This Climate Change Bulletin is part of a series that is prepared periodically by BLG’s Climate Change Group to alert our clients to emerging issues and initiatives that are relevant to their businesses and strategic interests. Future Climate Change Bulletins and Alerts will review and consider issues facing various provinces as well as different industrial sectors. Comments and questions are always welcome and should be directed to the authors.

Overview

Has the November 4, 2008 election of Barack Obama as the 44th president of the United States spurred a hopeful trend towards convergence of Federal and Provincial climate change policy in Canada? During the campaign, Obama committed to implement a US federal cap and trade program to reduce greenhouse gas ("GHG") emissions 80 percent by 2050 and to invest $150 billion over the next ten years to catalyze private efforts to build a clean energy future.1 Recent events show that most leaders in Canada, even members of the Canada's oil and gas industry, are closely monitoring developments in the US. However, it is not clear at this early stage whether the goal of maintaining harmonious environmental standards with Canada’s most important trade partner will be sufficient to overcome the differences that are manifest in the hodgepodge of Canadian approaches to climate change.

Recent Developments

On November 18, President elect Obama addressed climate change as the second major policy issue since the election (the first was the economy). In strongly worded remarks to the Governors’ Global Climate Summit, a two-day forum organized by California Governor Arnold Schwarzenegger for government officials from developed and developing economies to share ideas, problems and concerns on climate change (the "Summit"), President elect Obama reaffirmed his targets and committed to help lead the world toward a new era of global cooperation on climate change.2

The message of global cooperation was not lost on the government officials from 23 countries attending the Summit, including officials from the US, UK, Canada, Mexico, India, China and Brazil. Ontario Environment Minister John Gerretsen attended the Summit and, on behalf of Ontarians, signed a declaration pledging Ontario’s continued support for global cooperation in combating climate change.

"This declaration is a significant step in advancing a shared global vision in working together to mitigate climate change," said Minister Gerretsen. "Through input from our own industries and other jurisdictions, Ontario will build a cap and trade system that significantly reduces greenhouse gases and is compatible with existing and emerging systems around the world," he said.

British Columbia Environment Minister Berry Penner joined Minister Gerretsen at the Summit. In a recent interview, BC Premier Gordon Campbell explained that "[…] I think British Columbia . . . has simply tried to be there to make sure that we're not just dealing with the climate issue, but we're maximizing the benefits of the climate issue to our economy" saying that "I'm hoping that we'll get a better understanding of what's going on in the United States."3

On November 25, Nova Scotia Environment Minister Mark Parent added his voice to the mix. In a statement at Province House, the home of the Nova Scotia House of Assembly, Minister Parent said the government is waiting for Barack Obama noting that "[a]ny climate change plan that you do has to be done in light of what other people are doing," and that "[w]e have to see what's happening with the New England states in particular."

In another significant development, on November 20th Democrat Representative Henry A. Waxman won the chairmanship of the powerful House Energy and Commerce Committee with a 137-to-122 vote over John D. Dingell in a change that is expected to accelerate passage of new energy, climate and health legislation backed by President elect Obama. While this may seem inconsequential to some in Canada, the fact that Waxman, known to be friendly to environmentalists, was successful in ousting Dingell, a Michigan Representative who was chair of the powerful committee for the past 28 years and was known for his ties to the automotive industry, is a signal of the changes to come in Washington under an Obama administration.4

In the November 19th Speech from the Throne, Prime Minister Stephen Harper reaffirmed his newly reelected minority government’s commitment to reducing Canada’s total greenhouse gas emissions by 20 percent by 2020 and set an objective that 90 percent of Canada’s electricity needs be provided by nonemitting sources such as hydro, nuclear, clean coal or wind power by 2020. However, it was the Government’s signal regarding a North America-wide cap and trade system that indicates Ottawa is now watching the developments in Washington with interest:

"We will meet this goal while also ensuring that Canada’s actions going forward remain comparable to what our partners in the United States, Europe and other industrialized countries undertake. We will work with the provincial governments and our partners to develop and implement a North America-wide cap and trade system for greenhouse gases and an effective international protocol for the post-2012 period."

In an interview with the National Post, Rick Hyndman, a climate-change advisor for the Canadian Association of Petroleum Producers, said the success of Harper’s proposed North American cap and trade system will depend on whether Canada can prevent itself from being left at a competitive trade disadvantage in the final agreement. "Aligning our climate change policy with the U. S., and integrating climate-change policy and energy strategies, is very important and necessary," Mr. Hyndman said.5

What’s Next?

The election of Obama has brought the Federal and Nova Scotia Conservatives, Ontario and British Columbia Liberals and representatives of Canada's oil and gas industry in line. They are all singing the same tune - but the question is how long it will last?

A cap and trade system can take a variety of different forms. It can be based on intensity targets, like the proposed federal regime in Canada, or absolute targets, as proposed in Ontario and BC. It can encompass a broad array of sectors, from industry to transportation such as the Western Climate Initiative, or it can focus in a single sector, like electricity generation in the Regional Greenhouse Gas Initiative. The thresholds for reporting and for compliance under regimes vary greatly, and schemes also differ on whether reported emissions must be audited or not. All of this leaves aside open questions about the treatment of a carbon tax (as in BC), banking credits, schemes to allow for early offsets, and equivalency with other regimes.

To-date, President elect Obama has been silent about the details of his proposed cap and trade system. No doubt his transition team is consulting with numerous advisors and interest groups in advance of his January 20, 2009 inauguration. Regardless of what is decided, it is unlikely that a cap and trade system implemented by the future President Obama will satisfy the demands of all of these different interests. For now all eyes are on Washington, and for some the devil will be in the detail of an Obama cap and trade system.