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Visions of emissions trading fading in puff of smoke

Once touted as a prime weapon of choice to attack climate change, cap-and-trade seems to be dying a quiet death.

It began earlier this year when the U.S. Senate killed climate change legislation that had a national cap-and-trade system at the heart of it. A few months later, the Canadian Senate killed this country's own climate change legislation, and the hopes of any kind of national carbon trading system were dashed along with it.

The Chicago Climate Exchange - the first voluntary cap-and-trade exchange in North America, which opened in 2003 - recently closed to surprisingly little fanfare.

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Now, there seems to be some doubt about the future of the Western Climate Initiative, the proposed cap-and-trade system involving a handful of U.S. states and Canadian provinces including Quebec, Ontario, Manitoba and B.C.

The Business Council of B.C. is putting pressure on the B.C. government to reconsider its commitment to the program because it could create a "competitive disadvantage" for companies by forcing them to meet increasingly more stringent emissions targets.

The program would almost certainly hurt the bottom line of high emitters, the council says, making it more difficult for them to compete against companies in provinces and U.S. states that don't have a cap-and-trade regime. This would include Saskatchewan and Alberta.

At least one of the Liberal candidates looking to replace Premier Gordon Campbell has suggested it may be time to step back from the aggressive climate change polices the B.C. government initiated a few years ago when the world seemed to want to do something about a warming planet.

The business community in Ontario, meantime, is similarly making behind-the-scenes noises about the impact there of the Western Climate Initiative. Even some inside the government aren't enthusiastic about imposing more costs on the province's beleaguered manufacturing sector with the dollar flirting at parity. As it is, the province is in the midst of drastically raising the price of energy.

California seems to be the only jurisdiction in North America still committed to doing something about rising greenhouse gas emissions. But even there, a recent referendum initiative that would have killed the state's tough climate measures - including its involvement in cap-and-trade - was defeated only narrowly by state voters.

Fact is, cap-and-trade has been a tough sell from the beginning, and much like the harmonized sales tax, easy for critics to attack. It's not something that is easily explained to the masses: a system in which companies must hit emission targets and can exceed them only if they buy "carbon credits" from companies that don't use up all their emission space.

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Cap-and-trade is also fading into irrelevancy because the North American economy remains fragile. This has allowed the usual suspects in the United States - big oil lobbyists, Republican climate change deniers - to work their magic on legislators. There is also legitimate concern that the murky world of emissions trading could become a bonanza for Wall Street manipulators. Cap-and-trade was also hurt by estimates that it would amount to a $3-trillion tax on U.S. businesses.

The talk in the United States now is of a fee and dividend system, in which a levy is built into the price of gasoline, coal-fired electricity and other carbon based fuels to give consumers and businesses an incentive to use less. It is a version of the carbon tax now in use in B.C., which is another reason businesses in the province aren't anxious to have cap-and-trade imposed on them as well.

If the HST is killed by referendum in B.C., it's almost certain cap-and-trade will die along with it. The HST is designed to give businesses a break. If companies lose that, there will be a revolt if cap-and-trade is forced on them. (Especially given that they are already being subjected to an increasingly burdensome carbon tax.) If B.C. pulls out of WCI, Ontario would likely not be far behind, and if B.C. and Ontario leave, there wouldn't be much reason for Manitoba and Quebec to remain.

All of this has huge consequences for a province like B.C., which has some of the most aggressive emissions reduction targets in the country. If it rejects cap-and-trade, there is virtually no way those legislated emission goals can be met.

It would seem climate change policy in North America is coming apart at the seams.

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About the Author
National affairs columnist

Gary Mason began his journalism career in British Columbia in 1981, working as a summer intern for Canadian Press. More

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