Sunday, March 25, 2007

Conservatives leaning toward emission trading
Will Canada participate in emissions trading? Judging from recent public comments, the prospects for Canada’s participation in some scheme or other seem to depend on the day of the week. Senior Conservatives have changed their tune on this issue more times than a Barry Manilow song. Well, at least they’re thinking about it.


Readers will note that I have advocated emission trading as one way (among many) of reducing capital costs in projects to build capital-intensive low- or zero-emission electricity generation plants based on nuclear and coal gasification technology. A structured market would enable quantification of financial risk, and thereby enable prospective financiers to divide prohibitively lengthy construction periods into more manageable increments at the ends of which they could exercise options.

Together with incentives like construction delay insurance, loan guarantees, and power production tax credits—which only the federal government could offer—an emission trading scheme could channel private investment into these capital-intensive technologies.

In my view, it’s time to put money on the right horse. Nuclear is a proven emission-reducer (as witness Ontario’s dramatic million-tonne power-sector emission reductions in recent years; see Ontario Liberals admit they’ve reduced power emissions). And coal gasification is a no-brainer. North America has zillions of tonnes of cheap coal. Public concern over climate change and air quality makes pulverized coal combustion—the most emission-intensive kind of electricity generation—less and less attractive.

Those who fear increased electricity prices as a result of emission trading, need not worry. As I pointed out in Talk meets reality
, the much-vaunted European Emission Trading Scheme is, at present, more about public relations than emission reductions. This is as it should be, because major emitters need time to incorporate the costs of carbon and governments need time to prepare the electricity consuming public for higher prices.

Therefore, emissions trading is another relatively risk-free way for the Conservatives to outflank the chattering green opposition.

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