November 19, 2008 / 6:26 PM / in 9 years

Canada pledges auto aid, cap-and-trade system

OTTAWA (Reuters) - Canada pledged new aid to its ailing auto sector on Wednesday and, in an apparent shift, it also said it would work toward a North America-wide cap-and-trade system to limit greenhouse gas emissions.

The minority Conservative government, re-elected on October 14, made the promises in a policy speech marking the start of Parliament and quickly passed its first confidence hurdle when it won the support of the main opposition Liberal Party.

The government also said it would be a mistake to run a budget surplus “at any cost”, signaling that next year Ottawa may run its first deficit since 1996-97, but it said any stimulus package would not be delivered in the next couple of weeks.

The agenda for the new session of Parliament, outlined in the Speech from the Throne, marked the government’s first explicit pledge of new aid to the battered auto sector since the election.

“The Canadian manufacturing sector, particularly the automotive and aerospace industries, has been under increasing strain. Our government will provide further support for these industries,” the government said in the speech.

It said that while Canada “must never return” to ongoing budget deficits, it would be “misguided to commit to a balanced budget in the short term at any cost” due to the global financial crisis.

Finance Minister Jim Flaherty will deliver an update on his fiscal and economic projections next week. Canada agreed on Saturday at a summit in Washington to do its part to stimulate the global economy but Flaherty said he would look at stimulus closer to the annual budget -- to be delivered next February or March -- rather than including stimulus in the fall update.

The government is trying to co-ordinate with the United States both its response to requests for auto aid and its approach to climate change, particularly in the wake of Barack Obama’s victory in the U.S. presidential election.

“We will work with the provincial governments and our partners to develop and implement a North America-wide cap-and-trade system for greenhouse gases,” the speech said.

Obama favors much tougher reduction targets than those set by the Canadian government, and says he will start a cap-and-trade system, intended to put caps on greenhouse gas emissions and allow trade in emission permits.

Environment Minister Jim Prentice said last week that he felt a cap-and-trade system and an intensity-based approach could function together. Until now, Canada has worked on cutting the intensity of emissions rather than imposing outright curbs.

Wednesday’s speech reaffirmed Ottawa’s commitment to reduce total Canadian emissions by 20 percent by 2020.

The government also said it would set an objective of meeting 90 percent of Canada’s electricity needs by 2020 from “non-emitting sources such as hydro, nuclear, clean coal or wind power”.

Parliament’s two smallest parties, the separatist Bloc Quebecois and the leftist New Democratic Party, quickly announced their opposition to the Conservative government’s agenda, leaving the Liberal leader Stephane Dion to decide whether to keep Prime Minister Stephen Harper in power.

Dion said it would be irresponsible to force what would be the third election in three years. “We will not oppose the government. We will vote. We will not bring down the government over a throne speech that is not worth it,” he said.

For most of the year leading up to the October election, the Liberals had been in the awkward position of verbally opposing the government but not taking action to defeat it.

Additional reporting by Louise Egan; editing by Rob Wilson

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