In January 2010, California passed regulation over Green House gases by determining the pollution of fuels coming into California: LA times has coverage here:

“The Air Resources Board voted 9 to 1 in favor of the complex new rule, which is expected to slash the state’s gasoline consumption by a quarter in the next decade”

The move was historic with California, evidently not unnerved enough by the state’s precarious financial position to press on with passing a remarkably progressive piece of Climate legislation.

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Canada has slightly adjusted its mid-term climate mitigation targets to match US pledges. Canada’s Environment Minister, Jim Prentice, recently announced that Canada has changed its mitigation goals in an effort to harmonize with the Obama administration.

Canada’s new emissions reduction target for 2020 is a cut of 17% on 2005 levels. Heading into the Copenhagen meeting this past December Canada’s mid-term target was a 20% reduction on 2006 levels by 2020. This adjustment comes as countries report their national targets to the UNFCCC as outlined in the Copenhagen Accord. The new Canadian commitment has been labeled by environmental groups as being slightly less stringent than the previous target, and well outside the range of targets proposed by the European Union (20% cuts from 1990 levels by 2020, with the possibility of going up to 30%).

On the face of things, Canada’s adjusted target is just another step towards an apparent harmonization between the Canadian and US positions on climate change, something that Minister Prentice has been calling for since taking over the portfolio.

However, differences clearly remain on policy direction and actions for addressing climate change. While Canada will now follow US pledges for 2020, it is not clear if Canada will adjust its long term targets to match those included in legislation before the US Senate.  A climate bill passed by the House proposed a sharp cut of 80% on 2005 emissions levels by 2050, a target that the Canadian government does not seem to be considering.

Additionally, as previously reported on Climatico here, there is a big difference in stimulus spending on green initiatives on either side of the 49th parallel. Reports by the Pembina Institute have suggested that the U.S. is vastly outspending Canada on a per capita basis on renewable energy infrastructure.

In a recent speech in Calgary to oil executives, Minister Prentice indicated that any Canadian action on climate change was contingent on American actions. Critics have argued that this matching of American policy may result in indefinite delays as climate legislation faces an uphill battle in the US Congress.  This position has also resulted in furthering internal political divisions within Canada, as Quebec Premier Jean Charest came out strongly against the federal government policy.

If Canada is to wait for certainty in the American position it could be some time before Canada implements a comprehensive program to reduce emissions, either through a cap-and-trade scheme or through regulation.

While the Obama administration is making moves towards regulating carbon emissions through the Environmental Protection Agency it is unclear how far along Canada’s plans are to similarly regulate industry north of the border.  A plan to regulate emissions from heavy industry in Canada was due to be released last year (a deadline already shifted numerous times) but will now likely be stalled indefinitely.

With the dust barely settled from the Copenhagen talks, critics within Canada have been scathing of its approach to the talks. They note Canada’s failure to take any leadership, its humiliation at the hands of the Yes Men (although there, Canada is hardly alone) in recent times, as well as the recipient of a fossil award, for lack of leadership as an industrialized country. When leaders came out of Copenhagen with an underwhelming accord, many in Canada were quick to point the finger at their own government’s failure.

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 From a party not known for a forward stance against Climate Change legislation and with many members downright sceptical, perhaps we should be positive when Senator Lindsey Graham (R-SC) visited Saskatchewan last week and declared himself a believer, that Climate Change was a “reality”. The interview, worth reading in full, brings to light some of the thinking of Republicans on Climate Change and the North American energy market.

Senator’s Graham’s views are particularly important for several reasons. Firstly the Climate change bill that passed through the US house and is awaiting its senate hearing is possibly the single most important turning point in getting a global deal on Climate Change. As Graham himself noted, the bill narrowly passed in the house meaning that it dropped Democrats, given the house is often seen as more partisan, the implication is that the bill would need to be watered down to make a passage through the Senate. While this may be true to some extent, Graham is being slightly disingenuous, the House bill passed with enough votes – some Democrats were able to vote against it for their constituency, safe in the knowledge it would pass (i.e. if it had been closer they would probably have also voted for it).

