Posted by Tim Stobbs on December 19, 2008
Well I had an interesting question the other day at work I thought I would share the answer with you all.
Q: So do you think federal government is going to come out with some detailed CO2 regulations?
A: I honestly don’t know when but I can tell you likely they will have changed dramatically from the Turning the Corner system which used ‘intensity based’ targets.
Intensity based targets are supposed to be about keeping the economy going while slowly converting over to a low CO2 economy. Basically the targets are tied to production. So as long as your emissions per unit of production goes down you could technically emit more CO2 in total by just producing more product. Overall it’s not a great system for real change, since Turning the Corner has lots of exceptions and loopholes.
Meanwhile the European Union, Australia, and two other regional groups in North American (which includes between them about half the provinces in Canada and a third of the US states) are going Cap and Trade. Oh, also likely after Jan 20 the US will be going Cap and Trade as well within six months.
So what is Cap and Trade? Basically you set an absolute limit on CO2 to be emitted in any given year. So if your company, for example, emits 1000 Mt of CO2 in a year you need 1000 Mt of CO2 permits to hand in by the end of the year to avoid stiff penalties. So if your company was only allocated or bought from an auction 800 Mt of permits you need to pick up another 200 permits from other companies that don’t need their permits. So by good old supply and demand we now have a price to emit CO2. Then each year you keep reducing the amount of permits issued to reduce overall emissions. Now a bunch of planners can evaluate plans to find out if it makes sense to do them right now or wait till later versus the price of CO2. Also consumers will actually start paying the real costs associated with their choices.
Sounds simple, but trust me the devil is in the details. Yet in general it likely means Canada will face steep pressure to join a Cap and Trade system which would effectively kill any hope of Turning the Corner from being used for anything other than a stop gap solution until a Cap and Trade system is up and running.
It’s going to be a very interesting year in 2009 for CO2 regulations. Let me know if you have questions. I’ll do my best to answer them.