Australia’s cap and trade system, the Carbon Pollution Reduction Scheme (CPRS), is being reintroduced into Parliament this week, after two rejections in 2009 (see here and here). However, it is almost certain that it will fail again, following decreasing public support for the policy after the Copenhagen conference and Tony Abbott’s ascension to the opposition leadership.

To start with, public support for Prime minister Kevin Rudd’s flagship policy has dived 10 points from 66 to 56 per cent according to the latest Herald/Nielsen poll, while opposition to the trading scheme has risen 4 points from 25 to 29 per cent. While there has always been a high level of confusion in the electorate about climate change policy, and in particular about the CPRS, the failure of the Copenhagen conference shifted to a certain extent the public sentiment about climate change. In particular, extensive media coverage of a series of ‘scandals’ linked to the IPCC’s work has opened new windows for the numerous Australian and international climate sceptics (see for example Lord Monckton).

However the biggest challenge faced today by the government is without doubt the unexpected come back of the opposition (the Liberals) in the climate debate. The previous opposition leader, Malcolm Turnbull, is a supporter of the scheme, which had greatly divided his party over the climate issue, to the benefit of the government. Yet Turnbull has recently been ousted by Tony Abbott, a strong opponent of cap and trade and climate policy in general, not to say a climate sceptic. The change here is that Abbott has come forward with an alternative to the governmental policy. The Coalition’s (Liberals+Nationals) “Direct action plan on the environment and climate change” would create an AUS$2.5bn fund to provide incentives for industry and farmers to reduce emissions through measures such as storing carbon in soil. The plan also includes the planting of 20 million trees by 2020 and would provide $1000 rebates to home owners for solar cells. The plan has immediately been slashed by environmentalists, Greens and the Labour Party as been unable to lead the country to a minimum 5 per cent cut in emissions by 2020 compared to 2005 levels, as Australia pledged in Copenhagen. While Kevin Rudd has ridiculed the direct-action plan as “a climate con job”, most business groups have backed the plan, agreeing with the opposition Leader’s assertion it is “cheaper, simpler and more cost-effective” than Labour’s proposed carbon emissions trading scheme.

With a now clear opposition to the scheme, the government’s CPRS is very likely to be rejected by the Senate this week. The government would then again have the possibility to trigger an early election, though it would be very unlikely since the next general election will take place this year. In the most optimistic scenario, a cap and trade system would therefore not be voted for another year. Kevin Rudd’s approval rating is still way ahead from his potential challenger, though Abbott’s popularity is rising. But it is surprising that Rudd is not working to rally public opinion: he has not made a speech about climate change in the past weeks and is, instead, trying to change the subject. It is time now for Prime minister Rudd to start campaigning for his cap and trade scheme and explain to people why Australia should be moving when things look bleak internationally.

Last week the US state department approved an oil pipeline which will carry tar sands oil from Alberta across Canada down to Wisconsin. The move follows long term plans between the US and Canada over energy deals, with tar sands already a key part of the US’s current oil provider. For environmentalists the move is a major setback, with tar sands, considered the dirtiest of all oils permanently and visibility crossing the boundary of the two countries.

Environmentalists both sides of the border and around the world can only greet this with disappointment. It had been thought during the Obama campaign that his rhetoric of “dirty oil” would restrict the development of tar sands to its most likely consumer, the US. However, what now appears likely is that the US has given tacit International approval to the oil sands by creating a permanent pipeline.

Continue reading…

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.

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.

The American Clean Energy and Security Act of 2009, commonly referred to as the Waxman-Markey Bill, is moving through the U.S. House of Representatives, after passing a vote in the House Energy and Commerce Committee 33 to 25 in late May. 

It must pass through a series of difficult legislative hurdles before a final vote in the House—approval here will enable the bill to move forward to the Senate, which may prove to be an even more challenging feat.

But if this first “victory” is to be any indication of what is to come, it might be fair to speculate that the Waxman-Markey Bill will clear its hurdles by incrementally lowering the bar.  Early review of the most recent version of the bill reveal the compromises made to move the bill forward: a diluted midterm reductions target, from a 20% reduction from 2005 levels by 2020 to a 17% reduction; an altered distribution of allowances, initially proposed by the White House to be fully auctioned, now moved to 85% allocation.  Furthermore, the role of offsets has been significantly increased.  Waxman-Markey includes provisions for offsets of 2 billion tons of CO2/yr, of which up to 1.5 billion may come from international sources.  A proposed 1.25:1 offsets to allowances ratio has been softened to a 1:1 ratio until 2017.  This decreases the maximum number of international credits that the use could absorb from 1.875bn to 1.650bn tCO2/y.  Although this sounds small, when you consider that there have only been 289m credits issued under the CDM to date, the cut of 225m comes into perspective. Defining the criteria for which offset programs will be considered appropriate also appears to have been broadened.

