Made-In-Canada Policy

This week, The Economist published an article entitled 'Interpreting smoke signals'. A new policy from prime minister of Canada Stephen Harper entitled "made-in-Canada" will lay the foundation for a climate exchange in Canada. Here are some excerpts:

Having shunned Kyoto, Stephen Harper is searching for a policy on emissions

The people who run the Montreal Exchange know all about risk. What began life as a market for penny stocks in a mining boom in the 1870s now deals exclusively in derivatives, an asset class known for its volatility. This month, the exchange announced plans to start trading credits for carbon-dioxide emissions, a scheme modelled on the Amsterdam-based European Climate Exchange set up last year. But the government regulations and registry of companies needed to make a climate exchange work do not yet exist in Canada. The exchange's bet is that they will appear this autumn, when Stephen Harper, the prime minister, unveils his promised “made-in-Canada” policy to address climate change.

Mr Harper, who won an election in January, has long argued that Canada could not possibly meet the emissions targets it had agreed to under the Kyoto Protocol. But since taking office, he and his environment minister, Rona Ambrose, have sent out confusing signals about what they intend to do about this. Joining the United States and Australia, fellow Kyoto-doubters, in the rival Asia-Pacific Partnership has been mooted. So has staying within Kyoto. An aide says, vaguely, that the government plans a “holistic” approach that covers air, land and water pollution.

Canada's policy on emissions has long been a shambles. Since the late 1980s, successive governments, Conservative and Liberal, agreed to targets but without the measures required to meet them. The latest was the Kyoto Protocol, which Canada ratified under a Liberal government in 2002. This requires Canada to cut emissions of greenhouse gases to a level 6% below 1990 levels by 2012.

The Liberals spent billions on programmes intended to encourage households and companies to curb their energy use, to little effect. Emissions of greenhouse gases continued to climb—but faster still. The government admits that in 2004 they totalled 758m tonnes—or a third more than the Kyoto target. On present trends, they will be double the target by 2012. To meet it, the government would have to spend billions more buying emission credits from countries such as Russia that have exceeded their goals.

So Mr Harper was merely stating the obvious. But on taking office, he cut several Liberal environmental programmes without putting anything in their place. Coming up with alternatives will not be easy. A wasteful attitude to energy use, business fears of extra costs and the eternal tension between federal and provincial governments all stand in his way.

It doesn't help that global warming sounds like good news in a country of interminable winters. Climate change may be melting the Arctic ice cap, endangering polar bears and the traditional way of life of the Inuit, but most Canadians live far to the south. They tell pollsters they are increasingly worried about the environment. But in practice they are champion energy consumers, outpaced only by Iceland and Luxembourg among rich countries (see chart).
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As for business, the degree of resistance to emissions curbs varies. Abitibi-Consolidated, a big paper producer, has already cut emissions from its Canadian mills to 42% below 1990 levels. But energy efficiency in the oil and gas industry has plummeted because companies in Alberta's oil sands use large amounts of natural gas to extract oil.

There is no shortage of suggestions for a new set of policies. Most borrow from international experience of pricing air pollution. The C.D. Howe Institute favours a carbon tax, compensated by cuts in other taxes. Another possibility is to use provincial schemes as building blocks for a national effort. Alberta and Quebec have already set up company registries for emissions, says Daniel Schwanen, an environmental analyst. It would cost Ottawa little to make them compatible.

Mr Harper could also look to the government's own advisory body, the National Round Table on the Environment and the Economy, which reported last month that emissions could be reduced by 60% by 2050. Technology is not the problem, said the report. What is needed is a clear signal from the government that it is serious about climate change. But so far Mr Harper has been uncharacteristically muddled. Perhaps a summer vacation—the ultimate Canadian antidote to long winters—will bring clarity.