Uploaded on November 1, 2007 by Stuck in Customs

Uploaded on November 1, 2007 by Stuck in Customs

Canada, has announced that it is beginning to formulate its own Cap and Trade system this week, to continue the trend of North American policy convergence on Climate Change issues.

Fresh off the press (from Treehugger),it has been reported that what many Environmental proponents have long hoped for In Canada, could soon become a reality as serious federal policy is being formulated. Here’s the scoop:

“Canada has just announced that it will likely follow suit and move towards carbon cutting measures of its own. … And what’s more, Canada has said the two trading systems could later be linked”

More from Bloomberg, Canadian Environmental Minister Jim Prentice noted:

“We’re watching very closely what the U.S. is doing,” Prentice said. “We’re working on the broad-brush issues at the moment.” He declined to say when Canada might implement its own carbon-trading system . . . “There are still some continental issues that need to be worked out, but I’m in Washington regularly” to follow the issue.”

As Treehugger goes on to note, this could even reinforce efforts in the US, as legislators can now see a wider scope for a Cap and Trade system and if the systems were integrated it would allay to some extent fears that the US would be jeopardising its economic competitiveness.

The idea of a Northern American integrated Carbon Market might at once seem radical but in fact follows a well trodden path of economic policy convergence between these two countries that has been pursued for over two decades. The first agreement in 1988, the Canada-United States Free Trade Agreement, marked the beginning of the end of protectionist fears between two countries who already shared strong economic links. The treaty was soon replaced by the far-reaching NAFTA act, signed in 1994. Despite considerable anxiety about further economic integration, NAFTA created further standardisation of trading and worker movement, including the first such major economic deal which included a developing country in Mexico.

While NAFTA further opened up the North American continent in many respects it reflected pre-existing trade relations with Canada being the US’s largest trading partner. The integration of the continent and perhaps the lack of a linguistic barrier with Canada has also been reflected in contemporary policy, especially with regards to Climate Change. This shouldn’t be surprising the two countries share strong economic ties over resources that directly impact on Climate Change such as their energy markets. The most notable example of Climate policy convergence is in the WCI, which includes most of the major Canadian states as well as several US states including its founder, California. Notably the majority of observer states to the WCI are from Mexico (6 in total), underlining North America as a platform for policy convergence.

The convergence does not stop at state level. Federal policy on the environment has been a recurrent theme in recent years. Canada has three reasons for this: Firstly, given the integration of the two countries economically, a change in one would precipitate a change in the latter anyway, so they may as well follow suite, the example can be seen when Canada recently announced it will standardise its fuel standards with the US, reflecting the overlap of the two countries’ automobile markets. Secondly, and because of the first, any undue burden Canada on its economy, could directly reduce its competitive in some areas with the US. Finally, Prime Minister Harper, long reluctant to pursue Climate Change policy, could follow the US under President Bush, safe in the knowledge that Canada would then have to do very little.

While no one expected the status quo to stay the same after the 2008 election, with both Presidential candidates supporting action against Climate Change, and a widely tipped increase in the Democrats’ control of congress, few could have expected the Obama administration and congress to move so quickly on Climate Change. Although many of the measures have received individual criticism for a lack of strength, consider that since coming to power: the US has funded billion to green projects through the stimulus, seen a Cap and Trade bill, unthinkable under Bush, emerge out of the House energy committee and a fuel standard passed, 4 years earlier than expected aim for standards far higher than expected, and that has just been the first 4 months. 

In reality, what we’ve seen is a paradigm shift in the US that has seen the Climate Change debate move from its existence to debating its solution, from an “economic burden” to an essential tool for recovery through millions of green jobs and from a fringe liberal idea, to one that is central the US’ geo-political security

The pace of change has left the Harper government playing catch up, when before even its meagre efforts could make it seem like the leader in North America. Prentice’s latest statement underlines two factors; that Canada cannot afford to be left behind on the green market (something most major Canadian states have long recognised), nor isolated internationally as the US sets a positive tone for UN discussions later this year.

A Canadian Cap and Trade has obvious benefits, in that it would link in with the current state systems, such as those proposed by Quebec and Ontario, as well as bringing in to play albeit with concessions, heavy polluting states such as Alberta. Bringing in states such as Alberta is critical, to re-aligning polluting industry with Climate goals. The simple fact is that as long as carbon has a price, even if heavily polluting developments such as tar-sands continue, investment in cleaner technology for them will become a necessity. Furthermore, Cap and Trade on a federal level create a stable investment climate for renewable technology whose value can only rise as carbon prices increase.

The same can be said of a North American wide system. By creating a single market, it effectively allows pooled investment in renewable technology regardless of the geography. This makes eminent sense in North America, as in Europe, where crucially energy resources are already shared across the border and set to expand further.

A further strength of the system is that once initiated, it would be difficult to alter it, as it would be shared across two political systems, while this can work both ways a crucial element of Climate Change policy has to be that it can be sustained across political changes. Canada has seen such turbulence, when the former liberal government ratified Kyoto, only for the Harper government to declare that ratification was invalid because it was undertaken prior to Harper’s own government.

I can only see the move to federal and hopefully regional Cap and Trade policy as a net positive. If it goes ahead, and I suspect in the medium term it will, then we will have two regional blocs integrating Climate Change policy, the EU and the US. Not only could this set a trend for other regional blocs (and if in Climate Change why not in other areas) but it also paves the way in the long term for inter-regional integration of Carbon markets, given how much simpler policy alignment would be if regions are already integrated. I’m getting ahead of myself, but one can’t help but feel positive that at the start of the 21st century, it is a promising that a global problem is beginning to be met by global solutions.

Print Friendly, PDF & Email