On 26 August 2026, Québec published amendments to its cap-and-trade regulation in the Gazette officielle du Québec, revising several operating parameters of the province's system. A draft version of the regulation underwent a public consultation that closed in early July; the final rules take effect on 10 September.
The update tightens the use of offsets by lowering the overall limit and reserving a larger share for Québec-issued credits. It follows California’s updated rules, which were adopted on 28 June and took effect on 1 September, and aligns the compliance periods in California and Québec’s linked carbon market. The regulation also expands eligibility for free allocation, introduces disclosure obligations for investment funds and advisers, and updates emissions-accounting rules. Together, these changes affect how covered entities use credits, receive allowances, and calculate emissions in Québec’s cap-and-trade system.
Offset limit falls to 6% in 2027, with more room reserved for Québec credits
The regulation lowers the total quantity of offset credits an emitter may use to 6% of covered emissions, down from 8%, beginning with the compliance period starting in 2027. Within that limit, offsets not issued by Québec cannot exceed five-sixths of the ceiling (equivalent to 5% of covered emissions) for the 2027 period, falling to two-thirds of the ceiling (equivalent to 4% of covered emissions) from 2029 onward. Over the first four compliance periods from 2013 to 2023, offsets represented around 6% of total compliance obligations in Québec, and 96% of those were issued in California.
Québec revises compliance-period structure
Québec will replace its fixed three-year compliance periods with two-year compliance cycles covering 2027-28 and 2029-30, then alternate between three- and two-year compliance cycles from 2031. The structure matches the compliance periods established under California’s recently updated regulations and will help align the two systems ahead of their planned linkage with Washington State.
Free allocation widens and new disclosure rules apply to funds
The government extended free allocation eligibility to additional activities, including in the metals and minerals sectors, with certain activities also receiving additional allocation for 2024. The regulation also introduces disclosure requirements for investment funds registering in the system, covering fund ownership and management, and obliges advisers to commit in writing not to disclose information about mandates or use it to coordinate or guide the market activities of other persons or emitters.
Emissions accounting rules are updated
Other changes include the introduction of revised global warming potential values starting in 2027 and the explicit exclusion of CO2 emissions captured, stored, eliminated, reused, or transferred out of an establishment when calculating verified emissions. The update also introduces a new formula to determine the amount of emissions associated with electricity acquired from US states where producers are covered by a system outside the Western Climate Initiative (WCI).
Next steps toward market linkage
Québec’s amendments are set to take effect 10 September, while California’s updated regulations are already in force. Attention now turns to ensuring a smooth transition and extending the existing link between the Québec-California carbon markets to Washington’s Cap-and-Invest Program under the agreement signed by Québec, California, and Washington in June. Officials from all three jurisdictions expect the linked market to begin operating in 2027.
