The Cost of Bill C-288 to Canadian Families and Business

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A. Introduction

On February 14, 2007, the House of Commons passed Bill C-288 - An Act to ensure that Canada meets its global obligations under the Kyoto Protocol. Section 3 of the Bill states that, "The purpose of this Act is to ensure that Canada takes effective and timely action to meet its obligations under the Kyoto Protocol and help address the problem of global climate change." If Bill C-288 is approved by the Senate, Section 7.1 requires that "Within 180 days after this Act comes into force, the Governor in Council shall ensure that Canada fully meets its obligations under Article 3, paragraph 1, of the Kyoto Protocol by making, amending or repealing the necessary regulations under this or any other Act."

The purpose of this paper is to examine the economic implications for Canada of full implementation of Bill C-288. It assumes that the objective of the Act is to require that Canada meet its Kyoto obligations over the first commitment period from 2008 to 2012 by achieving greenhouse gas reductions that are real and creditable under the terms of the Kyoto Protocol.

Kyoto Protocol Article 3

1. The Parties included in Annex I shall, individually or jointly, ensure that their aggregate anthropogenic carbon dioxide equivalent emissions of the greenhouse gases listed in Annex A do not exceed their assigned amounts ... with a view to reducing their overall emissions of such gases by at least 5 per cent below 1990 levels in the commitment period 2008 to 2012.

The Kyoto Protocol

In December 1997, Canada and 160 other members of the United Nations Framework Convention on Climate Change (UNFCCC) met in Kyoto, Japan to conclude a protocol to the Convention to limit emissions of greenhouse gases (GHGs).1 The resulting agreement, called the Kyoto Protocol, was signed by Canada on April 29, 1998, and ratified in 2002. The Kyoto Protocol entered into force on February 16, 2005.

Under the terms of the Kyoto Protocol, 38 industrialised countries (Annex I countries) committed to cut their emissions of greenhouse gases between 2008 and 2012 to levels that are at least 5% below 1990 levels. In terms of individual country targets, Canada is required to reduce emissions to a level of 6% below 1990 levels in 2008-2012.2 As a group, the European Union has a target of an 8% reduction from 1990 levels, the United States (which did not ratify the Protocol) had a target of a 7% reduction from 1990 levels, while several other countries, including Australia (which also has not ratified), are permitted to let their emissions continue to rise above 1990 levels, but at a reduced rate of growth (see Annex I).

China and India, two of the largest and fastest growing economies in the world, and who have both ratified the Kyoto Protocol, are not required to reduce their emissions under the current agreement.

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1 GHGs are the atmospheric gases responsible for causing global warming and climate change. The major GHGs are carbon dioxide (CO2), methane (CH4) and nitrous oxide (N20). Less prevalent - but very powerful - greenhouse gases are hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6).

2 In accordance with Article 3, paragraphs 7 and 8 of the Kyoto Protocol, Canada's allowable emissions for the period 2008 to 2012 is 2,815 Mt (i.e. 94% of the 1990 level multiplied by five). This means that, on average, Canada's emissions cannot exceed 563 Mt for each year of the Kyoto period.

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