The Carbon Market

Compliance

A compliance period is a period at the end of which an emitter subject to the Regulation respecting a cap-and-trade system for greenhouse gas emission allowances must submit to the government a number of GHG emission allowances equal to the total verified GHG emissions that the emitter reported for the period. In other words, they must give the government one emission allowance for every ton of GHGs they emit into the atmosphere during the compliance period.

Compliance periods begin on January 1^st following the end of the previous period and will continue for three years each. On November 1^st following the end of a compliance period (or if that is not a business day, on the first business day that follows), covered emitters must have a number of emission allowances in their compliance accounts that is at least equivalent to the verified GHG emissions for all their establishments subject to the C&T during the period in question.

Duration of coverage obligation

Grand Emitters

Emitters, other than a fuel distributor, must cover their emissions starting January 1^st of the year when their verified emissions reach the 25,000 mt CO₂ eq. threshold and until December 31 following the third consecutive emissions declaration below this threshold.

At the end of this period, if the requirements are met, an emitter may submit a request to remain subject to the Cap-and-Trade System. Two options are available:

1. Continue to cover its emissions for five additional consecutive years
2. Apply to continue to cover its emissions as an opt-in

In all cases, the emitter must submit its request in no later than September 1^st of the last year of mandatory coverage.

Distributors

Emitters carrying out fuel distribution activities must cover the emissions associated with the use of the products which it distributes starting January 1^st of the year during which 200 litres or more of fuels are distributed and until December 31 of the first year its verified emissions are equal to zero.

Opt-ins

Opt-in emitters must cover their emissions starting January 1^st of the year following its registration, as long as it was completed no later than September 1^st. Otherwise, the emitter must cover its emissions as of January 1^st of the second year following its registration.

An opt-in emitter may terminate its coverage obligation on December 31 of the last year of a compliance period if a request for this purpose was submitted no later than September 1^st of that year. Otherwise, the establishment remains covered until December 31 following the third consecutive emissions declaration below the 10,000 mt CO₂ eq. declaration threshold. Like grand emitters, opt-in emitters may request to continue to cover its emissions for five additional consecutive years by submitting its request, no later than September 1^st of the last year of coverage.

Buying emission allowances

Emitters can obtain emission allowances in a variety of ways in order to cover their GHG emissions. They can acquire emission units at auctions or, under certain conditions, at sales by mutual agreement by the Minister. They can also purchase emission allowances from other emitters or participants. Early reduction credits (issued only once, in January 2014) and offset credits may also be used to cover their GHG emissions. Emission-intensive trade-exposed emitters, given the potential impact of Cap-and-Trade System on their production costs and their limited capacity to transfer their carbon cost to their clients, receive allocation of emission units without charge. Learn more about eligible emission allowances.

Previous compliance periods

First compliance period

The first compliance period began on January 1^st, 2013, and ended on December 31, 2014. During this first compliance period, around 80 establishments, mainly in the industrial and electricity generation sectors, were subject to the Cap-and-Trade System. Exceptionally, this first period lasted two years.

Emitters subject to the Cap-and-Trade System during that first compliance period had until November 2, 2015 to remit the emission allowances required for the years 2013 and 2014. All emitters subject to the C&T met their regulatory compliance requirements.

See Report on the 2013-2014 Compliance Period of the Québec Cap-and-Trade System (PDF, 123 KB)

Second compliance period

The second compliance period began on January 1^st, 2015 and ended on December 31, 2017. During that period, many business operators in Québec that distribute fuel or import it for their own consumption (e.g., gasoline, diesel fuel, propane, natural gas and fuel oil, with some exceptions) joined the number of companies subject to the Cap-and-Trade System.

Emitters subject to the Cap-and-Trade System during that compliance period had until November 1^st, 2018 to remit the emission allowances required for the years 2015, 2016 and 2017. All regulated emitters surrendered the necessary allowances to cover their greenhouse gas emissions.

See Report on the 2015-2017 Compliance Period of the Québec Cap-and-Trade System (Excel, 263 KB) - Updated May 22, 2023

Third compliance period

The third compliance period began on January 1^st, 2018 and ended on December 31, 2020. During that period, an emitter operating an establishment not subject to the Cap-and-Trade System could request an opt-in for the establishment if it met the eligibility criteria in effect. These establishments were then added to the list of establishments subject to the Cap-and-Trade System.

Emitters subject to the system during that compliance period had until November 1^st, 2021 to remit the emission allowances required for the years 2018, 2019 and 2020. For a third consecutive compliance period, 100% of reporting emitters surrendered the emission allowances needed to cover their emissions.

See Report on the 2018-2020 Compliance Period of the Québec Cap-and-Trade System (Excel, 93 KB) - Updated December 1^st, 2021

Failure to Meet Emissions Coverage Requirements

Emitters with an insufficient number of eligible emission allowances in their compliance accounts on the first business day of November following the end of a compliance period will be subject to an automatic administrative sanction. They will have to surrender 3 emission allowances for each missing emission allowance (section 22 of Regulation), in addition to being required to surrender the number of missing allowances.

For additional information about compliance, see the CITSS User Manual – Volume 6: Compliance Management ( PDF, 1.2 MB).