In an interview on Monday, Steven Chu acknowledged the draft legislation fell short of White House aspirations, but went on to recognize the role of the climate change bill as a positive step in the right direction.  As reported by Reuters, “This is the really the arc of what really can be done,” Chu said. “I personally believe strongly that we have to get started and so a comprehensive energy and climate change change bill, which has to recognize certain compromises, is really the issue.”

One might consider Chu’s remarks and the revision to the bill thus far in the context of an axiom of political compromise—to not let the perfect be the enemy of the good.  But the nature of climate change and climate change policy means that there are limits to this conventional political wisdom, for two important reasons: without sufficiently robust targets, the effectiveness of the legislation in resulting in emissions reductions is severely compromised, and, perhaps of more immediate relevance, so too is the ability of the United States to play a strategic role in international negotiations on climate change.  A watered down U.S. domestic policy will dramatically constrain the U.S. position in both Bonn and Copenhagen, to the potential outcome of lowering the bar at the international level as well.  The EU has promised to commit to a 30% in reductions by 2020 from 1990 levels, rather than a guaranteed 20%, provided other key players play ball.  Comparing like for like, US reductions of 17% by 2020 from 2005 levels equate to merely a 3% reduction from 1990 levels. A question remains as to how the EU will respond to such levels.

The Waxman-Markey Bill, diluted at present, will surely be subject to further compromise as it makes its arduous journey through the U.S. Congress.  Will the (hopeful) resulting legislation suffice as evidence to the EU that the U.S. is indeed playing ball?  Will it signal to non-Annex 1 emitters, such as China and India, that they will need to consider significant reductions in emissions?  While it is true that the U.S. indeed must act quickly to rectify the delay in legislation on climate change of the past 8 years, it must do so with the understanding that the outcome of this legislation stands to shape the trajectory for climate change action at the international scale as well.  In doing so, the U.S. should calibrate the height of this bar very, very carefully. 

Simon Billett also contributed to this post.

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.

Quebec is in the process of taking a bold step towards North America’s first Cap and Trade system.  Bill 42, tabled recentlyis designed to bring in a mandatory Cap and Trade system to Quebec, in line with the WCI, of which Quebec is a key member along with Ontario and British Columbia and California among others. The bill aims to be passed by fall of this year ready to come into action for 2012. The Globe and Mail has the details:

“The first emission caps will be issued between 2012 and 2015, targeting only electricity-producing companies and major industries that emit more than 25,000 tonnes a year of greenhouse gases. After 2015, the second phase will target, among other sectors, transportation as well as home and commercial heating companies.”

As with all Cap and Trade systems, companies that can make reductions will be the beneficiaries as they sell their Carbon Credits to larger polluters.  In effect putting a price on pollutions and benefitting those within an industry who can undercut the industry average, profiting from their competitors failures. As the number of credits is contracted over time, companies have the choice of bearing the cost, keeping up with the contraction or best of all, aiming to beat the contraction and gain financial advantage by reducing carbon emissions so as to be able to sell their carbon credits. Part of the beauty of Cap and Trade is that  the internal competition between similar industries, in the electricity sector this is most evident, where cap and trade will directly feed down to customers, the designers hope that consumers will favour the cheaper which will in theory become synonymous with lower emitting companies.

Quebec’s move is not just symptomatic of state level leadership in Climate Change but also of what direction Climate Change policy in North America may be taking. Although Quebec has a carbon tax

“Quebec became the first province to create a carbon tax, collecting just under one cent per litre of fuel products from petroleum companies; the aim is to raise about 0 million a year to pay for energy-saving initiatives”

Cap and Trade through the WCI appears be gaining momentum as the favoured form, despite British Columbia’s recent election where the pro-Carbon tax incumbents stayed on. The reasons are numerous but the fundamental issues appears to be the reluctance of politicians to impose anything that would directly tax citizens from the state ( or even has the word in it), Cap and Trade will raise prices for consumers, particularly in electricity, consumers will in theory be able to choose.

The collective approach of the WCI, containing big names such as California, Ontario, Quebec and British Columbia to name a few means that throughout North America, some of the biggest regional economies will be committing to a Cap and Trade system. As far as Canada is concerned AHN news notes this will make up: “80 percent of the nation’s headcount and 75 percent of Canada’s local economy”. The figure is critical on two counts. WCI leaders have been able to show that leadership on Climate Change is possible even in the midst of a recession. Furthermore, strong leadership has kept Climate Change policy in the public domain the in the middle of a global recession.

