Several Canadian provinces, like an increasing number of
U.S. states, are actively contemplating adopting cap-and-trade
schemes as one of the principal mechanisms to help reduce local
greenhouse gas emissions – in some cases in
coordination with other provinces and states but independent of
the federal government's climate change efforts. This
approach seems motivated by disagreements with the federal
government over what targets and means should be used to combat
climate change, as well as differences of opinion over the
economic opportunities that may come with participation in
North American regional carbon markets. This bulletin outlines
some of the latest developments.
British Columbia, Manitoba, Ontario And Quebec To Discuss
On January 28, 2008, British Columbia Premier Gordon
Campbell announced that B.C., Manitoba, Ontario and Quebec will
engage in talks aimed at establishing a common cap-and-trade
system to reduce their greenhouse gas (GHG) emissions. The
announcement came at the end of the two-day Council of the
Federation meeting of provincial and territorial leaders, which
focused largely on climate change. B.C. and Manitoba already
stand out as the only two Canadian members of a California-led
regional group, which includes seven western states, known as
the "Western Climate Initiative (WCI)." Launched in
February 2007, the nine WCI members support the use of a
cap-and-trade system to help reduce members' GHG emissions
by 15% of 2005 levels by 2020. Although not formally pursuing
membership, Ontario recently met one condition for WCI
participation by joining the Climate Registry, a uniform GHG
reporting and verification system that has been adopted by 40
U.S. States, along with B.C., Manitoba, Saskatchewan and
Quebec. A remaining precondition for membership would be to
adopt California's proposed vehicle emission standards,
which Quebec has already done. Premier Dalton McGuinty
reportedly prefers a single North American vehicle emission
standard, such as the one recently put forward by the U.S.
Environmental Protection Agency.
Provinces Meet With New England States
Representatives of the Atlantic provinces, Ontario and
Quebec are meeting with the New England states on February 4
and 5 to explore regional mechanisms for GHG emissions trading
and plan to make recommendations to their respective
governments. One of these mechanisms is the Regional Greenhouse
Gas Initiative (RGGI), a regional cap-and-trade–based
scheme designed to reduce GHG emissions. Ten northeastern
states (Maine, New Hampshire, Vermont, Connecticut, New York,
New Jersey, Delaware, Massachusetts, Maryland and Rhode Island)
are already members; the Canadian provinces are only official
observers at this point. RGGI applies to fossil fuel
electricity generating plants and advocates capping emissions
at 2009 levels and then reducing them by 10% by 2019. As part
of the implementation process, RGGI states are planning to
auction permits to electricity generators in June 2008.
Alberta On Its Own Path
In contrast to the regional ambitions of other provinces,
Alberta continues to forge its own path. It was, of course, the
first jurisdiction in North America to implement a soft
(intensity-based) cap-and-trade regime in summer 2007.
Recently, Alberta also announced its 2008 Climate Change
Strategy, which will allow Alberta's GHG emissions to rise
until 2020 before being reduced by 14% below 2005 emissions by
2050. This target is weaker than that of the WCI, as discussed
above, as well as that of the federal Conservatives'
Regulatory Framework, which aims to reduce Canada's GHG
emissions by 20% of 2006 levels by 2020 and by
60%–70% of 2006 levels by 2050. Alberta's plan
proposes three paths to achieve its 2050 target: carbon capture
and storage is to account for 70% of the planned reductions;
energy conservation and efficiency initiatives for 12%; and
measures for "green energy production" for 18%.
Newfoundland Premier Danny Williams expressed his support for
Alberta's position and cautioned that climate change action
in oil-rich provinces must balance environmental protection
with economic growth.
Meanwhile, the Alberta carbon market has begun to see an
increase in transactions following its launch in July 2007. On
January 24, 2008, World Energy Solutions, an environmental
commodities exchange, announced the auction of 80,000 carbon
offset credits to buyers in Alberta. Last summer Torys acted on
one of the largest carbon transactions in the Alberta
The Alberta carbon market has a de facto price cap of
$15/tonne because regulated emitters have the option to pay
that amount into a research and development fund for low carbon
technologies to cover up to 70% of their excess emissions
rather than purchase offset credits.
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