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Market News

 May 30, 2007
Ontario signs climate pact with California

 Toronto, Canada (GLOBE-Net) -- The Ontario government has signed an agreement with California Governor Arnold Schwarzenegger that will see the province adopt the state's groundbreaking Low Carbon Fuel Standard. Schwarzenegger will also meet with Prime Minister Stephen Harper in Ottawa and British Columbia Premier Gordon Campbell in Vancouver during his first official trade mission to Canada.

Governor Schwarzenegger joined Ontario Premier Dalton McGuinty at the Ontario legislature, where they signed a Memorandum of Understanding on climate change.

Under the agreement, Ontario will require fuel producers to reduce carbon emissions from transportation fuels by 10 per cent by 2020, a move which the government says is the equivalent of taking 700,000 cars off the road.

The province will essentially adopt California's Low Carbon Fuel Standard, which requires fuel providers to ensure that the mix of fuel they sell into the California market meets, on average, a declining standard for GHG emissions measured in CO2-equivalent grams per unit of fuel energy sold.

However, Ontario will not be adopting California's new tailpipe emissions standards, which force automakers to produce more fuel efficient and/or less polluting cars. The California regulations are the most stringent in North America and have been met with severe opposition from vehicle manufacturers and the U.S. federal government. Ontario would prefer such standards be enacted on a national basis in Canada and does not want to hurt the province's auto industry, noted a government official.

The Ontario government notes that the Low Carbon Fuel Standard is "technology neutral" and allows the market, rather than the government, to determine how to reduce emissions at the lowest cost and in the most consumer-friendly way. In California, fuel providers may choose how they lower the carbon content of their fuels: by blending ethanol into gasoline products, purchasing credits from electric utilities supplying low carbon electrons to electric passenger vehicles, or by diversifying into hydrogen or other alternative fuels. Details of the Ontario standard have yet to be released.

Other highlights of the accord include:

  • Collaborating on energy efficiency programs

  • Coordinating efforts to switch to clean energy technologies, promote green buildings and increase efficiency

  • Working together on national, North American and international emissions trading

  • Exploring market-based mechanisms such as expanding the Western Regional Climate Action Initiative (WRCAI) to encourage an effective carbon market.

The Government of Ontario has previously expressed interest in joining both the Regional Greenhouse Gas Initiative (RGGI) and the WRCAI, two US state-level strategic partnerships which involve plans for carbon trading to reduce greenhouse gas emissions. British Columbia recently joined the WRCAI.

The provincial government also wants Ontario to be the North American leader in renewable energy capacity, and the long-term provincial energy supply plan will double the use of renewable energy to 15,700 MW by 2025. The province's Standard Offer Program, which allows small generators of renewable energy to sell power to the grid for a fixed price, is similar to California initiatives to support solar and wind power.

California has long been an environmental leader, and has recently challenged the U.S. government on a number of issues related to vehicle fuel efficiency and climate change. The state's Global Warming Solutions Act pledges to lower greenhouse gas emissions to 1990 levels by 2020, using emissions trading and other market based solutions.

Were Ontario to join California in a carbon trading market, it would bring two of North America's largest economies together, lending greater weight to a number of regional climate change initiatives that have sprung up in the void left by federal inaction.

The latest data from Environment Canada shows that Canada's greenhouse gas output is still rising, with emissions in 2005 more than 32 percent above the country's target under the Kyoto Protocol. Many provincial governments are launching their own climate change initiatives, and some called for greater federal action at a recent meeting of the Canadian Council of Ministers of the Environment (CCME).



For More Information: Government of Ontario