Senator Graham’s views were likewise interesting in terms of the shape of Climate legislation in North America, which can probably be read as a reasonable gauge of Republican thinking on energy policy if not Climate Change policy.

“Carbon sequestration is the key to anything you want to do when you talk about getting away from fossil fuels or controlling CO2 emissions”

Not that this will surprise many, but CCS ( Carbon Capture and Storage) is in the near future at least a political reality– whether its viable or not. For both Canada and the US, CCS is the magic wand which can placate their powerful fossil fuel lobbies – especially Coal in the US and the oil-sands in Canada. Both Obama and Harper have alluded to its necessary use – and with many Democrats hailing from coal states such as West Virginia and Virginia, it will be next to impossible for Climate Change legislation to be passed without it. Similarly in Canada, the powerful geopolitical role envisaged from Alberta’s oil sands including in any North American Cap and Trade, ensures that both countries will create opt outs or subsidies to nurture their particular fossil fuel industries.

On Oil Sands Senator Graham words will disappoint environmentalists:

“the United States should accept it, because every drop of oil that we can receive from our friends in Canada is one less we have to buy from people who don’t like us.”

“I think the future’s on your side when it comes to your U.S. neighbours accepting your products.”

Almost without a doubt, there is a necessary trade-off to be made in environmental issues. Senator Lindsey Graham (R-SC) may be a “believer” in Climate Change, but his language was firmly rooted in pragmatic security and economic issues- cheap and safe energy - if Congress does swing back towards Republicans, future Climate Change debates will be shaped by this kind of language. This isn’t necessarily negative, in order to make Climate Change a permanent legislative priority it needs to be bundled into other issues, to appeal to wide base. In this case, the issue is energy security, while for many this was meant to be about fuel economy standards, reduction in oil for power stations and growth of new green energy industries – yet in the interim this will mean oil sands from Alberta. The battle for environmentalists will be to try to lobby for the clean- up of the Alberta sands and the US coal.

Following on from Derek Piper’s article on Canada’s proposed Cap and Trade system for this fall, environmentalists and policy makers will be left to wonder at whether Prime Minister Harper’s effort is part of a more serious effort to tackle green house gas emissions or simply keeping up with Jones’.

Some of the most far-reaching efforts have been initiated in Canada’s provinces: from British Columbia’s carbon tax to Ontario’s Premier McGuinty’s push for a transformation of domestic energy suppliers as renewable base. These efforts on the one hand, provide an idea on Canada’s potential to act as leader in climate change issues and, in stark contrast on the other hand, show the lack of leadership at federal level. The efforts of provincial leaders mean that the vast majority of Canada’s population and a majority of its economy are located in areas that face significant climate legislation. In addition, the British Columbia election, has shown that environmental legislation can endure beyond an electoral term. To put it plainly, Harper need only coordinate provincial efforts to turn Canada into a global leader for Climate Change policies.

Harper’s efforts however, have always been to manouvre Canada to around the middle of the developed countries pack. Harper has two rationales and if nothing else he has always been consistent with regards to climate change policy. His first rationale is that Canadian economic development is his primary aim and climate change targets will only be implemented where they don’t conflict with existing industries; particularly the EITE group industries “(energy intensive, trade exposed) which includes aluminium, cement, chemicals, iron & steel, lime, gas transmission, base metal smelting, iron ore pelletizing, pulp & paper, and potash companies”. The EITE industries are core areas of the Canadian export economy, and as might be expected have concomitant environmental impacts.

