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The Carbon Market

Allocation of Emission Units Without Charge

Because they are subject to national and international competition, some emitters covered by the Regulation respecting a cap-and-trade system for greenhouse gas emission allowances will receive GHG emission units without charge. Emitters with establishments subject to the cap-and-trade system that carry out an activity appearing in Table A of Part I in Appendix C of the Regulation are eligible to receive emission units without charge. Eligible activities are primarily in the industrial and electricity production sectors.

The quantity of free GHG emission units allocated is determined using equations provided in the Regulation and is based on the activity sector, the intensity target and the establishment actual annual quantity of reference units. Therefore, the number of GHG emission units allocated without charge each year is directly proportionate to the quantity of actual annual reference units.

A reference unit is a standard unit of measurement for a raw material used to pursue an activity or for a product resulting from that activity. Therefore, for some activity sectors, the quantity of GHG emission units allocated free of charge is calculated based on the quantity of raw material used, while for other sectors the quantity of GHG emission units allotted free of charge is calculated based on production.

Since 2015, the number of emission units allocated without charge to eligible emitters has progressively decreased, particularly for combustion emissions, in order to encourage covered emitters to further reduce their GHG emissions.

The first allocation without charge took place on May 1, 2013. Thereafter, the Minister issued emission units free of charge twice a year:

  • On January 14 of each year, for the issue of emission units corresponding to 75% of the total estimated quantity of emission units that may be allocated without charge;
  • On September 14 of each year, for the remaining 25%, adjusted to reflect the quantity of reference units reported and verified for the year covered.

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