I recently attended the Mid-Year Meeting of the Energy Bar Association (EBA) in Washington, D.C. This year the entire two-day program was devoted to climate change. The first keynote speaker was Ambassador Stuart E. Eizenstat, a very substantial figure in the Democratic party. Eizenstat, regarded as one of the leading U.S. trade lawyers, was the senior domestic policy adviser to President Jimmy Carter, and held senior domestic and state department posts in the Clinton administrations, including chief U.S. negotiator for the Kyoto Protocol.

In Eizenstat's view, there is no doubt that the incoming administration will propose, and the 2009 - 2010 Congress will pass, comprehensive climate change legislation. He made it clear that Congress would ultimately support such a measure for environmental, job creation, and national security reasons. He also felt that the plan, at least in the early years, would stress low cost options to attain its objectives. This would suggest some reliance on domestic and foreign offsets. He thought at least the main outlines of such a program would be in place in time for the climate change experts meeting in Copenhagen in December 2009.

Coincidentally, President-elect Obama made clear in his national radio address on November 22nd that alternative energy (including demand management) will be a key part of a 2-year major fiscal initiative to construct new infrastructure and thereby create well-paying jobs for Americans, and the first priority of his administration.

We also know that Prime Minister Harper, in his recent Throne Speech, has proposed a "North America-wide cap and trade system for greenhouse gases and an effective international protocol for the post-2012 period".

These are encouraging developments, although several speakers made it clear that the U.S. will have to settle its own climate change policy first before embarking on any treaties or other arrangements with foreign countries. The Senate will not approve any treaty to do with climate change until it is satisfied that satisfactory arrangements have been agreed to to deal with the issue domestically. While many prominent economists in both Canada and the United States (for example, David Courchesne in Canada and William Nordstrom in the United States) advocate a carbon tax as opposed to a cap and trade scheme, nearly all the EBA speakers, including Eizenstat, firmly believed that a carbon tax was a non-starter in Congress. There was, however, a consensus that a price would have to be put on carbon. There was surprisingly little discussion of new nuclear plants, which one would have thought was one major way to tackle the problem going forward.

The consensus was that, once the U.S. had decided what it would/could do on climate change, it needed, as part of the implementation of the program, to engage China, India and the other developing countries in a "grand bargain" to obtain some commitments from the developing world, otherwise Congress would not impose burdens on U.S. industry. A part of the contribution of developing countries may well come in the form of anti-deforestation policies since about 20% of CO2 emissions worldwide come from deforestation, and with advanced satellite imaging technology it is now possible to verify compliance with these policies.

It seems that the U.S. approach to climate change will:

  • be broad, touching on all sectors, not just major industrial users, and include transportation users;  
  • be firmly linked to efforts to build a green economy and create "green collar" jobs in the U.S., a linkage which bodes well for energy efficiency projects and renewable energy projects of all types as they are both manpower intensive;  
  • include a national renewable portfolio standard and perhaps a national energy efficiency standard.  

What are the implications of all this activity for Canadian GHG initiatives? It reinforces the need for the federal government to get its GHG regulations out and in place as soon as possible, for two reasons:

  1. Canada will not be able to negotiate a treaty with the United States on GHG until it has its own house in order. The principal Canadian players must have agreed on a reasonable program that makes sense for Canada. Only then can Canada look at the pros and cons of adjusting its program to make a treaty possible.
  2. The Canadian GHG industry, both on the buy and sell side, has invested considerable time and effort to develop GHG expertise, and many projects are underway, some of them voluntary, in anticipation of legislated requirements. This "head start" on the United States must be maintained. If it is, when the U.S. GHG control program ramps up, Canadian firms will be able to capitalize on their experience in Canada and, if a treaty were eventually signed, they would be in a strong position to compete.