A significant gesture

by Robert Asselin. Posted June 5, 2014

In announcing a meaningful plan to fight climate change, US President Obama has put forward one of the most significant acts of his presidency.

The objective announced by the Environmental Protection Agency (EPA) to reduce power plants carbon emissions by 30% by 2030 (compared to 2005 levels) represents the largest effort ever undertaken by the US government to tackle climate change. If the plan is implemented, it will mean a reduction of 500 million metric tons of carbon annually.

In the United States, 40% of emissions are produced by power plants (mainly coal). Yesterday’s announcement targets these plants directly by imposing a cap on their emissions levels that is essentially equivalent to setting a price on carbon.

Beyond the national dimension, the announcement will have a significant international impact. Because the United States and China are the two largest emitters of carbon across the world (accounting for almost 40% of total emissions), the message sent to the rest of the world is unequivocal. In advance of the 2015 World Summit in Paris, President Obama’s announcement will breathe new life into negotiations towards a new multilateral agreement. This is far from trivial, considering the inertia we have seen in recent years.

The direction just taken by the US government will also have an effect on market forces, likely provoking a major shift in the production, transmission and consumption of energy. Investment and jobs related to renewable energy such as solar, wind and biomass have already been increasing in recent years in the United States. We can expect this trend to be amplified as a result of the new regulation.

So, what are the consequences for Canada? Boasting an already unenviable reputation on the environmental front, the Harper government is now in an even more vulnerable situation. By refusing to put forward its own regulations on carbon emissions, Canada will find itself at a double disadvantage.

First, as we have seen in the Keystone pipeline fiasco, the lack of a concrete action plan on climate change undermines the export of heavy oil from Alberta’s oil sands. Thanks in part to a revolution in the exploration of natural gas, the United States now have the luxury of being more selective in importing energy. It is clear they prefer less polluting sources. If Canada had taken action on carbon sequestration or on industry regulation, we would not be in this situation.

Second, rather than becoming a world leader in energy research, development and innovation — and creating a market conducive to private investment — Canada is likely to be outdone by those countries that have recognized the economic potential of this shift.

In the future, economies with low carbon emissions will have a significant competitive advantage. Beyond the fight against climate change, this is what we must grasp about yesterday’s announcement. President Obama has understood.