Where does this leave the Federal Government?

Speaking to the Globe and mail, Quebec’s Environment Minister Line Beauchamp had this to say:

“We hope Quebec’s participation in this common market with Ontario, Manitoba, British Columbia will incite the federal government to co-operate with the provinces to develop a Canadian carbon market compatible with what is taking place elsewhere in the world,”

Jim Prentice, Canadian Environment Minister added his own thoughts:

“I think it is typical of the kinds of efforts that we are making with all of the provinces to harmonize…,” Mr. Prentice said. “And we’ll need to determine the extent to which it’s consistent with what’s been proposed continentally with the United States and also internationally.”

Prentice’s line is symptomatic of the Canadian Government, that of a follower not a leader in Climate Change, despite Harper favouring “intensity based reduction” it appears the clock may be running down as absolute systems as envisaged in Cap and Trade, crop up across North America, partly through the WCI but also through a US federal cap and trade as envisioned in Congressman Waxman’s bill currently trying  to get through congress.  What may prove harder for Harper is the manner in which Climate Change legislation has managed to stay in the limelight in some of Canada’s largest states, indicating that Canadians may be difficult to avoid it in upcoming elections and that many Canadians may not accept Canada as simply a follower when their own states have proven that leadership is possible.

During the past week, the House Energy and Commerce Committee held hearings on the draft legislation of ‘American Clean Energy and Security Act 2009′. Over 60 witnesses testified, including Energy Secretary Steven Chu, former House Speaker Newt Gingrich and Nobel laureate Al Gore, as well as representatives of environmental groups, electricity producers, auto manufacturers and renewable energy companies.

Prior to the hearings, Rep. Henry Waxman, chairman of the Committee and co-sponsor of the bill, promised that he will stick to his proposed 20% reduction in GHGs emissions in the next decade and that it was Congress, rather than the EPA who should determine how to regulate these emissions (referring to the EPA’s endangerment finding released on the previous Friday).

Here is a brief description of the proceedings and some of the highlights.

Tuesday:

The first day consisted of opening statements only, but the action surrounding the hearings kick-started with a letter from the 23 Republican members of the House Energy and Commerce Committee to the Committee’s Democratic leaders saying that the draft bill is not ready to be discussed, as a major element - how the permits will be distributed - is missing. They also called for a hearing dedicated to the EPA’s recent endangerment finding.

This was seen more as a delaying tactic, as Edward Markey, the other co-sponsor of the bill, said in the opening session - “The time for delay, denial and inaction has come to an end”.

Wednesday:

In the second day the committee heard from representatives of the administration (Secretary Chu, EPA Administrator Lisa Jackson and Transportation Secretary Ray LaHood), the United States Climate Action Partnership (USCAP) and others, such as the CEO of American Wind Energy Association, President of the Union of Concerned Scientists and a Senior Economist from the Stockholm Environment Institute.

The administration’s representatives responded to the concerns of Republicans as well as some Democrats and explained that the benefits of a cap-and-trade system will outweigh the costs, stressing that such a bill will create jobs and a stable investment environment, as well as ultimately reducing costs to consumers. Both Chu and Jackson though said they are still studying the details of the draft bill and that the administration had not given its blessings to it.

Secretary LaHood, in response to a question from Democrat John Dingell, assured the committee that the administration is committed to helping the automobile industry.

Companies belonging to USCAP generally stated their support of a cap-and-trade system. For example the representative from Alcoa, an aluminium producer, mentioned that increasing energy efficiency has already helped them reduce costs, and that aluminium is expected to be used in future energy efficient vehicles and buildings. However, both she and others (Duke Energy and NRG Energy, to name two) said they will drop their support for the bill if they did get free permits.

Thursday:

Day three saw testimonies from utility companies, think tanks and research institutions, consumer organisations, renewable energy companies and more. The panels dealt with issues of allocation policies, ensuring US competitiveness and the more technical issues of low-carbon electricity, CCS, renewables and grid-modernization. 

The utility companies stressed that they will need time to adapt and urged a gradual transition to a full auction system, also requesting allocation of free permits at first. It is encouraging to note though, that the American Public Power Association, which represents more than 2,000 community-owned electric utilities, supports auctioning no more than 5 percent of total allowances from the onset of the programme.

In response to that and to opposition from Republican members of the committee, as well as concerns raised by Democrats, Markey told reporters that “There are going to be some free allocations of allowances.”

