Manitoba ETS a good fit for WCI, but could face political headwinds

Published 12:49 on December 23, 2015  /  Last updated at 18:59 on December 23, 2015  /  Americas, Canada, US  /  No Comments

Manitoba’s proposed emissions trading scheme will likely be accepted by WCI participants, though the plan to launch a provincial carbon market could be scrapped following this spring’s elections, analysts have warned.

Manitoba’s proposed emissions trading scheme will likely be accepted by WCI participants, though the plan to launch a provincial carbon market could be scrapped following this spring’s elections, analysts have warned.

The Canadian province’s left-leaning NDP government earlier this month announced that it would pursue cap-and-trade as a way of cutting GHG emissions by 33% below 2005 levels by 2030, and that it would seek to link its market to those in California, Quebec and Ontario through the Western Climate Initiative.

However, Manitobans are tentatively scheduled to vote on Apr. 19 and a victory for the Progressive Conservatives, who currently lead in the polls, could see the plan shelved because it probably wouldn’t gain approval in the province’s assembly, analysts at Thomson Reuters Point Carbon said in a report published earlier this month.

“Should the Conservative Party win, the prospect of Manitoba implementing cap-and-trade reduces significantly. The Party has never pursued cap-and-trade policy for GHGs on the national and provincial level in Canada,” said Point Carbon’s Tom Marcello.

“The elections represent the primary political hurdle Manitoba must cross … If the New Democratic Party wins, cap-and-trade implementation is unlikely to face any political hurdles.”

Approved or not, Manitoba’s market is not likely affect the other markets operating under WCI due to the province’s relatively small emissions profile, he said, no matter how over- or under-allocated the new scheme is forecast to be.

DESIGN

Point Carbon estimated that agriculture and waste would be left out of Manitoba’s carbon market, leaving it to cover some 61% of the province’s GHG emissions, compared to around 80% in California and Quebec.

The largest emitting sector would be transportation fuel at around 7.5 million tonnes of CO2, while natural gas sales would make up a further 3.3 mtCO2e.

Around 11 industrial plants would account for 2.1 mtCO2e, with Manitoba’s energy sector and power imports, which are mostly low-carbon, adding a further 0.1 mtCO2e.

All together, the sectors forecast to be covered emitted a total 13 mtCO2e in 2013, compared to 10.9 mt in 2005, the province’s baseline year.

That means reductions of around 5.7 mt from 2013 would be needed to bring emissions down to 7.3 mt, the level required to hit the first of the province’s three targets.

It has also set itself the goals of halving 2005 levels by 2050, and slashing GHGs by 100% by 2080.

STRINGENT ENOUGH

“We estimate that the target declines at an average rate of 3.9% from 2018-2030, which is the exact same decline rate California plans for its emissions cap between 2021 and 2050,” Marcello said.

“Even though the baseline year is not consistent with the other WCI jurisdictions, Manitoba’s target and cap trajectory should be stringent enough to join the WCI.”

“If Manitoba does not design its cap-and-trade program like the other WCI jurisdictions, it will not be accepted. The province lacks the leverage necessary to deviate from design features implemented by California and Quebec. Ontario’s cap-and-trade design plans differ only slightly from California and Quebec’s and it is poised to cap 10 times more emission than Manitoba. Therefore Manitoba must simply copy and paste regulations already drafted and finalized by other WCI jurisdictions to implement its program. The province is too small to implement a cap-and-trade program on its own.”

Marcello said he assumes Manitoba will follow Ontario in its cap-and-trade plans and set aside 5% of its allowance budget to put in a price containment reserve, which would act has a price ceiling by releasing the units into the market if prices cross a certain threshold.

He added that if the law is approved by the province’s legislature, the market is expected to start in 2018, “providing the province with ample time to engage stakeholders and design its programme”.

By Mike Szabo – mike@carbon-pulse.com

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