Category Archives: cap and trade

Paul Martin’s the best you’ve got?

When we call Joe Clark, John Turner, Kim Campbell and Paul Martin “former prime ministers,” it is technically true. But, I mean, come on…

Four former prime ministers – Kim Campbell, Paul Martin, Joe Clark and John Turner – and leaders in academia, science, business and the environment have united to demand the federal government do much more to deal with climate change.

The diverse group, which also includes students, steelworkers and authors, is expected to release a statement in Toronto Tuesday calling for “steep cuts” in Canadian greenhouse gas emissions and deployment of “climate-safe technologies at a staggering rate.”

While the group claims to be non-partisan, it is clearly dissatisfied with the Conservative government’s performance on what many consider the most pressing issue facing the planet.

These were really, really, really bad prime ministers. Only Martin actually won an election and that was another technicality — he really just sort of notched an election along the Liberals’ long decline. In fact, the secondary members of the group

Stephen Bronfman, the Hon. David Peterson, Prof. David Keith, Katherine Giroux-Bougard, National Chairperson, Canadian Federation of Students, Prof. Andrew Weaver from the IPCC and the University of Victoria, Ken Neumann, National Director for Canada, United Steelworkers, Kashmere Dahliwal, President of North America’s largest Sihk temple and Dr. Marlo Raynolds from the Pembina Institute

— while a somewhat random collection of luminaries, probably collectively shine brighter than the most embarrassing living losers in Canadian politics.

Which is a shame, because the group’s signature policy recommendation, that some sort of policy be adopted that prices carbon at not less than $30 a tonne, ought to be taken seriously in the public debate.

Ontario and Quebec do cap-and-trade

It took some doing, but I finally found a copy of the Quebec–Ontario cap-and-trade deal (PDF) on the website of Quebec Premier Jean Charest. Here’s the text, if you’re looking for it yourself. My commentary’s beneath.


Provincial – Territorial
Cap and Trade Initiative
Memorandum of Understanding

WHEREAS the Intergovernmental Panel on Climate Change (IPCC) recently concluded that warming of the climate system is unequivocal and that most of the observed increase in global average temperatures is due to human activities; and

WHEREAS strong, immediate and sustained action is an absolute requirement to minimize the risks posed by climate change; and

WHEREAS early action to reduce greenhouse gas emissions is now understood to be less costly than the severe economic impacts associated with inaction; and

WHEREAS reliance on intensity-based targets does not provide for sufficient certainty of real reductions in greenhouse gas emissions; and

WHEREAS collaboration among provinces, territories and states of the United States and Mexico engaged in developing and implementing climate change policies provides a consistent approach to achieving absolute greenhouse gas emissions reductions; and

WHEREAS Ontario, Québec and other provinces and territories have joined The Climate Registry; and

WHEREAS cap and trade systems are a flexible, market-based mechanism that can facilitate the reduction in greenhouse gas emissions and provide opportunities for lowering the global costs of greenhouse gas emissions reductions; and

WHEREAS greenhouse gas cap and trade systems can facilitate the transition to a low carbon economy and encourage technological innovation, economic growth and job creation; and

WHEREAS the ability to link to other jurisdictional greenhouse gas cap and trade systems can provide greenhouse gas emission reductions at lower cost, allow for larger trading volumes and improved liquidity and improve the pace of innovation; and

WHEREAS harmonizing reporting requirements with other jurisdictions will facilitate the joining of new partners and linkages with other cap and trade systems; and

WHEREAS Ontario and Québec agree that like-minded provinces and territories are invited to sign this Memorandum of Understanding and work together collaboratively on this cap and trade initiative.

NOW THEREFORE, the signatories to this Memorandum of Understanding agree to collaborate on a Provincial and Territorial Greenhouse Gas Cap and Trade Initiative including the design and implementation of a cap and trade system in conjunction with broader regional trading systems already under development to reduce greenhouse gas emissions in their jurisdiction respectively. This collaboration shall include, but is not limited to:

  • Working co-operatively and with other provinces, territories and states on the design and implementation of a joint regional market-based multi-sector greenhouse gas cap and trade system, based on real reductions that could be implemented as early as January 1, 2010;
  • Facilitating participation and linkages with broader North American and international trading systems, to the extent permitted by applicable provincial, territorial, state and federal laws;
  • Providing an intergovernmental forum for collaboration between provinces and territories dedicated to developing and implementing a greenhouse gas cap and trade system in addition to other greenhouse gas emissions reductions policies
  • Recognizing early action in reducing greenhouse gas emissions based on the internationally accepted base year of 1990 for entities owning or controlling covered facilities or sources that have an established and credible record of emissions reductions for those facilities or sources;
  • Harmonizing greenhouse gas reporting requirements with other jurisdictions to facilitate the joining of new partners and linkages with other cap and trade systems so that regulated sectors do not face duplicative reporting requirements.

