Canada: Regional Climate Change Initiatives: An Overview

Last Updated: July 1 2008

Article by Perkins Coie And Fasken Martineau

Originally published May 1, 2008


Concerns about climate change have sparked global efforts to regulate carbon dioxide and other "greenhouse gases" (GHGs). Recent, and sometimes inconsistent, developments at various levels of government present significant business risks and opportunities. To anticipate future GHG regulation, North American companies should follow two regional regulatory initiatives: the Western Climate Initiative (WCI) and the Midwestern Regional GHG Reduction Accord (Midwestern Accord). These regional initiatives are developing market-based GHG cap and trade programs that may become models for future continent-wide regulations.

To inform you of regional developments and their implications for business, we at Perkins Coie LLP and Fasken Martineau DuMoulin LLP are working together to provide monthly updates on these GHG initiatives. We will also inform you of developments in a third regional initiative, the Northeast Regional Greenhouse Gas Initiative (RGGI)1, where it is relevant to the WCI and Midwestern Accord.

Fasken Martineau has six offices across Canada, one in London and one in Johannesburg. Perkins Coie has 12 offices across the United States and two in Asia. Both firms are leaders in environmental and energy law. Our goal is to work together to provide you with seamless coverage of these important regional and cross-border issues.

A Brief Summary of the WCI

Formed in February 2007, WCI is a collaboration among seven U.S. states (Arizona, California, Montana, New Mexico, Oregon, Utah and Washington) and three Canadian provinces (British Columbia, Manitoba and Quebec) whose goal is to reduce regional GHG emissions. In August 2007, WCI issued a Statement of Regional Goals that set 2020 targets for regional GHG emissions at 15% of 2005 levels. The statement calls for each state and province to undertake comprehensive and economy-wide emission reduction activities targeting all economic sectors, including stationary sources, energy supply, residential, commercial, industrial, transportation, waste management, agriculture and forestry. The activities include a regional multi-sector cap and trade program and an offset program.

Today, WCI is completing the design of its cap and trade and offset programs. Various WCI subcommittees recently published draft design recommendations on issues ranging from allocation of tradable allowances to which GHG offsets should be eligible for credit. We will continue to provide WCI updates on these issues.

WCI's statement also encourages other U.S. and Mexican states, Canadian provinces and First Nations to join WCI. New entrants must undertake comparable efforts to control climate change. Fourteen states and provinces have joined WCI as observers, including Alaska, Colorado, Idaho, Kansas, Saskatchewan, Ontario, Baja California and five other Mexican states.

To date, WCI's draft recommendations contemplate the first GHG emission caps applying to (1) electricity generators; (2) large stationary combustion sources (e.g., oil refineries, and cement, pulp and paper plants); (3) process industries and waste management (e.g., aluminum smelters, iron and steel producers, agricultural chemical and plastics manufacturers, wastewater treatment facilities and landfills). Businesses with significant GHG emissions in WCI jurisdictions will be required to measure, monitor and report their GHG emissions in anticipation of mandatory GHG limits or "caps" and to offset emissions that exceed this cap with recognized allowances or eligible offsets. This could impose heavy operational costs on such businesses.

What Is a Cap and Trade Program?

Cap and Trade is market based-regulation. Governments establish maximum GHG emissions, and distribute or auction emission allowances permitting emissions up to but not exceeding the cap. The allowances decrease with time to meet the government's target future emission levels. For each compliance period, regulated emitters must remit allowances equal to their actual emissions. Emitters with excess emissions or excess allowances may "trade" them with others in market transactions. Each program determines its own emission goals, regulated sectors, level and allocation of allowances, and methods to verify compliance and regulate markets.

What Is an Offset?

An offset is an emission reduction from a source not capped by a cap and trade program. Permitting offsets encourages reductions beyond the scope of a cap and trade program, often in sectors where emissions are more difficult to track and report (for example, mobile sources). To provide the necessary market to encourage offset development, regulated emitters in the cap and trade program can use offsets for compliance, in the same way they use allowances. The introduction of offsets into the cap and trade program provides an additional source of compliance units that may, in certain cases, be less costly than those available to capped emitters otherwise restricted to reducing their own emissions.

Brief Summary of the Midwestern Accord

Formed in November 2007, the Midwestern Accord involves U.S. states (Illinois, Iowa, Kansas, Michigan, Minnesota and Wisconsin) and one Canadian province (Manitoba) in a regional program to reduce Midwestern GHG emissions. Indiana, Ohio and South Dakota participate as "observers." The Midwestern Accord will establish its regional reduction targets by July 2008 and plans to establish its multi-sector cap and trade program by November 2008.

The Midwestern Accord intends its cap and trade program to enable linkage with other jurisdictions' programs. This enables a future network of regional programs that could link WCI, the Midwestern Accord and other regional efforts such as RGGI.

Partners to the Midwestern Accord agreed that their emissions reductions targets would be "consistent with each state's goals," which, when established, will likely reflect the fact that members produce approximately 14% of total GHG emissions in North America and generate approximately 60% of their electricity from coal. Members have emphasized the need for innovation and leadership in using the region's significant coal reserves while reducing GHG emissions and expanding the use of other energy sources such as wind and biofuels. The Midwestern Accord will use incentives and other funding mechanisms as policy tools to encourage energy efficiency programs, ethanol and biodiesel industries and carbon capture and storage.

