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Canada's "cap in hand" cap and trade policy


I think this article by John Ibbitson of The Globe & Mail does a very good job summarizing the forthcoming US policy on GhG reduction, and the implications for Canadian policymakers.
As the U.S. goes (green), so too goes Canada
Because we can’t do it on our own, Congress is legislating a cap-and-trade system for us
John Ibbitson
The Globe & Mail — Thursday, Apr. 02, 2009 01:40PM EDT
Ten Congressional committees are working on Canada’s plan for reducing greenhouse gas emissions to fight global warming.
They’re not actually thinking about Canada at all. But the chances are getting steadily better that Congress will pass legislation to cap carbon dioxide and other emissions, allowing polluters to trade credits depending on whether they are above or below their cap.
“There is the strongest prospect ever” that the United States will embrace cap-and-trade, believes Elliot Diringer, vice-president for international strategies at the Pew Center on Global Climate Change.
That likelihood represents a profound surrender of sovereignty by Canada on environmental policy.
For a dozen years, since signing the Kyoto Protocol to fight global warming, the federal government has struggled to craft a cap-and-trade policy of its own.
But repeated Liberal and Conservative governments have retreated in the face of entrenched opposition from energy and manufacturing interests, and from provincial premiers who fear the economic consequences.
Now Canada can only watch as the United States, moving from laggard to leader in the fight against global warming, crafts a cap-and-trade policy, one that Canada will have no choice but to emulate.
“It’s almost certain that Canada will mirror U.S. cap-and-trade legislation,” said Gerald Butts, president of World Wildlife Fund Canada.
“The government’s delay in implementing caps shows the danger in outsourcing such a fundamental piece of national policy.”
To do nothing while the United States joins Europe and Japan in the fight to cool the planet’s air would leave Canada virtually alone among major developed nations in refusing to act, something that neither Canadians nor Canada’s international partners would tolerate.
In essence, the Americans are legislating for us because we can’t do it on our own.
How did this come to pass? Simply put, while Canada dithered, Barack Obama became President of the United States.
The 44th President is determined to implement a cap-and-trade system, because he sees it as the linchpin of not only his environmental but also his economic policies.
Mr. Obama is determined to retool America’s energy sector by reducing its reliance on fossil fuels, while establishing dominance in a new economy founded on researching and manufacturing alternative energy sources.
Capping and reducing carbon dioxide emissions by manufacturers and energy producers is fundamental to that industrial strategy. And with a strong Democratic majority in the House, and a majority as well – though less robust – in the Senate, the President has an excellent chance of pulling it off.
The House is expected to pass cap-and-trade legislation this year. And “if the President continues to push the way he has, there will be strong pressure on the Senate to move a bill next year,” Mr. Diringer believes.
The U.S. could have cap-and-trade legislation in place within months, with Canada’s Parliament scrambling to catch up.
So, what will Canada’s new cap-and-trade system look like, once we emulate whatever the Americans adopt? To find out, it’s best to look to the House of Representatives. And here, Canadian opponents of cap-and-trade can find at least partial reasons for solace.
The House Energy and Commerce committee recently passed an amended version of the American Clean Energy and Security Act, commonly known as Waxman-Markey in honour of its authors, congressmen Henry Waxman and Ed Markey.
Although eight other committees in the House are looking at the bill, the real fight was in the energy and commerce committee. Liberal Democrats from outside the industrial Midwest championed the toughest possible legislation; those from the states with coal or heavy manufacturing wanted the weakest possible rules. The conservatives won.
While scientists and environmental groups argue that the United States must cut emissions to 20 per cent below 1990 levels by 2020 if global warming is to slow, the revised bill has a target of 4 per cent below 1990 levels, or 17 per cent below current levels.
Initially, emitters such as coal plants or heavy industry were to buy at auction credits allowing them to continue polluting, creating a carbon market that would provide the federal government with tens of billions of dollars in revenues as it auctioned off the credits.
But the revised bill gives away 85 per cent of the initial credits, to give coal-powered plants, steel factories and the like more time to reduce emissions.
Requirements for utilities to greatly expand the percentage of renewable energy they draw from were also watered down.
“The revised bill is a triumph for coal-patch Dems and big business and a punch in the gut for greens,” analyst David Roberts lamented on Grist, an environmental website.
Some environmental leaders, such as former vice-president Al Gore, continue to support Waxman-Markey, despite the weakened provisions, arguing that it remains more than half a loaf, and is in any case better than no loaf at all. But Greenpeace, Friends of the Earth and other environmental groups have swung against it.
“I don’t know that the perfect being the enemy of the good is an apt analogy,” said Nick Berning, in the Washington office of Friends of the Earth.
“It’s more of question of: Is the United States going to stand up and be a leader in doing what’s necessary to avert a catastrophe? And that bill doesn’t get us there.”
Nonetheless, the Republicans staunchly oppose cap-and-trade in its entirety, calling it a “cap and tax.”
“It will have a devastating effect on the economy, on families and individuals in the United States,” warned Pennsylvania Congressman Glenn Thompson in an interview.
The Republicans calculate that the increased energy costs resulting from cap-and-trade will equate to $3,100 (U.S.) per family.
“All energy will be taxed,” Mr. Thompson observed. While analysts offer a range of estimates, there is no question that cap-and-trade will make it more expensive to heat homes and purchase manufactured goods. That will apply to Canadians as well, once the equivalent bill is passed.
Despite Republican opposition, most observers believe House Speaker Nancy Pelosi will be able to assemble a comfortable majority for passage by the House. Meanwhile, the Senate has two committees working on similar legislation, which could be put to a vote in the first half of 2010.
Pressure on Congress from the White House to keep moving on cap and trade has been relentless. Apart from domestic economic considerations, the President believes that he will be unable to convince emerging-market polluters, such as China and India, to clean up their act unless he can show them that the United States is prepared to do its part. And if the legislation isn’t in place by the time the campaign for the 2010 midterm elections begins next summer, it might never pass at all.
“There will be changes to the bill,” predicts Mr. Berning. But “there’s a very real chance that he could have legislation passed” either this year or next.
The U.S. bill mandates that if any other country wants to integrate its emission-reduction measures with the United States, it must meet the American standards. This is just another reason for Canada to duplicate the American bill: It would be foolishly inefficient to operate separate carbon markets in both Canada and the U.S.
And though its language has been watered down and the date deferred, Waxman-Markey also envisions the possibility of penalizing countries in the future who try to export goods or energy to the United States but who lack emission-reduction regimes of their own.
Add it all up, and the case for Canada’s federal government simply photocopying the U.S. program and submitting it to Parliament is overwhelming.
Canada will join the fight against global warming whether its politicians want it to or not. The Americans will leave us no choice.


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