Countdown to Copenhagen: Feds bid adieu to intensity-based targets

Finally.

The federal government has announced that its much anticipated climate change program will not be based on emissions intensity targets. Responding to a question from question from Bloc Quebecois MP Bernard Bigras, Environment Minister Jim Prentice said, "we are talking about a cap-and-trade system, a continental cap-and-trade system that involves absolute emission reductions, not intensity targets." The change is a welcome one for both the environmental and business communities. It is also well timed, given Canada's declared strategy for the negotiations in Copenhagen.

Ever since tabling its Turning the Corner plan, the Conservative party has been under fire for proposing to limit emissions per unit of production instead of absolute emissions. Environmentalists feared that even if the targets were met, Canada's total emissions could rise as productive output grew. In contrast, a cap based on absolute targets provides direct control over total emissions, regardless of economic growth, and is thus a more certain way to address climate change.

The business community will also be relieved by the change. The costs of complying with a cap-and-trade system depend significantly on the size of the market in which carbon credits can be traded. Bigger and more diverse markets tend to result in lower compliance costs. A critical feature of Canada's plan is therefore to ensure that our cap-and-trade market is integrated with that of the U.S. However, there was significant doubt that intensity-based carbon credits would have been recognized in the U.S. The move to a regime based on absolute targets should help ensure that homegrown carbon credits are fungible and tradable with those used south of the border.

It is the need to integrate with the U.S. that most likely drove the Conservatives to change their tune. The timing of the announcement, just a few days before the opening of COP 15 in Copenhagen, is certainly intended to reinforce our solidarity with the U.S., whose lead Canada has consistently said it would follow in the negotiations.