The Western Climate Initiative’s cap and trade market may soon need to be renamed The Canada Climate Initiative.

Until last week, the Western Climate Initiative boasted seven U.S. states and four Canadian provinces who were working toward the launch of a regional cap and trade system on Jan. 1, 2012. Last Thursday, Arizona formally announced it was backing out of cap and trade. As the state with the fastest rate of emission growth — 61% between 1990 and 2007 — many feared a body blow to Arizona’s economy if it tried to meet the initiative’s carbon reduction goals.

The following morning neighbouring Utah indicated it might follow suit. By a 6 to 2 vote, its House Committee on Public Utilities and Technology passed a nonbinding resolution to urge Governor Gary Herbert to pull out of the Western Climate Initiative. Earlier in the week, the full Utah House voted resoundingly — 56 to 17 — to curb any carbon-curbing attempts by the federal government’s Environmental Protection Agency. Specifically, the resolution introduced into the House “urges the United States Environmental Protection Agency to halt its carbon dioxide reduction policies and programs and with its ‘Endangerment Finding’ and related regulations until a full and independent investigation of the climate data conspiracy and global warming science can be substantiated.”

To date, only four of the 11 jurisdictions have adopted legislation that would allow them to participate in the cap-trade-market: California, British Columbia, Ontario and Quebec, with Manitoba appearing close to joining. Oregon, Washington, Montana and New Mexico have not yet adopted cap-and-trade legislation and now California, which is tottering toward bankruptcy, has become iffy: A voter initiative in California, if it passes in November, would halt the cap-and-trade program until unemployment falls to 5.5%.

Even before last week’s climate revolt, many believed the Western Climate Initiative unofficially died with the ascension of Barack Obama to the presidency. When George W. Bush was U.S. president, those backing climate change legislation could argue for a regional plan on the basis that national legislation would never pass a Bush presidency. As soon as Obama came to office, pressure built in the western states to abandon the regional cap and trade plan, on the logic that the states should harmonize with federal cap and trade policy. Now that federal cap and trade legislation appears dead, the states have cooled further to regional trading.

The upshot? By the end of the year, the only jurisdictions left in the Western Climate Initiative’s cap and trade program could be the Canadian provinces.

Lawrence Solomon, Financial Post, February 22, 2010