The signatories to this Memorandum of Understanding agree to direct their respective staff and appropriate agencies to meet as soon as is practicable to develop a work plan to deliver this initiative.

The signatories to this Memorandum of Understanding agree that other provinces and territories may join this initiative by signing a copy of this Memorandum of Understanding and provide a copy of it to all other signatories.


Given that it’s not an actual cap-and-trade deal, but rather a deal to make a deal soon, it strikes me as pretty thorough. Aside from the stuff obviously meant to tweak the federal government’s nose (like the part about using 1990 as a base year, which matters not at all in comparison to the percentage you’re promising to cut from that point), the commitment to absolute rather than intensity-based targets is significant, and so’s the commitment to link up with other carbon trading systems, which should lead to money finding its way to the most economically efficient emissions cuts, over time.

That much “real” stuff in the accord, and the 2010 target date for getting this thing going, suggests that both Dalton McGuinty and Charest grasp that this is a policy initiative that will reward swift innovation. You want to be ahead of this curve. Charest said as much, apparently:

Quebec Premier Jean Charest warned the federal government is missing the boat on a worldwide term.

“Ottawa won’t have a choice,” Charest said. “Ultimately, between you and me, the day the Americans elect a new government, the new government gets elected and says from now there will be a ceiling and such and such level and the trading will work this, don’t kid yourself,” he said.

“It’s not Canada which will say to Europe, ‘No, no, we’re doing our own system.’ Come on. They will be isolated at that moment.”

Naturally, the feds are frothing, but pretty ineffectually. It’s true that all the details, including the pivotal ones of how permits are to be distributed and whether there will be a “safety valve” price for unlimited permits from governments, have yet to be worked out. But it doesn’t seem fair to criticize a deal-to-make-a-deal for not actually being a deal. The extent of the desperation for material is suggested in this CBC story:

In the House of Commons on Monday, NDP Leader Jack Layton said the two Liberal premiers are filling a “vacuum of leadership” on the issue of cutting greenhouse gas emissions.

In response, Prime Minister Stephen Harper criticized the plan for not establishing a regulatory mechanism and suggested the new Montreal Climate Exchange will have to fill that void.

Canada’s first carbon trading market, a joint venture between the Montreal Exchange and Chicago Climate Exchange, was launched last Friday.

They’re going to leave the details to a privately operated market and that’s a problem? Remind me — who are the conservatives, again?

McCain on cap-and-trade

This is a statement of general principles and the devil is always in the details, but it’s encouraging to see words like these from the Republican Party’s presumptive presidential nominee:

We will cap emissions according to specific goals, measuring progress by reference to past carbon emissions. By the year 2012, we will seek a return to 2005 levels of emission, by 2020, a return to 1990 levels, and so on until we have achieved at least a reduction of sixty percent below 1990 levels by the year 2050. In the course of time, it may be that new ideas and technologies will come along that we can hardly imagine today, allowing all industries to change with a speed that will surprise us. More likely, however, there will be some companies that need extra emissions rights, and they will be able to buy them. The system to meet these targets and timetables will give these companies extra time to adapt — and that is good economic policy. It is also a matter of simple fairness, because the cap-and-trade system will create jobs, improve livelihoods, and strengthen futures across our country.

The goal in all of this is to assure an energy supply that is safe, secure, diverse, and domestic. And in pursuit of these objectives, we cannot afford to take economic growth and job creation for granted. A strong and growing economy is essential to all of our goals, and especially the goal of finding alternatives to carbon-based technology. We want to turn the American economy toward cleaner and safer energy sources. And you can’t achieve that by imposing costs that the American economy cannot sustain.

As part of my cap-and-trade incentives, I will also propose to include the purchase of offsets from those outside the scope of the trading system. This will broaden the array of rewards for reduced emissions, while also lowering the costs of compliance with our new emissions standards. Through the sale of offsets — and with strict standards to assure that reductions are real — our agricultural sector alone can provide as much as forty percent of the overall reductions we will require in greenhouse gas emissions. And in the short term, farmers and ranchers can do it in some of the most cost-effective ways.

Canadian carbon market to open May 30

Good news that the infrastructure for trading carbon emissions is nearly reality in Canada, with the Montreal Exchange planning to open the doors (well, flick on the computers) May 30 this year. The head of the exchange, Luc Bertrand, has previously been lukewarm on the viability of such a market, given the weak federal regulation of emissions, but apparently he’s changed his mind:

The Government of Canada has provided greater regulatory certainty regarding intensity-based emissions reduction targets and the definition of a single compliance standard for tradable credits,” added Mr. Bertrand. “This will enable emitters to more accurately forecast their individual intensity-based reduction targets and exposures.”

