Abstract:We compare flexible low-carbon regulations in the transportation sector and their interaction and sequencing with greenhouse gas emissions trading systems in California and Quebec. As momentum builds for greater climate action, it is necessary to better understand how carbon markets and other low-carbon transportation policies influence one another. First, we demonstrate that emissions trading between California and Quebec has been asymmetric, with linking having little influence on carbon prices from California's perspective but leading to a considerable cost reduction from the point of view of Quebec. Second, we present evidence that Quebec has replicated many of California's low-carbon transportation policies that promote increased electric vehicle use, where Quebec has an advantage, while deferring to the Canadian federal government with regard to policies that incentivize the production of other low-carbon transportation fuels. Third, we demonstrate that while the stringency of the policy mix of carbon pricing and flexible transportation regulations has increased over time in both jurisdictions, the stringency of flexible regulations has been more aggressively ratcheted up and is expected to continue to dominate. Overall, our findings suggest that the policy sequence observed in California and Quebec can be attributed to the political economy benefits that the selected instruments confer to governments seeking to move from the middle towards the bottom of the clean technology experience curve. We discuss a number of important research questions and associated hypotheses emanating from our findings, which provide the basis for more in-depth studies involving a larger universe of cases and economic sectors.

Key words: California, climate policy, emissions trading, low-carbon transportation, policy sequencing, Quebec