California vote has Canadian green partners on edge

Wed Oct 20, 2010 3:15pm EDT
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By Allan Dowd

VANCOUVER (Reuters) - Canadian provinces moving to cut their greenhouse gas emissions are facing a setback if California, a key partner, decides the battle against global warming should wait for better economic times.

British Columbia, Quebec, and Ontario plan to launch a carbon cap-and-trade market with California and New Mexico in 2012 -- a market scheduled to be joined later by Manitoba and at least four additional U.S. states.

But Californians will vote in November on a ballot proposition to put the state's climate agenda on hold for years, and the Republican candidate in the gubernatorial race promises a pause as well.

California is the political force behind the Western Climate Initiative, a group of U.S. states and Canadian provinces that plan to set up a carbon trading market, and is by far the group's largest economy. So a step back by California would have both an economic and psychological impact.

"Losing California would be a major blow to the WCI and possibly to carbon trading systems elsewhere in North America ... and quite possibly to the developing international carbon market," Ontario Environmental Commissioner Gord Miller's office warned in a report this week.

Few observers predict the Canadian provinces will scrap their cap-and-trade efforts if California pulls out, but there is concern the loss of such a major player could hinder the market's liquidity and efficiency, possibly leaving it subject to wide volatility in prices.

California greenhouse gas emissions traded on the WCI market would be larger than those of the three Canadian provinces combined.

"It certainly will be more challenging, but I think they will move forward... It's always more challenging when there are fewer of you," said Mike Gerbis, chief executive of the Delphi Group, an Ottawa consulting firm that helps Canadian companies develop environmental strategies.   Continued...