Advocates of renewable energy called on Congress to set a renewable-energy standard requiring all states to get part of their energy from renewable sources.

Friday:

The main focus of the day was on the “star” witnesses - former vice-president Al Gore, former Republican Senator John Warner, and Former House Speaker Newt Gingrich, which was apparently added by the Republicans as a last minute addition to balance out Gore and Warner’s favourable testimonies.

Former Sen. Warner was one of the few Republicans in the last Congress who supported strong action on climate change (and joined with Dem. Joe Leiberman in a bipartisan attempt to pass a climate change bill). He attacked the “clean coal” mantra, saying that “we know clean coal is not around the corner” and argued that climate change is a national security issue which must be addressed.

There were no surprises in Al Gore’s testimony, who equated the bill under discussion to the civil rights legislation of the 1960s and the Marshal Plan of the 1940s. He urged the House panel to make sure the bill includes provisions to protect people who would face hardships as a result of the expected changes. In response to Rep. Dingell’s concern that US jobs will suffer after all, as countries such as China won’t face the same burdens, Gore drew on his experience with the international negotiations when he said that “If the United States leads, China will follow”.

What Next?

The bill will have to go through other House panels, but Waxman planned a tight schedule and hopes to have it ready for discussion in front of the full House by Memorial Day (May 25).

In the meantime, there are apparently negotiations going on behind the scenes to find a compromise that will build a winning coalition in favour of the bill.

Canadian coins (Pieper)

The Canadian province of British Columbia has a carbon tax that is not yet a year old and already it is on thin ice.  First announced during the delivery of the 2008 budget and implemented July 1, 2008, British Columbia`s carbon tax policy came as a surprise to many observers in the Canadian environmental field and was considered a significant shift in policy on climate change for the Government of British Columbia.  The orgin of the policy is thought to be as a result of the direct influence of Gordon Campball, Premier of British Columbia, who has been strongly influenced by the ‘green’ California Governor Arnold Schwarzenegger.

In the context of an increasing sense of urgency about environmental policy making, consideration of this new carbon pricing policy is instructive as the suggestion has been made that the B.C. carbon tax may be internationally significant as a model of carbon pricing policy.

However, despite the passing of the 2008 British Columbia Budget containing the carbon tax measure, the future of British Columbia’s environmental tax policy remains uncertain. 

National politics may also influence the future of British Columbia carbon tax policy.  In the Canadian federal system, the sub-national jurisdictions (10 provinces and 3 territories) retain control over natural resources, environment, and energy policy.  As a result, the Canadian climate change and energy policy landscape has been described as a ‘patchwork’, differing significantly between the provinces in scope, scale, and instrumentation, and which suffers from a lack of coordination and leadership from the federal government.  Without coordination of efforts across Canada, the compatibility of B.C.’s carbon tax with other provincial and federal actions might be limited, thereby reducing the overall effectiveness of the measure.  In the October 2008 federal election the Canadian public clearly rejected the central policy of the opposition Liberal Party of Canada - a nation-wide carbon tax similar in structure to that of the provincial tax in British Columbia.  Demonstrated public opposition to carbon tax measures across Canada may influence future decisions to increase the rate of B.C.’s carbon tax. The current rate is $10 CAD per tonne of carbon dioxide, or carbon dioxide equivalent, emissions scheduled to escalate $5 per year until reaching $30 per tonne in 2012.  Those increases, and even higher rates in the future, will be required in order to achieve significant GHG reductions but they are at risk in an uncertain political and economic climate.

The effectiveness and the future existence of the B.C. carbon tax policy might also be influenced by international developments in carbon pricing, climate change negotiations, and global economic conditions.  US President Barack Obama and Canadian Prime Minister Stephen Harper have both signalled their interest in the creation of a North America wide emissions cap-and-trade scheme and potentially new emissions reduction mechanisms will emerge from ongoing international negotiations proceeding under the United Nations Framework Convention on Climate Change. The impacts of the current global financial crisis might also have an impact on the future plans for increasing the rate of British Columbia’s carbon tax.   Despite the fact that emissions tend to decrease during economic recessions, political reactions to the downturn might influence the ability of the carbon tax to reduce emissions effectively when the economy recovers (eg. if the carbon price does not escalate over time according to the proposed plan). 

While it is too early to evaluate the overall impact of B.C.’s carbon tax, given increasing international trends towards the implementation of market-based mechanisms to meet stringent environmental targets (should the policy remian) B.C. may gain a ‘learning-by-doing’ advantage for having first implemented a significant carbon pricing policy in Canada and North America.