New developments in climate change management are occurring around the world that will make an impact on the environment and local economies.

By Cheryl Slusarchuk

The silver lining in the dark cloud of climate change is the unprecedented global galvanization of government and business to find ways to address the resulting problems and challenges. Those able to work out successful solutions are expected to benefit from the associated economic development - particularly in the burgeoning energy efficient technologies, clean tech and renewable power industries.

Governments in many countries, at all levels, are implementing policies, legislation and initiatives aimed at managing climate change and promoting economic development. Governments, however, can only provide an environment that drives competitive, economic decisions by businesses and the marketplace.

It is the businesses and the business leaders that must make the change happen.

Carrots, sticks and standards
To encourage businesses to manage climate change and accelerate adaptation technologies, governments are using three primary approaches: (1) incentive programs; (2) penalties or taxes, such as the much-discussed carbon tax; and (3) regulations imposing standards, such as a cap on greenhouse gas emissions (GHGs). Further, these varied approaches are being employed by at least three levels of government: national, provincial and municipal.

This patchwork of policies, legislation and initiatives makes it challenging for senior managers to keep up with new developments and identify what will have the most impact for their businesses. The Canadian Council of Chief Executive Officers, in their Memorandum to Premiers and Territorial Leaders (January 23, 2008), stated: "At both the federal and provincial levels, governments have brought forward innovative and creative proposals for driving progress in reducing GHG emissions. At the same time, we are concerned that insufficient policy coordination and cohesiveness among governments could lead to the imposition of additional costs on businesses and consumers without corresponding environmental benefits."

Recent examples of climate change developments include fuel efficiency legislation, equipment energy efficiency and renewable fuel standards, as well as drives to remove oil and gas subsidies (U.S. Energy Independence and Security Act), legislation to reduce emissions (B.C. Greenhouse Gas Reduction Targets Act), and programs to encourage the use of biofuels (Canadian Federal ecoENERGY for Biofuels Program, together with several provincial programs). There is also Quebec’s Draft Regulation on GHG Emissions from Motor Vehicles, which is based on California’s tailpipe standards. Further, several provincial and state governments are developing cap and trade systems and evaluating carbon tax programs. Here are some details about a few of these initiatives.

U.S. Energy Independence and Security Act 2007
This omnibus energy policy law focuses on increasing energy efficiency and availability of renewable energy. The new legislation sets a corporate average fuel economy target of 35 miles per gallon for combined fleets of cars and light trucks by model year 2020. It also tackles renewable fuels standards, energy efficiency equipment standards (imposing new requirements for lighting, and for residential / commercial appliances such as freezers and walk-in coolers), and repealing two oil and gas subsidies.

An unexpected consequence of this legislation may be the preclusion of the U.S. military and post office, the first and second-largest purchasers of vehicle fuels in the U.S., from purchasing fuels made from the oil sands. In mid-January, Alberta Premier Ed Stelmach met with Vice-President Dick Cheney to discuss this matter, as well as Alberta’s role in providing U.S. energy security, after extending his Washington meetings for that purpose.

B.C. Greenhouse Gas Reduction Targets Act 2008
With the Act, B.C. has become the first province in Canada to legislate broad-based GHG targets, including a reduction of 33 per cent by 2020 and 80 per cent by 2050. Interim targets for 2012 and 2016 will be determined before the end of 2008 by the recently appointed Climate Action Team, which comprises several Nobel Peace Prize winners, senior business executives and others. Further, the provincial government, including ministries and crown corporations, has committed to being carbon neutral by 2010. One way it will be doing this is by requiring work-related travel by public officials to be carbon neutral in 2008 and 2009. This approach of "leading by example" will create opportunities for businesses and clean technology companies to assist the province in reducing its GHG emissions.

Biofuels Programs
The Canadian Federal ecoENERGY for Biofuels Program encourages less use of traditional fuels and more use of biofuels. Through it, the federal government is providing $1.5 billion of investment to ethanol and biodiesel producers to ensure projects can be developed in Canada. In contrast, the provincial programs are mainly based on road tax exemptions and producer payments. The Ontario Ethanol Growth Fund provides an operating grant to eligible recipients. Quebec offers a tax credit that is reimbursed up to 18.5 cents a litre depending on the prevailing value of crude oil, and Alberta offers a producer incentive up to a specific production cap until March 31, 2011. These varied approaches to biofuels by the federal and provincial governments are just a small sample of the patchwork set of solutions that are causing difficulties or proving challenging for many businesses in the broader context of climate change.

Cap and trade systems
Many Canadian provinces and U.S. states have been developing emission registries, and are partnering with the European Union to develop best practice standards and compatible cap and trade systems as part of the International Carbon Action Partnership.

Cap and trade legislation will be complex and contentious. Among the central issues that will be hotly debated are:

• the level of the cap;
• where the cap will apply - upstream, at the mine mouth or refinery, or further downstream, at utilities or industrial concerns;
• the extent of the cap - economy-wide or focused on certain sectors;
• the extent of auctions for emission permits as compared to handouts on the basis of prior emissions; and
• how reductions from "early action" and other domestic or offshore projects that reduce emissions will be managed.

These cap and trade systems will have differing economic impacts on industry sectors and businesses within industry sectors, making it a key area in which business leaders will be engaged as these markets develop.

Climate change and economic development
These are just a few of the many initiatives, laws and policies that are being implemented around the world to address climate change challenges. Others include performance standards for renewable electricity and energy efficiency; requirements to build new coal plants with technology allowing carbon capture and storage; consumer incentives for the purchase of energy-saving goods, such as hybrid and plug-in hybrid cars; and substantially increased spending on research and development for new technologies and innovation.

If some of these measures prove successful, the benefits will be significant both for the environment and the local economies in the regions that provide the solutions. For example, a recent economic study out of the University of California, Berkeley, estimates that California will increase its GDP by between $60 and $74 billion as a result of energy efficiencies and new clean tech solutions for meeting the state’s 2020 emission reduction targets.

Cheryl Slusarchuk is a partner in the Vancouver office of McCarthy Tetrault LLP practising in the business law and technology groups. She is the president of the B.C. Premier’s Technology Council and serves as Chair of the B.C. Climate Action Team.

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