California is expanding its carbon-trading program to three Canadian provinces

May 08, 2011 - energycentral.com

California officials announced Tuesday that the state will expand its newly adopted carbon-trading program to three Canadian provinces, creating the largest regional cap-and-trade system in North America.

The Western Climate Initiative, launched by former Gov. Arnold Schwarzenegger, was originally designed in 2008 to engage seven Western states and four Canadian provinces in a trading program. That program, it was hoped, would eventually fold into a broader federal cap-and-trade system to be enacted by Congress.

But since then, support for curbing global-warming emissions has ebbed, and the economic downturn has cut into business profits. Federal cap-and-trade legislation was passed by the House in 2009 but stalled in the Senate.

Arizona, New Mexico Washington, Oregon, Utah and Montana had signed on to join the initiative but have pulled out of the trading plan.

Quebec is expected to join California's program when it is launched in January, with British Columbia and Ontario finalizing their rules within a year. Manitoba is also considering signing on.

"We hope this will evolve into a broader North American program," said Michael Gibbs, deputy secretary of the California Environmental Protection Agency. "Just how it gets there is an open question."

The initiative comes as studies show climate change is taking a toll on the Western region of the U.S. and Canada. Scientists say that without dramatic cuts in the burning of fossil fuels, Western states will suffer from water shortages, severe wildfires, coastal flooding and the loss of animal and plant species.

Even without other U.S. states, the new trading program will cover two-thirds of the greenhouse gas emissions of the original 11 states and provinces, because California and Ontario are the largest regional economies by far. The Western initiative also will be three times larger than a program mounted by Northeastern U.S. states, which covers only electrical plants, Gibbs said.

Harvard University economist Robert Stavins, an authority on cap-and-trade systems, said that despite the defection of the other Western states, California "is leading the way toward a national carbon-pricing policy." He added that the "demonization" of cap-and-trade by conservatives in Congress, who branded the system "cap-and-tax," makes the Western regional system "of the greatest importance in influencing future congressional debates."

margot.roosevelt@latimes.com