“Clear regulations are always welcome news for buyers, sellers andmarket operators. Our aim is to offer a market based solution that will optimize the policy guidelines set by the federal Government and support the reduction of carbon emissions in a cost effective manner.”

My guess is, they’re expecting tougher targets eventually and want to be up and running well in advance. It’ll be very, very interesting to see what price the market puts on emissions credits, given the government’s regulations.

Dion’s dithering

This is, unfortunately, indicative of the way Stéphane Dion has been leading the federal Liberal Party:

Liberal Leader Stéphane Dion says he would place a price on carbon as part of his government’s commitment to environmental leadership, but he steered clear of calling for a tax, at least for now.

Mr. Dion told a forum for emerging environmental leaders Friday morning that it’s the government’s job to manage the economy and environment responsibly.

The Liberal Leader acknowledged that the concept of pricing carbon is still a work in progress for his party and the end result could be either a cap-and-trade system or a tax.

I was pretty pleased when Dion snuck up the middle to take the party leadership. It seemed as though, at last, both the major federal parties would have adult supervision. As it turns out, not so much (in either case).

Dion was elected to lead the Liberals in 2006 on a platform whose most interesting and prominent component was environmentalism: he went so far as to add it as a “third pillar” to the party’s traditional two priorities of social justice and economic growth. In addition to which, he was supposed to be both smart and stubborn, as evidenced by his handling of separatists in Quebec when he was the minister in charge of that file. Maybe Dion didn’t inspire as a leader, but look at what he did.

But it’s coming up on a year-and-a-half since then, and Dion’s party is still dithering around what the leader himself as presented as the key public-policy question of our time. I mean, no kidding it’s going to take a carbon tax or cap-and-trade, or more likely a combination of both in different sectors of the economy. This is as far as you’ve gotten?

Dion’s best bet, short of waiting for the Conservatives to self-destruct (which any party will, eventually, viz. the Liberals under Dion’s predecessor Paul Martin), is to be the guy who’s done his homework, who can make policy promises backed up by unimpeachable research and compelling argument. “Yes, we need a carbon tax, it should be this much on these commodities, here’s what that will do, these are the places where they’ve tried it, here are the experts who agree, and here are the economists who have projected the effects five, 15, 25 years out. Now, here are our cap-and-trade plans…”

If you want to be the government, you’ve got to prove you’re better than the one we have now.

A tax “even the Right might like”

The Ottawa Citizen‘s response to the National Roundtable on the Environment and the Economy’s call for a price — some kind of price — for carbon:

There is a worse economic sin than overregulation, the NRTEE says, echoing warnings from the business community, and that is capricious regulation. Given warning, industry can adapt to just about anything; it’s shocks that are scary. When governments set long-range targets without setting rules that will get the country to them, investors get nervous.

Less pain now almost certainly means much more pain later. Yet the Harper government seems to focus entirely on short-term costs instead of long-term benefits when contemplating environmental economics. This is doing Canada no service.

Whatever you do, get on with it

Canada needs an “economy-wide” price on carbon emissions, says the federal government’s environmental economics think tank … but the National Roundtable on the Environment and the Economy punts on the key question in the debate today, which is whether a carbon tax or a cap-and-trade system should be the key measure for imposing that price.

There is, of course, no pithy money quote to demonstrate this vagueness, but the gist of the lengthy report is that the feds can use whatever instrument they like to put a price on carbon, as long as it’s properly designed and is coupled with complimentary policies to get at whatever parts of the economy the chosen instrument doesn’t capture.

Ah. Easy enough, then. Just some details to be sorted out.
What does come through clearly in the NRTEE’s final report on “Getting to 2050: Canada’s Transition to a Low-emission Future” is that this is an extremely urgent problem that the NRTEE doesn’t think the government is taking seriously enough.

The federal government has committed to deep long-term emission reduction targets for GHGs and air pollutants. For GHGs, these targets are 20% below 2006 levels by 2020, and 60% to 70% below 2006 levels by 2050; these targets match those of the NRTEE’s “fast and deep” [that is, most ambitious — DR.] scenario in this report. Achieving this vision of a low-emission economy for Canada requires embarking upon a focused and deliberate transition beyond current policy approaches. Our research shows that achieving the 2050 target of a 65% reduction in GHG emissions from current levels requires meeting the stated 2020 target of a 20% reduction. Missing the 2020 target will put at risk the attainment of the longer-term target, or make achieving that target come at both higher economic and environmental costs.

People who pay close attention believe that the government’s plan, which is still off somewhere in perpetual consultations awaiting death that will be either quiet (if the governing Tories call an election) or extremely noisy (if the supposedly green-friendly Liberals force one), will not actually achieve the targets the government has set, suggesting the whole thing is a fiasco in the making.