Sunday, April 01, 2007

Should Ontario trade carbon with the U.S.?
There has been speculation recently that Ontario is mulling over the prospect of joining an emission trading scheme. The scheme in question, the Regional Greenhouse Gas Initiative (RGGI), covers power generation in nine northeastern states, and is America’s first mandatory cap-and-trade system.


Should Ontario join the RGGI? It is definitely worth looking into. Let’s set aside for a moment the financial opportunities (though they are significant, as I pointed out last week), and focus on the legal ramifications. It is just a matter of time before an emissions-related lawsuit against an emitting company is successful in the U.S. Some of those recently before the courts—e.g., Connecticut v. American Electric Power and California v. General Motors; see article—rested on the tort doctrine of public nuisance. Don’t let the innocent-sounding phrase “public nuisance” fool you into thinking these actions are frivolous. The implications of a successful public nuisance lawsuit will be profound (see article).

Most big American coal-based generating companies understand this, which is why they’re demanding federal leadership on the issue, including carbon caps through either taxation or a carbon market (see article). They want a framework in place so they can respond, in both legal and PR terms, when the inevitable verdict comes down.

What does this have to do with Ontario? Our biggest coal-fired generating plant, the 3,900-megawatt behemoth at Nanticoke, sits on the north shore of Lake Erie. Its emissions often drift south and east, i.e., right into New York State. New York’s current governor, Elliot Spitzer, was the attorney general before he won the gubernatorial election last November. In that capacity he filed numerous legal complaints against power companies, some of which were directed at Ontario. Nanticoke is one of his favourite targets. He knows exactly what he’ll do if and when a public nuisance complaint succeeds in the U.S.

Spitzer is also a big RGGI supporter. He believes in making life harder for emitters by forcing them to purchase carbon permits rather than granting permits for free (as the European Emission Trading Scheme did in its first year of operation; see my post). If this is the case, then he and his fellow RGGI governors might agree to favourble terms on which Ontario could sell its low-emission power into the northeastern power markets.

Such an agreement would have to acknowledge that Ontario’s power-sector emissions have dropped, sharply, in recent years. This would help our legal case, and wouldn’t hurt in the PR department either.

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