québec operations, cutting GHG emissions by 200,000 tonnes CO2e per year from 2026 – equivalent to removing more than 57,600 vehicles from the road.
- ELYSIS, a joint venture between Alcoa, Rio Tinto, and the Québec government, is developing the world's first aluminium smelting technology that produces zero carbon emissions. The first industrial-scale installation is under way at the Alma plant.
- Glencore's Raglan Mine in Northern Québec has become the first mine in Canada to replace diesel fuel with wind energy, transforming energy production in the Arctic.
Revenue at Work: Climate action funded by C&T
The CA $12 billion raised since 2013 has financed Québec's successive climate action plans, and now underpins the Plan for a Green Economy 2030 – the province's overarching framework for reaching its 2035 target of 37.5% below 1990 emission levels.
For Businesses
The C&T system creates a direct financial incentive for industrial decarbonisation through its price signal and allocation mechanism. Since 2024, free allowances reduction for trade-exposed industries are partially replaced by auctioned allowances, with revenues returned to companies that submit approved projects to reinvest in decarbonisation or R&D. This consignment mechanism ensures that carbon revenue is channelled directly back into industrial transformation.
For Municipalities and Citizens
The Accelerating Local Climate Transition programme (ATCL) provides CA $500 million over five years to help every Québec municipality develop a local climate plan by 2030. 101 municipalities are expected to have an adaptation and GHG reduction plan by 2030. The program also funds specific projects included in these climate plans, per exemple tocombat urban heat islands and manage heavy rainfall.
Beyond Québec's borders
The International Climate Cooperation Programme (ICCP), funded from C&T revenues, has supported 65 projects in 17 vulnerable countries, directly benefiting more than 160,000 people. It received the UN Global Climate Action Award in 2019.
Economic Benefits and Co-Benefits for Québec
For Government
- In 2020, Quebec surpassed its emissions target — achieving 26.6% below 1990 levels, exceeding the 20% goal.
- The system has been maintained by three successive governments from different political parties; no major relocation of companies or job losses attributed to the C&T system in over a decade.
- On-going regulatory evolution: system has been updated and strengthened in response to lessons learned, with amendments implemented in September 2026.
For Businesses
- Free allowances for emissions-intensive, trade-exposed industries (steel, aluminium, cement) prevent carbon leakage while rates decline gradually to maintain incentive.
- Flexible compliance: three-year compliance periods give businesses time to plan and invest cost-effectively.
- Revenue from consignment allowances (since 2024) returned to companies for approved innovation and decarbonisation investments.
For Citizens and CSOs
- Cleaner air, reduced urban heat and climate-resilient communities with tailored support for municipalities and Indigenous communities (ATCL).
- Public health adaptation plans across all 18 health and social care regions expected by 2030.
- International solidarity: ICCP projects promoting participatory approaches and women’s agency in vulnerable Francophone countries.