Reuters, Friday April 18 2008

By Timothy Gardner

NEW HAVEN, Conn., April 18 (Reuters) – A coalition of western U.S. states and Canadian provinces eyeing a regional carbon credit trading market picked up an eastern member on Friday when Quebec said it would join.

Premier Jean Charest said Quebec had joined the Western Climate Initiative while he was meeting at Yale University with U.S. governors who have bypassed the Bush administration to set tough emissions limits on greenhouse gases.

Early last year, the WCI set a group-wide greenhouse gas emissions target of 15 percent below 2005 levels by 2020.

Quebec had been an observer of both the WCI and of the Regional Greenhouse Gas Initiative, a group of 10 states in the U.S. Northeast that agreed to cut carbon dioxide emissions from fossil fuel power plants.

“We’re all hydro power, not thermal power,” Charest said, regarding why it chose to join the WCI and not RGGI. Quebec derives much of its power from low-carbon hydroelectric sources, so the province joined the WCI, which seeks to cut emissions from economy-wide sources including transportation.

The WCI, spearheaded by California Gov. Arnold Schwarzenegger, is expected to announce details in August for a regional “cap and trade” market for emissions of greenhouse gases blamed for global warming.

Such markets allow major polluters to comply with caps on their emissions by purchasing offsetting credits from sellers who have not used their total emission allowance.

Quebec’s Montreal Exchange wants to host the carbon trading market, and the bourse plans to launch a futures market for Canadian carbon dioxide emissions on May 30, subject to regulatory approval. Charest said joining the WCI would boost trade on that market.

In addition to California, the WCI’s members include the U.S. states of Arizona, Montana, New Mexico, Oregon, Utah and Washington, and the Canadian provinces of British Columbia and Manitoba.

Ontario, Canada’s most populous province, and Saskatchewan also have observer status in the WCI, as do Alaska, Colorado, Idaho, Kansas, Nevada and Wyoming, and several Mexican states.

Canada’s federal government has said it supports the idea of carbon trading but opposes mandatory caps on emissions. Supporters of carbon trading say the caps are needed for the market to establish proper pricing.

Quebec has said it wants to cut its greenhouse gas emissions between 1.5 percent and 6 percent below 1990 levels by 2012 but has not legislated absolute targets. The province also has a carbon tax on gasoline. (Additional reporting by Allan Dowd in Vancouver, editing by Rob Wilson and Matthew Lewis) (timothy.gardner@thomsonreuters.com; +1 646 223-6058, timothy.gardner.reuters.com@reuters.net))