The ambiguous and noncommittal outcome of the Copenhagen climate change talks, and Canada’s statements leading to and at Copenhagen, add further uncertainty to Canada’s climate change strategy. The “Turning the Corner” plan (released in March 2008) is of doubtful relevance today. Instead, the federal strategy will likely mirror whatever develops in the US Congress, where attention may shift back to climate change now that the intense legislative battle over health care reform has ended.

Twelve years after the Kyoto Protocol was adopted, Canada still has no federal regulations limiting industrial GHG emissions, and has now more or less officially adopted a wait and see policy where Washington gets to make the first move. The federal government’s admitted lack of willingness to put in place domestic GHG regulations before the US regime takes shape likely means that the focus in the next year will be on the provinces, and in particular those that are members of the Western Climate Initiative (Ontario, Quebec, Manitoba and BC), which is poised to implement a cap and trade system in 2012. In the absence of a federal regime, the key question may well be whether these provinces and their US state counterparts have the courage of their stated convictions and regulate on a provincial-state basis.

The WCI began in 2007 as a partnership of five western US states and has since expanded to include two more states and the four provinces (several other US and Mexican states, as well as Saskatchewan, have “observer” status but are not full partners). The WCI is now well positioned for implementation, with design documents and concepts well advanced. If it does proceed, the key elements industry in the WCI provinces should expect are:

  • the first phase of the cap and trade program, covering electricity generation and large industrial and commercial emitters, would come into force on January 1, 2012; the program would be expanded in 2015 to cover other emissions including from transportation, residential and smaller industrial sources (the WCI states that almost 90% of GHG emissions would be covered once the second phase is implemented);
  • a mix of GHG allowances – some distributed gratis and some by auction;
  • an offset system allowing non-capped entities to earn carbon credits for voluntary emissions reduction measures;
  • trading of allowances and offsets;
  • interchangeability of allowances and offsets with those from other WCI provinces and states;
  • some international linkages (e.g. with the Clean Development Mechanism under the Kyoto Protocol) on a limited basis;
  • the partnership as a whole has set a regional target of a 15% GHG reduction from 2005 levels by 2020.

Copenhagen may have dealt a blow to hopes for an integrated global cap and trade system based on common compliance-based requirements for credits. The focus may now shift, at least in the short term, to subnational and regional systems.

Copenhagen goes to show how difficult it is to create a GHG limiting regime across jurisdictions of disparate economic and political realities. The same holds true within Canada. Any federal climate change plan would have to strike a delicate balance between competing provincial concerns.

The future of climate change regulation may lie with building blocks of less ambitious climate protection systems in smaller units of like minded and like situated jurisdictions. It may be that, when it comes to GHG strategy, Ontario has more in common with California or Oregon than it does with Alberta.