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Canada may adopt cap-and-trade to prevent US tariffs on exports

The Globe and Mail reports today that, “Ottawa could be forced to drop its controversial intensity-based approach to reducing greenhouse gas emissions to avoid having to pay U.S. border duties, Environment Minister Jim Prentice says.”

“Under last week’s bill, introduced by California Representative Henry Waxman and Ed Markey of Massachusetts (to the House of Representatives), the U.S. government would target energy-intensive industries, including steel, aluminum, cement, glass, pulp and paper and chemicals. Where domestic industries lose market share to importers due to an unfair environmental advantage, those foreign companies would have to purchase ’emissions allowances’ to equalize the burden.”

(In other words, US tariffs or border duties could be imposed on Canadian exports to the US if Canada’s carbon-emission policies were considered weak.)

“The U.S. bill would set strict limits on the amount of greenhouse gases that industries are allowed to emit, and President Barack Obama has given it broad support. As a result, Ottawa would align its overall reduction targets, reporting rules, enforcement mechanisms and regulations for specific industries with whatever system emerges in the United States, Mr. Prentice said.”

“’There are clearly measures (being planned in the United States) that would have trade-related consequences for Canada if we don’t have equivalent environmental legislation in place,’ Mr. Prentice said…”

“At the same time, he said, Canada, the United States and Mexico are discussing ways to strengthen the North American free-trade agreement’s environmental side agreement to manage trade-related climate-change issues better.”

The full article can be read at http://business.theglobeandmail.com/servlet/story/RTGAM.20090409.r-carbon09/BNStory/Business/home

The Globe and Mail editorial board writes, “Jim Prentice, the Minister of the Environment, is wise to be seriously considering a viable, effective cap-and-trade system to limit greenhouse-gas emissions, not only because of the intrinsic merits of acting to prevent climate change, but also to protect Canada’s trade with the United States.”

“Because American proposals would, if enacted, typically require ‘comparable’ emission standards from nations exporting to the U.S., Canada would be prudent to adopt a (cap-and-trade) system that lends itself to such a comparison.”

“Canadian officials must act on the assumption that Congress will pass legislation of this kind before the United Nations Climate Change Conference in December in Copenhagen, which will aim to replace the Kyoto Protocol. Fortunately, Mr. Prentice is a politician less disposed than some to partisan positioning, and inclined toward problem-solving. Canada is now likely to be ready this year with a respectable cap-and-trade plan.”

The full editorial can be read at http://www.theglobeandmail.com/servlet/story/LAC.20090409.ECAPANDTRRADE09ART2000/TPStory/Comment