Published by Senator Grant Mitchell on 16 March 2009
The Canadian debate over climate change is now facing a critical moment. We will get a climate change policy and it will be cap and trade. Unfortunately, this policy will be made in the US and not in Canada.
A responsible government needs to be preparing Canada to take advantage of the huge economic opportunities inherent in cap and trade and also to avoid the real disadvantage our firms will face if we are not ready for a continental market. If we fail to act in advance of the US, we will be ill prepared to protect and promote our interests in negotiating a bilateral cap and trade system with the US.
As Deputy-Chair of the Senate Committee on Energy, the Environment and Natural Resources, I do not want to be presumptuous about the intentions of the committee, but I have sensed a real desire from members, to help develop Canada’s response to the US cap and trade initiative. Under the leadership of our Chair, Senator David Angus, the committee can study established carbon markets elsewhere; solicit the views of Canadian businesses, farmers, market experts and individuals; and make thoughtful recommendations to assist the government in developing its Canadian cap regime and carbon market.
Almost two years after the government announced that its climate change policy preference was cap and trade, Canada is not ready to compete effectively in a US-led cap and trade system. Recently, for instance, two large final carbon emitters operating in Alberta indicated that they had not been engaged, either informally or formally, by the government, to determine emissions caps. Nor is there any evidence of progress with a national carbon credit market, or a carbon offset system. Say what they might, the Conservatives have not delivered on these fronts.
There is a significant urgency to this work. Alberta oil sands access to US markets is vulnerable to unfair “dirty oil” attacks. Canadian manufacturers may well face the same issues. US protectionism can be disguised as environmental standards that Canadian businesses will not be able to meet.
The “trade” part of cap and trade consists of investments in credits and/or offsets. Carbon markets present a tremendous opportunity. For example, Europe has a market that is in the order of $100.0 billion annually. Currently credits sell for $15.00 per tonne. Without a well developed Canadian carbon market, our businesses will be forced to trade in the US market. The revenue from these investments that could go to our businesses and farmers, creating jobs, profits and capital investment here will instead be invested outside of Canada. In a time of economic peril, why would we want to export what should be significant Canadian opportunities?
Carbon credits are not “hot air”. Performance credits (those awarded to large emitters for lowering their emissions significantly below their cap or baseline), and offset credits (emission reductions voluntarily undertaken in a specific project) represent real, verifiable reductions that are held to government or international standards.
In spite of some limitations in the Albertan baseline and credit system, one million tonnes of offset credits, generated by the private sector and farmers in Alberta, were purchased by large final emitters in the 2007 compliance year. Imagine the benefit to farmers across the country if the government built upon this idea for all Canadian farmers (I have yet to meet a farmer who has too much money). Similar potential exists for other Canadian businesses that could develop credits and offsets.
There isn’t a tradeoff between a vital economy and meeting the challenges of climate change. Canadians have restructured our economy to meet great challenges before. Our economy was fundamentally changed to win the Second World War and that established a modern industrialized economy that has sustained one of the highest standards of living in the world for the last 60 years. It is business as usual that will hurt our economy.
We need imagination, ingenuity and leadership to take advantage of the opportunities that are inherent in cap and trade. Our committee aims to help by studying the challenges and opportunities a comprehensive and in-depth way. I look forward to working with a group of very dedicated Senators, and with the very capable Chair, Senator David Angus, to focus on these serious and urgent issues confronting our environment and economy today.