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LiveSmart BC

Cap and Trade

Greater Victoria; Source: Picture BC

A cap and trade system uses market principles reduce greenhouse gas (GHG) emissions. The system works by setting an overall cap on the total amount of emissions that are allowed, and then lowering the cap over time to reduce overall emissions.

GHG emitters in the system are issued emission allowances that add up to the total allowable emissions for the province under the cap.

When emitters have excess allowances, they will be able to sell them to those that produce more emissions than they’re allotted. In this way, the cap and trade system uses the marketplace to reward efficiency and innovation; those that are most efficient will profit from reducing their GHG emissions.

Emissions trading systems have already been successful in the United States, Europe and New Zealand. As governments, industries and businesses worldwide move to reduce their emissions, trading will spur companies and industry to invest in or develop their own innovative clean energy technologies to stay competitive.

British Columbia is the first province to introduce legislation authorizing hard limits ("caps") on GHG emissions through the Greenhouse Gas Reduction (Cap and Trade) Act. This legislation enables B.C.’s participation in the trading system being developed with other jurisdictions through the Western Climate Initiative (WCI).

For more information about the Greenhouse Gas Reduction (Cap and Trade) Act, associated regulations and B.C.'s involvement in the WCI, visit the Climate Action Secretariat.