The sum of Harper’s latest move as Derek highlights, is keeping up appearances, with the US having passed the Waxman-Markey bill, (although probably not voting on it now until late Autumn and possibly watered down) and in the face of upcoming talks with the US and in Copenhagen in December. Canada will have little clout to influence the direction of global talks with its current policy widely derided as insufficient. The current proposal of Cap and Trade with plenty of opt outs allows for a generous fig leaf cover when going into negotiations. Harper has aided the undermining of Obama’s climate leadership from both stiff resistance from industrial lobbyists in the US and Republican opposition in Congress.

Where does this leave us? Harper’s efforts should not be taken entirely negatively; an actual Cap and Trade is still an improvement on the intensity based targets, although it will still fall short of the requirement that Canada cut its emissions by far more than 20% on 2006, the current emissions targets for 2020. Going into Copenhagen, Harper has left Canada positioned to be neither praised nor censured, perfect positioning for Harper, but woefully short of what a country of Canada’s wealth and status is capable of.

Canada dropping intensity targets?

The Canadian Government is adjusting its climate plans to more closely resemble those proposed in the US.  This summer Environment Canada is conducting a series of consultations with respect to its greenhouse gas emissions policies for heavy polluting industries and an announcement is expected in the fall outlining the new regulations. 

Climatico has learned from confidential sources that changes are likely to include a turn-around on ‘intensity targets’ which the Conservative Government has been promoting since 2007 in its widely-panned ‘Turning the Corner’ climate plan.  This reflects the US direction towards ‘cap and trade’ plans envisioned by the Waxman-Markey Bill  and now being discussed separately in the US Senate.

According to the leaked information provided to Climatico, changes in the Canadian plan are likely to include hard emissions caps for the power and oil & gas sector (a change from previously announced intensity targets, levels not yet determined).   Hard emissions caps also being discussed for the utility & electricity sector as well as the ‘EITE’ group (energy intensive, trade exposed) which includes aluminum, cement, chemicals, iron & steel, lime, gas transmission, base metal smelting, iron ore pelletizing, pulp & paper, and potash companies.

While hard emissions caps represents a welcome shift in policy away from intensity targets, what still remains unclear is how the Government will allocate pollution permits under the proposed system, and what the actual cap will be.  Information leaked to Climatico indicates that EITE industries will likely receive their permits free instead of through an auction therefore weakening the incentives to reduce emissions.   

Critically, changes to the Canadian plan will not include an adjustment of the overall ambition of emissions reductions.  Canada’s 2020 target will remain 20% reductions from 2006 levels – a target that has received substantial criticism for not reflecting the levels suggested by scientists of the IPCC for developed countries.

Furthermore, sources indicate that the proposed changes are likely to include plenty of loopholes allowing industry to weaken the climate-impact of the measures.  For example, compliance with the emissions cap could be achieved through payment into a ‘technology fund’ instead of implementing emissions reduction measures.  The level of inter-firm trading, as well as domestic and international offsets that would be allowed has also not been determined and the government is seeking input from industry on these matters.  It also remains unclear who else, aside from those being regulated will be consulted regarding these proposed changes.

With multiple meetings scheduled between Prime Minister and President Obama in the fall, the renewed discussion of a possible fall election, and the pivotal UN climate meeting in Copenhagen this December it appears the Canadian Government is trying to get its house in order on the climate front. The proposed changes to the ‘Turning the Corner’ plan start to fill the void in Canadian climate policy, but they still have a long way to go.

Last week, Ontario announced new plans to offer rebates on the purchase of electric cars purchased after July 1^st 2010. The long term aim of the Ontario government is to have 1 in 20 cars by 2020 electric, as part of a move to encourage greener transport policies. The law would allow rebates of “$4,000 and $10,00” for hybrid and plug in electric cars – making the vehicle prices closer to normal car prices of around $30,000.

