The challenges of a national carbon market

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On Friday, by a vote of 219-212, the US House of Representatives narrowly approved the Waxman-Markey climate bill that would force US companies to limit greenhouse-gas emissions. The legislation’s primary aim is the introduction of a cap-and-trade system. It also includes a federal renewable electricity mandate and new mandatory energy efficiency standards.

The bill now moves to the Senate, though it remains unclear whether it will survive in its current form which, according to this chart, would impose an overwhelming 397 new federal regulations and 1060 new mandates.

By contrast, Canada’s national plan will amount to a set of regulations adopted under section 322 of CEPA, which empowers the environment minister to “establish guidelines, programs and other measures for the development and use of economic instruments and market-based approaches” for environmental purposes.

That said, adopting climate change legislation in Canada is also likely to be messy, not least because jurisdiction for the environment is shared between the federal and provincial governments, and every province in Canada has a different emissions profile. Alberta’s emissions profile, for example, is much more carbon intensive than Quebec’s. Their respective regulatory frameworks are also vastly different from one another. The challenge for Ottawa will be in developing a carbon trading mechanism, that can properly balance the needs of the provinces while working to meet Canada’s international obligations on climate change.