Pembina Institute

Canada's Election: Same Government, More Uncertainty for Carbon Markets

By Clare Demerse

Published in Carbon Market North America (Oct. 17, 2008).

Clare Demerse

Prime Minister Stephen Harper took a weak climate plan into Canada's election and won himself a stronger minority government - but there's reason to doubt that his proposed greenhouse gas regulations will ever see the light of day.

When Canada's federal election got underway on September 7, the governing Conservative party held 127 of the Parliament's 308 seats. They added 16 more to that total on election day, but fell short of a majority government.

The Prime Minister cannot credit his climate policy for the improved result. Since taking office in 2006, Mr. Harper has faced criticism for an approach to global warming widely considered to be inadequate. Those critiques were a prominent feature of the election campaign, ranging from an open letter from 124 climate scientists asking Canadians to "vote strategically for the environment" to the more categorical advice of two prominent environmental groups: "don't vote Conservative."

In the end, although 62% of Canadian voters backed opposition parties with stronger climate platforms, it was the Conservative approach that won out.

Their proposal, entitled "Turning the Corner," was first announced in April 2007 and revised in the spring of this year. Scheduled to take effect in 2010, it calls for emissions trading based on intensity targets for Canada's heavy industry sectors, which make up nearly half of Canada's total greenhouse gas emissions.

Critiques of this approach have focused on the intensity-based targets, which would allow emissions from Canada's fast-growing oilsands sector to nearly triple between 2006 and 2017 (oilsands targets "based on carbon capture and sequestration" would kick in the next year). The proposal also contains a bewildering range of compliance options, including technology funds, domestic offset credits, early action credits and special "pre-certified" credits.

The campaign produced just two updates to this plan. The first was an announcement that the government will prohibit the export of bitumen to countries that "do not have equivalent emission reduction targets" to Canada's, in an attempt to avoid seeing bitumen upgrading move to other jurisdictions. (At present, 100% of Canada's bitumen exports go to the United States, although China is a possible destination in the future.) The announcement was very short on details, and it is not yet clear whether it will have any real effect.

The second update came in the Conservative platform, a 40-page document that does not contain the words "global warming" or "climate change". The platform states that the government will implement the "Turning the Corner" proposal described above, but also notes the winning party's intent to "develop and implement a North America-wide cap and trade system for greenhouse gases and air pollution, with implementation to occur between 2012 and 2015."

If Canada truly intends to link with a future U.S.-based cap-and-trade system, the government's proposed regulatory framework will have to change dramatically. At both the federal and state levels, the major U.S. proposals left intensity-based targets behind long ago. And Canada's convoluted compliance options are unlikely to mesh with any proposal that the next president will endorse.

Rather than implementing one system only to switch to an incompatible one within a few years, the government may well opt to delay any action until the U.S. system starts up. So there's now serious reason to doubt that "Turning the Corner" will ever come into effect. And it's fair to ask whether Canada - a country with one-tenth the U.S.'s population - will be able to play any meaningful role in shaping the American proposal.

That's just at the federal level: Canada's provinces are moving too. The oil-producing province of Alberta has implemented an intensity-based targets-and-trading system even weaker than the federal proposal. British Columbia and Québec have both brought in carbon taxes, and four Canadian provinces are full members of the Western Climate Initiative.

Meanwhile, the three opposition parties in Canada's Parliament have vowed to continue pushing for stronger action from the re-elected Prime Minister. In the last Parliament, their joint efforts resulted in the adoption of a pro-Kyoto law. In the upcoming session, a bill that proposes much more ambitious longer-term national emissions targets than the governments' is likely to be revived.

Canada's election day has come and gone, and the results are in: same government, more climate confusion.

Clare Demerse is a senior policy analyst at the Pembina Institute, a Canadian sustainable energy think tank.

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