Ken Silverstein EnergyBiz Insider Editor-in-Chief

The newly-elected Conservative Prime Minister Stephen Harper has long cast doubt on whether the treaty ratified by 173 nations in November 2004 could deliver its promised benefits -- 6 percent reductions in greenhouse gas emissions from 1990 levels and all by 2012. While the new leader stopped short of saying Canada would renege on its pledge, he did say that the government is re-examining its commitment to comply with the timetables for making reductions in such emissions. He also said that his administration would emphasize more free-market approaches as well as elicit the input from the country's provinces to develop a new plan.

"I've said for a long time that the Kyoto Protocol won't succeed in achieving its objectives and that this government, our Canadian government, can't achieve the objectives," Harper told reporters. "We intend to collaborate with our provinces to develop a plan in Canada to get results," as opposed to using a top-down approach.

Canada and the European Union were instrumental in the effort to get the protocol ratified. The United States had refused to join it while major developing countries like China and India were exempted from early emissions, although they did join it as signatories. The agreement was initially signed by Canada's liberal government. Conservatives, however, protested it and said it would cost jobs and have little effect on emissions. They now point out that Canada's annual greenhouse gas releases are about 25 percent higher than they were 1990.

The nations that joined the protocol are required to submit reports fairly soon that detail their progress. Beside Canada, Finland, New Zealand and Spain are at least 20 percent off target. The enforcement mechanism employed by the Kyoto Protocol requires that any country that fails to meet its 6 percent goal by 2012 must then increase its obligation by 30 percent during the next commitment period. Such nations also have to develop a blueprint that details their future plan of action. Negotiations will begin this year as to what that next set of obligations will be.

Interestingly, Canada now chairs the U.N.'s Conference of Parties that is responsible for leading the discussions on implementation of the next phase of Kyoto requirements. According to the U.N, 34 industrialized countries are set to reduce emissions by at least 3.5 percent from 1990 levels by 2012.

"We must not shift from leaders to global villains without a vigorous public debate," says Elizabeth May, Executive Director of the Sierra Club of Canada. The environmental group says that Prime Minister's Harper's position reflects his lack of understanding on global warming issues and that most scientists say it is a profound problem.

Market Approaches

Last year, while the Liberal government was still in office, Canada released its outline to cut greenhouse gas emissions. Project Green called on the government to invest about $10 billion (Canadian) between 2005 and 2012 to enable compliance.

Canadian industry would be compelled to cut its greenhouse gas emissions by 240 megatonnes -- a megatonne is about 1.1 million tons by U.S. metrics -- by 2012. To get there, it would use a variety of tactics that include "carbon sinks" where forest and farmlands sequester gases. It would also use trading credits and newer technologies that focus on energy efficiency. Meantime, it would emphasize a greater use of cleaner burning fuel sources such as renewable energy.

Canada's strategy to purchase credits from other countries is a hot topic. In other words, the government will spend taxpayer money to buy credits from those countries able to meet their reduction targets. Such countries will involve those that are less developed and which use older technologies. In essence, the developing nations can meet their climate reduction goals by shifting to newer technologies that pollute less -- and then sell their earned credits to countries unable to do so. Critics say that this tack won't cut emissions in Canada while advocates say that it is okay to have rich countries pay poor countries to install new technologies, thereby cutting global emissions.

Meantime, the so-called Large Final Emitters provision sets a reduction target of 45 megatonnes for about 700 Canadian companies. That level was initially set at 55 megatonnes but was cut to accommodate the industry's economic fears.

Kyoto's standards will have a nominal effect on Canada's economy, according to some estimates. Growth is expected to occur but at 0.4 percent less than it would otherwise. Along those lines, between 60,000 and 240,000 fewer jobs will be created during the first phase of the Kyoto agreement, which goes until 2012. Any economic risks pales in comparison to the environmental consequences of doing nothing, they say: Environment Canada predicts the earth's temperature could increase as much as 5.8 degrees Celsius by the end of the century.

Kyoto detractors say that global warming is not a scientific fact. At the same time, manufacturing groups in Canada are saying that because of Kyoto about 450,000 potential jobs will never be realized. A Canadian taxpayer group adds that incomes after inflation will drop by 5.5 percent there. That's because prices will have to rise and wages will have to be slashed to pay for the cost of implementing Kyoto.

"Our position remains that the Kyoto accord is seriously flawed and that the emissions targets it imposes on Canada are unrealistic and unattainable," says Rona Ambrose, Canada's new Minister of the Environment in a letter to the Toronto Star. "The Kyoto framework does not optimize Canada's position to develop new technology or take other effective measures to reduce Canada's greenhouse gas emissions."

The new Canadian government seems to be philosophically in line with the Bush administration's view on this matter. The United States along with South Korea and Australia did not endorse Kyoto but have instead written their own plan. The Asia-Pacific Partnership would rely more on free market solutions and the development of modern technologies that cut emissions. The U.N. says that the agreement does not undermine the global warming pact, although it does not set binding targets and timetables.

Canada is unlikely to scuttle all of its obligations under the Kyoto Protocol but it has given every indication it will downshift, or slow down its efforts to comply. While the actions may be a setback to the environmental movement, the external pressures to curb greenhouse gas emission won't subside. That pressure, along with the development of new technologies, will help speed along efforts to address global warming.

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