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Credit crunch

Cap-and-trade is on its way, but what it means is anyone's guess

By: MARY AGNES WELCH

28/11/2009 2:34 PM | Comments: 0

LET'S just say it up front: Carbon credits are not sexy. Right now, for all but a handful of Manitoba green nerds, carbon credits are little more than a nebulous, theoretical climate change catchphrase. They don't affect your company, what you drive, how much your power costs or Manitoba's overall economy.

But they could. Maybe. If someone could just figure out how they'll work.

On balance, Manitoba, which has access to clean power and is already fairly green, stands to benefit from a carbon credit, cap-and-trade system.

Problem is, the province could be two short years away from the launch of a continent-wide, carbon trading system, and no one seems to have any idea how it will work, which companies might be affected, how much it will cost or what work needs to be done to get ready.

"We're taking a wait-and-see approach," said Ed Huebert, the executive vice-president of the Mining Association of Manitoba, whose 16 members could get caught up in a cap-and-trade system.

"There are more questions than answers."

The biggest question might be: Which Manitoba emitters will be affected?

Right now, only emitters that spew more than 100,000 tonnes of CO2 a year are obliged to count their emissions and report them annually to the federal government. There are only seven of those big emitters in the province, including Brandon's Koch fertilizer plant and Manitoba Hydro's Brandon generating station.

That's a remarkably small number.

But if a continent-wide cap and trade system shrinks that threshold to 25,000 tonnes -- the number up for discussion at the biggest cap-and-trade consortium -- that means dozens more Manitoba companies will find themselves caught up in a carbon cap-and-trade regime.

Gaile Whelan Enns, Manitoba Wildlands director and a climate change insider, says a lower threshold could mean 10 times more sites will have to count and report their emissions and participate in a complex carbon credit system.

That could include Winnipeg's two universities and Red River College, all the province's large livestock operations, food processors such as McCain and Maple Leaf, bus manufacturers such as Motor Coach, aerospace companies such as Boeing and Standard Aero.

And, it could even include big construction projects such as northern dams.

That's a good thing, she believes, but it's also a complicated one. And it's not clear to anyone how much planning the province has done to help companies get ready.

Dan McGinnis, the province's assistant deputy minister in charge of energy, climate change and green initiatives, says his staff has a pretty good idea which companies emit more than 25,000 tonnes of greenhouse gases a year. He just can't name them because emissions are proprietary information of a sensitive commercial nature.

That's despite the fact Ottawa publishes a list of big emitters every year.

That raises questions about just how transparent and accountable the province's climate change plans are going to be.

The province has pledged to meet the original Kyoto goals by reducing emissions to six per cent below 1990 levels by 2012, which means cutting three million tonnes of greenhouse gases. Manitoba's problem is it has few big emitters -- not one big nasty coal-fired power plant or tarsands operation. By finally counting all the smaller emitters and monitoring their reductions, the province might find it's cut more greenhouse gases than it thought.

"That's the huge irony in all of this is," said Whelan Enns. "With a good inventory and reporting mechanism, the province could actually do better than their target."

MEANWHILE, carbon credits are caught in a cauldron of competing and overlapping initiatives.

The eastern U.S. states have banded together to create the Regional Greenhouse Gas Initiative, known as Reggie, which established a cap-andtrade system for power companies.

Six midwestern governors are also working on a carbon trading system.

But the biggest and most advanced project is the Western Climate Initiative which includes most Canadian provinces and the entire western half of the U.S., from Wyoming to California to Kansas.

It's actually set up a series of draft rules and thresholds and has a plethora of working groups on the go. The first phase starts in two years, with a three-year phase-in.

Then there's Obama.

The American Clean Energy and Security Act passed over the summer and establishes a cap-and-trade system.

A similar bill called the Kerry-Boxer bill is moving its way through the Senate. But it's not clear how exactly U.S. President Barack Obama and the U.S. government will set up a cap-and-trade system.

Will Washington create its own system with its own caps and thresholds? Will it cobble together the ones created by the states and use them as the backbone of a trading system? Will the WCI become the de facto, continent-wide system because it already has so much buy-in?

No one knows, and all this is made even more muddled by the fact Canada's federal government has been widely criticized for abdicating all leadership on climate change. Few can predict the outcome of a critical global meeting on climate change in Copenhagen next month.

Manitoba is hedging its bets.

"Nothing has been decided," said McGinnis. "We are participating in all of them and we want to ensure that the final outcome is good for Manitoba."

McGinnis said the province has already started talking with manufacturers, mills and mines about how cap-and-trade might work.

But he wouldn't say how the province will ease the transition, what incentives there might be or how much a cap-andtrade system might cost or save Manitobans.

"We've had some discussion with industry on those items," said McGinnis. "But it's really, really too early to get into the weeds on it."

There are also many elements up in the air, including what to do about vehicle emissions, how much credit to give companies who already made green improvements and whether carbon credits can be traded between industries, within a country or continent-wide.

Meanwhile, the WCI keeps chugging ahead with plans for a carbon-credit trading system, and the 2010 start date looms. "People will have enough time to get ready," promised McGinnis.

maryagnes.welch@freepress.mb.ca

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