U.S. mid-term election results effectively kill chances for a comprehensive national climate change policy, at least during President Obama's first term in office. While this represents a significant 'game-changer', it does not mean the end of the world, nor does it mean progress is not possible in other important areas such as clean technology. 

GLOBE-Net, November 4, 2010 - This week's U.S. Mid-term election results have sent many messages to the U.S. political and business communities, but one thing is very clear - there will be no national cap-and-trade program in the foreseeable future, nor any national consensus on a new climate change policy.

While at the Obama administration has little room to manoeuvre with respect to a national climate change policy, the defeat of Proposition 23 in California sends a clear signal that the nation's most populous state - and by far its biggest market for renewable energy - will continue to grow the clean industry sector.

The defeat of Proposition 23, the proposal that would have suspended that state's emissions-reduction law until unemployment rates fell sharply, is cause for optimism in the alternate energy community, despite continued uncertainty about the economy.

John White, Executive Director of the Center for Energy Efficiency and Renewable Technologies and a longtime clean-technology advocate in Sacramento said in a Los Angeles Times interview that California's future clean-technology economy could be "as important as the aerospace industry was to California during World War II," with a new generation of wind and solar projects that "lead the world again."   

It's a view echoed by Rhone Resch, head of the U.S. Solar Energy Industries Association, who says the results ensure "that California and the entire United States will continue to grow the clean industries and reclaim leadership in the world."

What does this mean for Canada?

Had Proposition 23 succeeded, it would have had implications for Canada - particularly for British Columbia - notes the University of British Columbia's Sauder School of Business.

Given that California is the economic engine for climate policy on the West Coast, it notes in a Briefing Paper, Proposition 23 not only would have stalled key climate change mitigation programs in California, it would have had a negative ripple effect on other regions looking to limit GHG emissions, including British Columbia.

California's economy, which is larger than those of 90 per cent of the countries in the world, creates a much larger pool for firms in British Columbia and other economically smaller jurisdictions to find a viable carbon trading market, notes the Vancouver Sun.

Cap and trade

The election results also sent a strong signal that states (and provinces) should consider going it alone to create their own climate change policies and programs. In particular, it gives further momentum to the Western Climate Initiative, a cap-and-trade program that includes California, six other American states, as well as Ontario, Quebec, British Columbia and Manitoba, which is scheduled to come on line in 2012.

Clearly, that is California's view in the face of little action at the federal level in either Canada or the U.S., noted Danielle Droitsch, director of U.S. policy for the Calgary-based Pembina Institute in a CBC interview.   

President Barack Obama said he will look for ways to control global warming other than placing a ceiling on greenhouse gases. "Cap-and-trade was just one way of skinning the cat; it was not the only way," Obama said at a news conference. "I'm going to be looking for other means to address this problem.

Rather than seeking a broad approach to energy and climate change, he said, he would look for smaller policy bites that could attract bi-partisan support such as further development of electric vehicles, or converting some of the nation's heavy truck fleet to run on natural gas, programs that lead to innovation and which could create jobs. 

That touches on the other clear message the election results have sent to the Obama Administration - that great deal more emphasis must be placed on job creation in the face of sluggish recovery of the U.S. economy.

Jobs, Jobs, Jobs

"Genuine improvement on the jobs front is a prerequisite for future success and conservatives should be forced to take responsibility for the economy." Center for American Progress

If the Obama Administration responds to that message, this could translate into renewed stimulus spending programs, many of which would focus on clean technology, the one area where new jobs are possible in the short term according to recent research by the GLOBE Foundation.

Canada-US climate relations

While acknowledging that the U.S. election results will put a national cap and trade system in America on the back burner for a "continued period of time," Canada's now former Environment Minister Jim Prentice said recently in a CBC interview that the federal government won't move by itself on cap-and-trade legislation to lower greenhouse gas emissions. "We've been very clear that we will not go it alone on cap-and-trade legislation," he said.

What impact Jim Prentice's sudden resignation from the Harper Government Cabinet will have on Canada's climate policy is unclear. His interim replacement as Environment Minister, John Baird (who previously held that post) has been equally adamant that Canada would proceed in concert with the U.S. on climate change goals and regulations.

Both countries have promised to lower emissions 17 per cent below 2005 levels by 2020.

"If the U.S. is on pause for federal climate legislation, does that mean Canada really is on pause for the next two years?" asks Pembina Danielle Droitsch. "I hope not."

Ideally, the Conservative government should now shift to a "made in Canada" approach that will get the country started on a road to a serious climate change policy, she says, and then adapt to "whatever the U.S. does, whenever the U.S. does it."

Energy

On the energy policy side, the changed political landscape in the United States has been interpreted by some analysts as providing additional breathing space for U.S. fossil fuel energy imports from Alberta's oil sands, and there is every indication that major new developments in this regard will proceed.

Nonetheless, Canadian energy giants such as Transalta will continue to explore opportunities in the alternate energy sector. (See GLOBE-Net article ( TransAlta is now Canada's largest producer of wind power).

In fact, an industry led initiative is underway to develop a new 'National Energy Strategy' that places Canada's clean energy resources at the forefront of the initiative is another 'game changer'. A recent 'Clean Energy Dialogue' that took place in Banff involved some of the heavy hitters in the fossil fuel sector.

The three-day conference included energy leaders, environmentalists and analysts, including representatives of the Energy Policy Institute of Canada (EPIC), the Energy Framework Initiative, the Canada Council of Chief Executives and the Canadian Chamber of Commerce. It purposely excluded government representatives.

Bruce Carson, a former senior adviser to Prime Minister Stephen Harper who now co-chairs the EPIC, presented the strategy to the country's energy ministers at their annual meeting in September, in Montreal.

Quoted in a CBC interview, he said "I think that going forward with a coherent strategy, then one sector of the energy sector relates to another ... and it would allow us to really take on the world leadership role that we could possibly [have]."

"Without a strategy, everything that's announced by government, everything that industry does, is always just a one-off. If you've got a strategy, you could make your energy efficiency announcement relate to international trade, relate to demand-side economics, relate to other parts of the energy sector and other parts of the Canadian economic and social sector."

That is a view that is shared by other business leaders as evidenced by a BSR/GlobeScan State of Sustainable Business Poll 2010 released this week shows that more than eight in 10 respondents (84 percent) of corporate leaders are optimistic businesses will embrace sustainability as part of their core strategies and operations in the next five years, with a major emphasis on energy efficiency, use of renewable energy, and carbon offsets as the bases of their climate change policies.

In summary, while the U.S. midterm elections have not removed lingering uncertainties regarding climate and energy policies both in Canada and the United States - with the possible bright light being the clean technology sector - neither do they means the end of progress in these areas.

What we seeing is a change in the pattern of leadership, which is coming from the sub-national levels of government, i.e. at the state, provincial and even municipal levels, and from industry.

In fact, this is one area where the business community seems prepared to move forward, leading rather than following government policy.

John D. Wiebe

President and CEO