Recently, the voters of California overwhelmingly defeated Proposition 23, a ballot proposition seen by residents from Arnold Schwarzenegger to State Democrats as a tactic to delay the state’s existing law aimed at curbing global warming by putting tough limits on greenhouse gas emissions. However, on the same day, the Republican Party took control of the U.S. House of Representatives, threatening any national effort to control global warming or implement federal cap-and-trade legislation.
How will this affect efforts to control emissions in Canada?
The defeat of Proposition 23 means that Arizona and other states will likely follow through on existing commitments and put in place their own climate change regulations. Now that California has cleared this hurdle, there is renewed momentum within the Western Climate Initiative (WCI), a collaboration of jurisdictions working together to identify, evaluate, and implement policies to tackle climate change at a regional level, and, more importantly, independent of national regimes. The WCI consists of 11 partners including seven U.S. states and four Canadian provinces (Quebec, Ontario, Manitoba, and British Columbia), together with observers consisting of five U.S. states, five Canadian provinces (the Yukon, Saskatchewan, New Brunswick and Nova Scotia) and five Mexican states.
On July 27, 2010, the WCI released its “Design for the Regional Program” document, which outlined a detailed framework for cap and trade programs to use in implementing cap and trade legislation in each of WCI partners’ home jurisdictions. Even before the most recent round of voting took place south of the border, Ontario and BC had passed enabling legislation to allow for the implementation of WCI mandated programs, and provincial authorities had commenced work to move toward WCI compliance. In particular, the BC Ministry of Environment is moving forward to that end in establishing its own regional emissions cap and trade and carbon-offset system and is currently consulting on two proposed regulations that will enable implementation of its own cap and trade system pursuant to the Greenhouse Gas Reduction (Cap and Trade) Act, S.B.C. 2008, c. 32 and supporting regulations.
On October 25, the BC government issued two white papers on the system and is currently seeking comments from stakeholders, First Nations, and the general public on proposed Emissions Trading and Offsets Regulations. This public comment period on the proposed system will end December 6, 2010. All information, consultation documents/papers, and response forms, are available online. (www.env.gov.bc.ca/cas/mitigation/ggrcta)
In particular, the B.C. Government is seeking comments on the Emissions Trading Regulation with respect to:
1. Specifying the subjected facilities (i.e., facilities emitting more than 25,000 tonnes of carbon dioxide equivalent), based on greenhouse gas emissions source and overall greenhouse gas emissions;
2. Defining the process by which the cap for regulated emitters and distribution of allowances is established;
3. Defining the functions and operation of the registry; and
4. providing a foundation for linking other emissions trading systems.
The government is also seeking comments in reference to the companion Offsets Regulation with respect to:
5. Defining the criteria for eligible offsets;
6. Establishing a process to recognize valid emission reductions as offsets;
7. Establishing accreditation requirements for third-party validators and verifiers; and
8. Defining the obligations of project developers, including the requirement to replace deficient offsets.
BC’s cap and trade system as proposed would apply to activities/businesses/facilities, some of which are not otherwise already subject to carbon tax. In theory, because the cap and trade system is designed to fit with the WCI, the market price of carbon allowances and offsets will be set broadly across the entire region potentially allowing qualified businesses in BC to buy, trade, or sell allowances or offsets with other WCI partners.
In brief, a company’s total allowable CO2E emissions become the “cap” under the proposed BC system. The total number of allowances for all facilities will be set through the government’s nine-year allowance forecast and three-year compliance period; however, the number of allowances on a per facility basis will be issued annually and will be reduced over time. The cap on overall CO2E emissions will be based on projected emissions in 2012 and subsequent years. There will be no restriction on the ownership of allowances and offsets — i.e., they will be tradable between and among facilities or third parties. Additionally, allowances and offsets could be banked indefinitely for later use if they are not sold.
Despite what position the Canadian or U.S. federal governments may take nationally on curbing global warming, the influence of California and its bolstering of the WCI means that if you are considering an offset project or implementing carbon efficiency measures for your business, action at the provincial or state level may provide the conditions necessary to make your project a success.
Sarah Hansen is a Partner with Miller Thomson’s Vancouver, BC office. Contact Sarah at email@example.com Aaron Atcheson is a Partner with Miller Thomson’s London, Ontario office. Contact Aaron at firstname.lastname@example.org The authors wish to thank student Andrew Kowalchuk for his assistance in preparing this article.