The move is the latest by Ontario Premier Dalton McGuinty, who continues to lead his state on a remarkable path towards a more sustainable state, making Ontario a leader among states and provinces in North America. The move fits into a broader pattern of environmental legislation with an economic underpinning. One of Ontario’s most far-reaching laws included the “right to connect”, legislation that means any renewable energy supplier has to be hooked up to the main grid, in a push to encourage decentralised renewable energy growth in the state. Ontario does not see this simply as an environmental objective, with state legislators, aiming to push their province to the forefront of renewable technology in research and supply as the world slowly turns towards low carbon future. The latest push is not without some direct self-interest, as Ontario owns 3.9% of General motors, with it’s Chevy Volt due to come onto the market in 2010.

In keeping with their broader attempt to create a more holistic sustainable approach, the law also allows for electric cars to use High occupancy vehicle lanes even if only one person is driving in them. The report behind the new law also suggested an expansion of electric car provisions across the state. How effective the scheme will be naturally depends on Canada’s wider economic fortunes; nevertheless its the cumulative impact of Onatario’s legislation that makes the province a leader in environmental legislation.

Regardless of how quick the uptake is, the move is hardly without a rational basis, with Toyota set to prepare for mass production of the Prius in 2012, Honda and Nissan also in production of the electric car, it may not be unreasonable to suggest a tipping point in the electric car market. If the opportunity of a new market was not enough perhaps the more sinister implications of oil-shocks, may motivate those buying at the pump to save money by investing in ever more fuel-efficient vehicles. In either case, Ontario’s early provisions of plug-in stations will once again have put its citizens in a strong position to capitalise on changing markets through incremental legislation towards a sustainable state.

This week WWF-Allianz released their annual scorecard in advance of the G8 negotiations in L’Aquila. Canada came 8^th, under-performing both Russia and perhaps more embarrassingly, the US. The report cited increased efforts by the US such as Obama placing high priority on stopping climate change, and Russia’s recent moves to come to the negotiating table as an example of how Canada was now the bottom placed country.

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President Obama, in close discussions with Energy Secretary Stephen Chu and Alberta Premier Ed Stelmach is to give the green light for US consumption of oil sand oil, or rather the import of fuels considered among the “dirtiest” in the fuel market. In a meeting last week, President Obama decided that the Canada’s oil sands represented an important part of national security supplies for petroleum in America’s near future.

The move is not without immediate precedent, as Francois Cardinal at cybercress.ca notes, both Hillary Clinton had offered support for oil sands at a recent conference on energy security, and Obama’s national Security adviser General Jim Jones was similarly adamant that the US would be foolish to reject the possibility of a stable source from a close partner in Canada.

The move will disappoint many in the green movement, given Obama has previously been less supportive of oil sands, noting that the Us needed to ween itself off dirty and dangerous oil supplies. In particular at a recent summit with Canada, President Obama described US coal as equivalent to Alberta’s oil sands, given environmentalists hope that the US would take a tough line demanding far reaching cleanup efforts if the oil sands were ever to be imported.

Speaking at a recent energy conference the Calgary Herald noted Energy Secretary’s Chu’s position

“This is energy that one hopes to develop in a clean way, and so that you can decrease the environmental footprint, both in the energy invested in order to recover it and on the local environmental issues,” Chu said Monday in response to a Herald query.

“There are also environmental issues having to do with the recovery of the oil sands, the very tarry stuff that’s left behind, the residues. There haven’t been solutions to that yet,” added Chu, who met privately with Premier Ed Stelmach on Monday for about 30 minutes”

How far the environmental issues are pushed depends on a large number of factors, in terms of Canada’ s federal Climate policy projects such as oil sands are only required to reduce the intensity of their energy consumption in order to keep with Canada’s GHG targets, in short allowing growth in absolute Carbon emissions. Worse, of the projects designed to reduce emissions from critical polluting sectors, most of Canada’s research investment is going to “clean coal” rather than oil sands:

“Alberta Minister of Environment Rob Renner said Tuesday that the lion’s share of $ 2 billion planned for the burial of carbon was destined for the coal industry”

However, environmental movements within Canada, have made strong progress in other states such as British Columbia, Ontario and Quebec which could increase the pressure on states such as Alberta to set more ambitious reduction targets and forcing them to channel greater investment into cleaning up the oil sands. Furthermore, the role of California the US’s biggest car using state has effectively banned Alberta oil unless it cleans up, through regional Environmental alliances such as the WCI such policy could be diffused throughout other key states, potentially even within Canada.

