The next few months of activity in the US will be crucial for Canada, says Dennis Mahony in Environmental Finance.

Canada's emissions plans fall victim to U.S. uncertainty

April 22, 2009

Reports say that Canada’s quest to harmonize its federal cap-and-trade program with that of the United States may impose absolute emissions caps more quickly than initially proposed.

Canada’s environment minister, Jim Prentice, recently indicated a willingness to consider modifying the country’s proposed intensity-based cap-and-trade system as officials pursue a North American trading system with the United States and Mexico.

The Canadian federal government remains committed to reducing the country’s total greenhouse gas (GHG) emissions by 20% from 2006 levels by 2020 and 60-70% by 2050, according to a Ministry of Environment spokeswoman.

The first step in developing a program similar to the proposed likely U.S. system will be to modify the Canadian federal framework, known as ‘Turning the Corner’, to shorten its multi-year transition period from intensity-based targets to absolute caps, observers said. The plan envisages this transition being phased-in over eight years, by sector.

But Alberta is uneasy about the impact of an absolute cap because fossil fuel production—including from oil sands—accounts for about 40% of the province’s GHG emissions.

“That is a particular concern to Alberta because it will be, within seven to eight years, the highest GHG producer in the country,” says Dennis Mahony.

The schedule for moving to a hard cap should be announced well in advance, according to a report issued last week by the National Round Table on the Environment and the Economy which advocated development of an economy-wide cap-and-trade system.

The program should take effect as soon as possible, but no later than 2015, said the group, which will be influential on emerging policy. The federal government intends to put its regulatory framework into law in the near future, but it appears likely that officials will miss the 2010 target date for compliance featured in its original proposal—first unveiled two years ago.

Dennis says the next few months of activity in the United States will be crucial for Canada. If it becomes clear that U.S. president Barack Obama cannot get a cap-and-trade system approved by Congress, Canada will start to act independently and set up its own program. Conversely, if it looks like the United States is closing in on a framework, Canada will wait to see what develops and try to establish a system that is compatible, he said.


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