Canada's two biggest provinces sign emissions deal

OTTAWA (Reuters) - In a major rebuff to the Canadian government's plan to fight climate change, the country's two biggest provinces agreed in principle on Monday to set up a market-based system to curb greenhouse gas emissions.

The premiers of Ontario and Quebec, which between them account for almost two-thirds of Canada's 33-million population, said Ottawa's program to cut emissions 20 percent from 2006 levels by 2020 was inadequate and misguided.

The two signed a memorandum of understanding to establish a cap-and-trade program by 2010 that would limit the amount of emissions that companies can produce. Companies that exceed their limits would pay a fee to those who keep within them.

The federal Conservative government opposes a cap-and-trade system with absolute limits. It says there is no chance Canada can meet its commitments under the Kyoto Protocol on climate change, which oblige Canada to cut emissions by 6 percent from 1990 levels by 2012.

Ottawa aims to cut the intensity of emissions, which means allowing greenhouse gas output to rise in the short term.

"What worries us is that the federal government is in the process of setting up a system that is incompatible with what exists in Europe and elsewhere," Quebec Premier Jean Charest told a news conference in Quebec City.

Charest also said the two provinces wanted to stay on the right side of the United States on the grounds that whoever wins this November's presidential election will do much more to fight climate change than President George W. Bush.

"We're expecting a 180-degree change in policy from the next administration," he said. Bush walked away from Kyoto in 2001, saying it would cripple U.S. industry.

Ontario Premier Dalton McGuinty said that, ideally, the deal between the two provinces would serve as the foundation for a national cap-and-trade system.

"We can reach higher, we can go faster and we can go further than the options that are present at this time ... we think we have a shared sense of responsibility to be a little bit more ambitious," he said.

Federal Environment Minister John Baird on Sunday dismissed the plan as "a little bit of smoke and mirrors," telling CTV television it was "more about talk and political posturing than it is about cutting greenhouse gas emissions."

Charest said he was astounded that Baird should criticize the two provinces for working together.

The environment has long been a potential weak spot for the Conservatives. Their power base is in the western province of Alberta, where development of the oil-rich tar sands has helped push Canadian emissions more than 25 percent over 1990 levels.

Critics say the government is unwilling to impose a tougher plan for fear of alienating the powerful energy industry.

The official opposition Liberal party is working on a plan to impose a carbon tax on energy costs and then return some of the money through tax cuts. The province of British Columbia will launch a similar program later this year.

David Ljunggren, Reuters

Published: Monday, June 02, 2008