Assessing the Impact of the Western Climate Initiative on Quebec industrial facilities
Julien Hanoteau  1, *@  
1 : Kedge Business School
Ministère de l'Education nationale, de l'Enseignement supérieur et de la Recherche
* : Auteur correspondant

Since 2013, Quebec (Canada) has implemented a greenhouse gas emissions trading system (ETS) as
part of the Western Climate Initiative. This carbon monetization has provoked strong reactions,
particularly in the industrial sector, where companies feared a loss of competitiveness on world
markets. The goal of this article is to assess the impact of these regulations on industrial plants in
Quebec. Conditional Difference-in-Differences OLS regressions show that regulated plants in Quebec
have reduced their GHG emissions about 10 percent faster than non-regulated plants in the rest of
Canada. They have also reduced employment about 7 percent faster. However, the implementation of
the Quebec carbon ETS had no significant impact on the efficiency of production with respect to GHG
emissions. These results suggest that during the period 2013-2015, regulated facilities in Quebec did
not adapt to the program through a change in their production processes or technology that would
affect carbon intensity. This raises questions about how efficiently Quebec's ETS induces innovation in
industrial facilities. Other studies on the early-stage effects of the British Columbia (Canada) carbon
tax scheme reveal that facilities adapted to it by cutting employment, but that this effect has been
mitigated thanks to the positive effect of a green fiscal reform that accompanied the carbon tax. This
finding challenges the initial allocation scheme of carbon permits in the Western Carbon Initiative,
underlying the importance of appropriately recycling carbon rent.

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