The Regulation to amend the Regulation respecting a cap-and-trade system for greenhouse gas emission allowances (O.C. 1252-2026) introduces significant updates to Quebec’s carbon market since the province linked its system with California’s Western Climate Initiative. The amendments update reporting requirements, adjust compliance rules for the 2027 compliance period and beyond, expand eligibility for free emission allocations, and strengthen oversight of market participants and emissions reduction projects.

A major change is the updated definition of verified emissions. Beginning with the 2024 compliance period, verified emissions will exclude carbon dioxide that has been captured, stored, eliminated, reused, or transferred out of an establishment. The regulation also introduces a methodology for accounting for emissions associated with electricity imported from U.S. jurisdictions that operate non-partner cap-and-trade systems, ensuring emissions are not counted twice where equivalent pricing systems already apply.

An important amendment reduces reliance on offset credits. For the compliance period beginning in 2024, emitters may continue using offsets for up to 8% of their emissions obligations. However, beginning with the 2027 compliance period, that limit falls to 6%. The regulation further limits how many offsets may originate from sources other than Quebec-issued credits, gradually increasing the share of compliance that must be met using Quebec-issued allowances or approved offsets.

The amendments also tighten registration and governance requirements for market participants, particularly investment funds. Funds seeking registration in the emissions trading system must now disclose their organizational documents, portfolio managers, major investors holding more than 10% of shares, and individuals involved in management decisions.

Quebec has expanded the list of industrial activities eligible for free allocation of emission units. New eligible production categories include aluminum alloys, synthetic olivine sands, titanium tetrachloride and titanium oxychloride, cast iron pipes and fittings, ferroniobium production, and additional agricultural processing activities. Assistance factors and reference units are established for these sectors to determine how many allowances they receive without charge, reflecting their emissions intensity and competitiveness risks.

The regulation also updates the technical formulas used to calculate free allocations. It incorporates new global warming potential (GWP) values that take effect in 2027, ensuring emissions are measured using the latest scientific standards. Numerous equations and calculation methods are revised to transition from the 2021 GWP values to the new 2027 values while maintaining continuity for regulated facilities. New correction factors and minimum expected effort calculations are also introduced to better align allocations with actual emissions performance.

Quebec (1252/2026) August 26, 2026
Disclaimer: Insights are for informational purposes only and does not reflect RRI’s official position or constitute legal opinion.