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OTTAWA and VANCOUVER — For months now, managers of a Chevron refinery in Burnaby, B.C., have known that the plant would fall under any carbon dioxide cap-and-trade regime put in place by federal or provincial authorities.
With British Columbia unveiling a cap-and-trade bill last week, it's clear which government is moving first.
But Chevron, along with other big greenhouse gas emitters in the province, remains in the dark on key aspects of the system and how much it will cost to comply.
"It's a challenge to begin working out what the practical options are for us," Chevron Canada Ltd. spokesman Ray Lord said when the legislation was announced.
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Mr. Lord added that current monitoring systems might not be sufficient for the new regime.
Chevron is not alone in its uncertainty.
B.C.'s Greenhouse Gas Reduction (Cap and Trade) Act, which requires legislative approval before taking effect, will set hard caps for large emitters and allow those covered by the act to buy and sell allowances or buy offset units. (An offset is a greenhouse-gas reducing activity, like generating energy from landfill methane.)
But the act, a key plank of B.C.'s ambitious climate change agenda, does not say what the cap will be, what facilities will be covered by the legislation or what qualifies as an offset. With those pieces still missing, there is also the question of how B.C.'s plan will mesh with those of its partners in the Western Climate Initiative, a group that includes California, six other U.S. states and Manitoba.
The group, which B.C. joined last year, is expected to develop a cap-and-trade system by August. That has financial players drooling over a new carbon trading platform for a region that has 63 million people and a GDP of $2.9-trillion. But critics say the Western Climate Initiative must avoid mistakes made in Europe, where emissions have climbed despite regulated caps and emission-credits trading.
"One of the problems in Europe when they first started was that they put out too many permits, so there was no scarcity and the market essentially collapsed," said Matt Horne, B.C. director for the Pembina Institute, a Calgary-based environmental group.
"They gave out more permits than there was going to be emissions, so there was no incentive to reduce emissions."
Greenhouse-gas emissions from major industries in the EU rose by 1.1 per cent last year, a report from Norway-based Point Carbon says.
But while emission levels remained stubbornly high in Europe, the cap-and-trade system did create a lucrative new market. Last year, the value of carbon credits traded in Europe topped $40-billion (U.S.), a 55-per-cent increase from 2006.
Increasingly, carbon credits are becoming tradable securities, just like futures in gold or crude oil or pork bellies. That does not upset Mr. Horne.
"There's no question that there is a lot of economic interest in cap-and-trade and some people will make money on the trading aspect of it," he said. "We don't have any problem with that. The key is to make sure the market is designed with the environmental goals front and centre."
Environmentalists hope the WCI initiative will spur the U.S. government to act. Both the U.S. Senate and the House of Representatives are considering bills that would establish a national cap-and-trade system, but neither is expected to pass before the November election.
"We strongly support the Western Climate Initiative and have been enormously heartened by its progress," said Ralph Cavanaugh, California director the Natural Resource Defense Committee.
"What you're getting is a lot of innovation and a lot of constructive pressure on the federal government to lead, and a clear understanding that if it doesn't, the western states are prepared to move on their own."
He said the California-led initiative scored a major victory in signing up Utah and Montana, two states that rely on coal-fired electricity.
As well, states are moving to prevent "leakage" - a surge in emissions from non-participating jurisdictions as a result of companies shifting power plants or other operations out of WCI boundaries.
Critics worry that scenario could also play out in B.C., if companies shift high-emission operations or extraction of raw materials to Alberta, which has less aggressive regulations.
B.C.'s new act leaves too many important questions unanswered, said NDP environment critic Shane Simpson.
"Who's in? Is aviation in? Is marine in - ships coming in to port, are they in? It tells you nothing who [regulated operations] might be," he said.