What Drives These Initiatives?

The WCI and Midwestern Accord each reflect expectations that climate change will present economic opportunities as well as burdens. Each seeks to position its members as market leaders in new climate-related industries: producing and selling alternative fuels, recruiting "green" business, and selling GHG reduction offsets. At the same time, each realizes that climate policies can be synergistic with other state goals—for example, expanding use of mass transit will reduce GHG emissions and encourage denser urban development.

Although the initiatives differ substantially from one another in design and timetable, there are signs that members will seek to integrate them into a single North American program. Each WCI and Midwestern Accord member seeks to work in partnership to achieve substantive reductions in GHG emissions while sustaining and enhancing regional economic development. Broad geographic partnerships can develop more comprehensive, integrated and cost-effective carbon control policies that eliminate duplication and bring uniformity and predictability to state rules and regulations. Regional leadership and expertise also earns credibility to influence development of nationally based cap and trade programs in a way that will reflect each region's unique needs and capacities.2

Summary of Key Information

The following table summarizes key components of the WCI, Midwestern Accord and RGGI initiatives.


Western Climate Initiative "WCI"

Cap & Trade:

Yes, potential start date in 2009




15 % below 2005 levels by 2020.

Other Programs:

Consider non C&T programs to meet targets.

Gases targeted:

C02. CH4, N20, HFCs, PFCs. SF6

Sector focus:

As many as possible Start w/electric sector and large stationary combustion sources. Expand to industrial process, waste management, fossil fuel production, transportation fuel, and other sectors


Develop GHG reporting rule based on each partner's mandatory requirement. Reporting likely required before C & T program in place. Capped sectors must report; some non-capped sectors may too. Plan to use ICR infrastructure and software if possible.

Status/major events:

Sub-committees designing program, recommendations due 8/2008. Each partners regulators must approve. Next public meeting: May 21, Salt Lake City.

Midwestern Accord

Cap & trade:

Yes, potential start date in 2009




Fix goals by July 2008.

Other programs:

Link to others (e.g, WCI/RGGI); develop other programs including carbon fuel standard and new funding mechanisms.

Gases targeted:

C02, CH4, N20. HFCs, PFCs, SF6

Sector focus:

Multi-sector. but not defined. Partners may phase in programs to be consistent with WCI.


Reporting plans not defined. Partners commit to track and manage GHG emissions. May develop reporting program in addition to TCR.

Status/major events:

Create C&T model rule by 11/2008. Developing work plan and work groups to implement program objectives through Midwestern Governors Assoc.

Regional Greenhouse Gas Initiative "RGGI"

Cap & trade:

Yes. 1st auction 9/2008.


C & T starts 1/2009


2008, single sector (power plant C02);

Other programs:

During 2009-20 14 maintain C02 emissions ≤2008 levels: post 2014 reduce emissions 2.5%/yr year for next four years (2015- 2018).

Gases targeted:

Start w/C02: expand to other GHG's

Sector focus:

Fossil fuel-fired electric generators ≥25 mw


Specific tracking registration system for tradable allowances will permit reporting of non power plant emissions to TCR.

Status/major events:

Model C&T rule adopted; individual partners seeking regulatory approval. First GHG allowance auction 9/2008; C&T in effect 1/2009.

Linkages Between WCI and the Midwestern Accord and RGGI

WCI is currently considering whether to link its cap and trade programs to the Midwestern and RGGI programs and whether voluntary carbon offset credits or other emission reductions generated outside WCI's area will be eligible within WCI. We will address these ongoing issues in future bulletins.

Coordination and Conflict With National Programs and Kyoto Protocol

Unlike the United States, Canada ratified the Kyoto Protocol in December 2002. Canada's federal government and its provinces share jurisdiction over Canada's environment. Typically, the federal government sets a baseline standard and enters into equivalency agreements with the provinces. Provided that provincial standards meet or exceed the federal standard, which is usually the case, provincial and regional programs will likely succeed without conflict or overlap with federal programs.

In contrast, the U.S. federal government has the power to pre-empt state or regional action thus creating more uncertain risks of overlap and conflict. Today, it is unclear how the regional cap and trade programs might interrelate with prospective U.S. national programs or ongoing efforts by the U.S. government to negotiate an international response to climate change. A U.S. national cap and trade program could expressly pre-empt individual state or regional programs, or it could expressly accommodate such initiatives.

Internationally, Canada and the United States may seek to integrate transboundary regional initiatives like WCI and the Midwestern Accord into ongoing efforts for a post-Kyoto GHG reduction agreement to take effect once Kyoto expires in 2012. International negotiations on this subject have officially begun.


Our firms will publish these updates monthly or more often as relevant events occur. We aim to assist our clients who will be impacted by climate change regulatory developments to better understand the regional initiatives and their effect on business on both sides of the border. We will be pleased to respond to inquiries and provide further information.


1. In 2005, several Northeastern U.S. states launched a process to develop and implement a mandatory CO2 cap and trade program to limit GHG emissions from power plants in their states. The participants and key aspects of the RGGI process are described more fully in the attached table.

2. Each regional initiative and its members are also members of The Climate Registry (TCR), a joint effort by most U.S. states and Canadian provinces, and two Mexican states to develop and manage a common GHG emissions reporting system.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions