US and Canada will not join forces on carbon trading

Over the past several months the Canadian federal government has been operating under the assumption that they would be joining forces with the US government in the development of a joint carbon trading system between the two countries. Because of this, progress in dealing with greenhouse gas emissions has basically been on hold at the federal level in Canada until the details of a US-led plan were revealed.

This inaction by the Government of Canada has taken the spotlight off of their much-maligned Turning the Corner greenhouse gas action plan, which was originally introduced in early 2007. This plan was widely criticized for its use of intensity-based emission reductions and targets that were not nearly as strong as those defined in the Kyoto Accord, of which Canada is a signatory.

But a recent newsletter by a major carbon markets research organization indicates that the US is not interested in working with Canada to develop a carbon trading system involving both nations. The newsletter cites Errick Willis, president and CEO of Carbon Capital Management:

“The Canadian government has operated under a fundamental misapprehension. It was looking towards a pan-American system, but it needs to be realistic. The US won’t be part of it.”

Willis indicated that the Canadian government would likely go back to the unpopular Turning the Corner plan. This would involve the introduction of a Canadian carbon trading system in 2012 with a domestic offset program being launched in 2010. The offset program would be launched prior to the full trading market to build liquidity in the system.

The most recent version of Turning the Corner would likely leave Canada susceptible to some of the protectionist measures promoted by Energy Secretary Steven Chu. These measures are being touted as a way to ‘level the playing field’ in a future cap-and-trade economy, whereby imports from countries with less strict environmental regulations than the US would be subject to tariffs. Potential trade wars developing between Canada and the US because of carbon cap-and-trade have been projected.

There are signs that the Canadian federal government is aware of the need to align their policies more closely with the US, even if they are going to be developing separate cap-and-trade markets. The Turning the Corner plan has been off the radar screen in Canada for a number of months. Canadian officials claim that it was only ‘undergoing a tune-up’ – for their sake I hope it was more of an ‘engine rebuild’ to give it a chance to compare to what the US puts forward in the near future.

Image courtesy of Jowo under a Creative Commons Flickr license.

Stephen Boles is co-founder of Kuzuka, a marketplace website that will bring a new level of convenience and confidence to carbon offset customers and provide consulting services to organizations that want to assess and reduce their carbon footprint.