In summary, oil sands as noted previously now look set for a stable future, one albeit without the much feared spectacular growth that marked environmentalists concerns prior to the recession and one in which increasing pressure will probably be put on the oil sands to reduce their environmental impact, but in terms of derailment, the oil sands appear to have escaped that pitfall.

As highlighted by Reuters, Canada’s “dirty secret” is making a comeback, amidst predictions of rising oil prices, as the global recession appears to be bottoming out. This is a classic two sides of the coin issue for those in the environmental movement. The global downturn meant a contraction in emissions but also an excuse for political inaction, the upturn could finally see renewable investment get back on track but could also see the rise of oil sands.

The maths is quite simple: oil sands are not cheap or accessible sources of energy. Quite the opposite, defined as “extra-heavy” the oil is difficult to extract requiring large quantities of energy and a pre-processing stage, before the substance can be sent to a refinery to be converted into petrol. Unsurprising, this process makes oil sands very expensive to produce and they require a large amount of upfront investment before they can begin to yield the profits. The effects are slightly paradoxical; many environmentalists are hopeful of a return to rising oil prices in the hope that it will stimulate demand for fuel efficiency, cleaner vehicles and renewable energy as oil is increasingly seen as a volatile fuel that economies depend upon at their own risk. That scenario is still the most likely, as McKinsey’s report outlines, however it’s not simply that oil prices could dramatically begin to rise by the beginning or end of 2010 (depending on the pace of economic recovery) but that their prices will be volatile, an investors nightmare. This is all well and good for environmental causes, however in the interim, the market will be even keener for stable oil suppliers, making Canada’s oil sands an ever more viable solution.

Green Inc, New York Times blog on green business, recently commented that although the recession has set the oil sands industry back from the steep growth forecasts predicted in 2007, the industry instead consolidated into a steady “sustainable” growth pattern. Most worryingly, is the lack of any political pressure from the main parties to halt the oil sands or force it into a  much more environmentally friendly industry. Liberal Leader Michael Ignatieff, as keen a supporter as Conservative Prime Minister Stephen Harper, sees the oil sands as a tragain a more equal status with the US. Ignatieff has made remarks that the oil sands need to be cleaned up, but unless there is very serious movement with regards to public opinion on acceptable pollution levels, no Government is likely to consider forcing the oil sands industry into reducing their environmental impact.

As Green Inc notes however, there could be one flaw  to oil sands unstoppable growth, a regional Cap and Trade. As it stands, this appears unlikely. When Obama visited Canada earlier this year, Climatico analyst, Derek noted how one of the critical negotiating issues was ensuring the US market remained open to Canada’s oil sands, despite campaign rhetoric from the Obama camp on restricting “dirty oil imports”. Problematically, Obama described the dual problems, America’s coal industry and Canada’s oil sands. Given the US is now likely to pursue clean coal, this is probably assurance enough that the oil sands, possibly with some restrictions will be given the green light as well.

Is there a silver-lining? Actually there could be, as seems to be the case with North American politics, to solely follow federal decisions is misleading. In April, I covered, a move by California to regulate the type of fuels allowed to be used, that bill passed and in theory would prohibit the use of oil sand fuel in California. There are two problems, firstly California is the biggest automobile user in the US and secondly, it often causes a domino effect in other states.

How quickly Climate Change debate moves could be the key. At worst, the oil-sands will have to undergo cleaning adjustments to reduce their pollution use, a compromise for entry, at best California is a bell-weather for future policy and oil sands may never make the major leap and become only a moderately developed source of energy.