Blogs & Comment

Protectionism shades green

Robert Pagehad his work cut out for him today. The Calgary, AB-based chair of Canada’s National Roundtable on the Environment and the Economy was fielding a packed morning’s worth of media from all across the country.
The issue du jour?How protectionism has crept into draft climate change legislation in the United States. How it’s likely to affect Canada. And how best to head it offbefore it becomes law, and real damage is done to our economy.
Last week, Page’s round table released a new report on how Canada needs to tackle the issue of climate change. Entitled Achieving 2050A Carbon Pricing Policy for Canada, it sensibly rejected much of the Canadian federal and provincial governments’ efforts to dateincluding the piecemeal provincial approach and the federal government’s favouring of “intensity” targets on only the largest emitters.
Instead, Page’s report favours one clear national standard to price carbon across the country. (This is a solution Canadian Business‘s editorial board has long preferred.)
Page has been at pains to stress that Canada’s future economic health depends on making these changesas quickly as possible. And it comes not a minute too soon.
Like Page, everyone who exports energy and manufactured goods to the U.S. should be paying close attention to the wording of draft legislation tabled by Congressmen Henry Waxmanof California and Edward Markeyof Massachusetts on March 31 of this year.
That’s because the current wording of the new bill, titled the American Clean Energy and Security Act 2009 , has major implications for Canada.
Under the segment titled Transportation Efficiency, for example, the bill proposes what amounts to a low-carbon fuel standard across the United States. If implemented in current form, that move would likely cut exports of oilsands syncrude out of the U.S. marketplace.
Worse yet, says Page, is the creeping protectionism embedded in the bill’s current wordingparticularly the segment titled Ensuring Domestic Competitiveness. “The gist of the bill is that if any U.S. company complains that this program puts them at a competitive disadvantage, it will become eligible for rebates from the U.S. government that will allow it to continue to compete,” Page explains.
The bill goes on to state that if…

….the President finds that these rebates do not sufficiently correct competitive imbalances, he would be directed to establish a “border adjustment” program, under which foreign manufacturers and importers would be required to pay for and hold special allowances to cover the carbon contained in U.S. bound products.

What this amounts to is new tariffs on goods from countries whose climate change legislation is deemed by the U.S. to be somehow inadequate to its own standards. Explains Page: “This represents both a direct threat for products from the oilsands, and a threat to any Canadian product that represents a high fuel intensity steel, cement, auto parts.” You can read a draft summary of the bill here.
Page acknowledges that we don’t yet know what kind of an economic hit this legislation is likely to represent. And it’s also important to stress that the legislation remains in draft form. Powerful entrenched constituencies in the United States ranging from the coal mining industry, to advocates for those on low incomes, to consumer groups, to the Department of Defencewill be working overtime to get these bills changed.
But Page insists that the threat is real. “The protectionist elements of this are really aimed at China,” he says. “Canada’s getting caught in the downdraft.”
In Page’s view, the best way to head off the impact of this legislation is by bringing Canada’s climate change legislation in line with what the U.S. is considering. But that, of course, is likely to mean major economic pain and dislocation for businesses and consumers right across the country. So his report recommends a series of measures to offset that pain.
For example, it suggests the government continue with an idea Alberta is already implementing: that the proceeds from the sale of pollution credits at auction go towards a technology fund. That fund would then invest in technologiescarbon capture and storage, thermal power, energy-efficient technologies and renewablesthat can help bring down the carbon content of Canada’s fuels and products.
Another likely offshoot: spiking oil prices, as high-carbon fuels are legislated out of the fuel supply. So Page’s report recommends some funds from the sale of credits be spliced off to help low-income Canadians most at risk from higher oil prices.
As for possible job losses: though the report doesn’t comprehensively tackle job training, Page says his group is closely following initiatives such as the Green Jobs corps currently championed by the White House’s green jobs czar Van Jones(see yesterday’s blog post Meet Mr. Jones .) “The infrastructure program in the last federal budget should be looking at the green jobs area,” Page says.
Toronto-based cleantech investor Andrew Heintzmanhas also been watching these developments. He applauds Van Jones’ green jobs training idea in theory, but points out “you can’t put training for green jobs in place without clear markets for those jobs in the first place.” That’s why he’s been investing in cleantech start-ups.
Heintzman also serves on Ontario Premier Dalton McGuinty‘s task force for greening Ontario’s economy. He acknowledges when it comes to finding clear leadership on climate change policy, Canada’s approach has been a bit of a mishmash. Ontario has feed-in tariffs to encourage the use of renewable energy. B.C. has a carbon tax. Alberta’s working with a form of cap-and-trade capping emissions on the largest polluters and investing the sales of pollution credits into a tech fund. And as for booming Saskatchewan, well, according to an article published this morning in the Globe and Mail, that province’s environment minister Nancy Heppner said recently that it just doesn’t make economic sense for the province to attempt to meet its climate change targets at least not for this year.
It adds up to a policy of madly off in all directions. And with Canada’s greenhouse gas emissions continuing to skyrocket, it clearly isn’t working.
“What amazes me is that we aren’t further along with this process yet,” Heintzman says. “We’ve known this was coming.”
Pragmatists hope that Page’s recommendationswhich some in the oilpatch applaud for their claritywill help Canada get its act together on the climate change file. For as Page sees it, some form of emissions reduction is going to have to happen in Canada, and it’s going to be painful anyway. Might as well figure out a clear policy now, to help businesses and consumers mitigate the painbefore the economy gets slammed with new green tariffs down south.