(Mar. 25, 2010) I would be very surprised if the Supreme Court (SC) rules in favour of Friends of the Earth (FOE). The problem is that the law of the land allows the PM to sign an international treaty without Parliamentary oversight. But to balance that power, the PM-signed/ratified treaty does not become law of the land unless/until Parliament passes domestic legislation that enacts the treaty in full.

The Kyoto Protocol Implementation Act (KPIA) fails to implement the Kyoto Protocol in its entirety. Further, a private member’s bill (the KPIA) is not binding on a minority government if it has budget implications. I don’t think it is possible for the Supreme Court to find that the government of Canada has a legally binding obligation to comply with the Kyoto Protocol, because Parliament has not passed a law to make the KP the law of the land.

And let’s put any potential ruling that the KP is the law of the land in context, as well.

The KP states that any party that fails to comply with its First Commitment (FC) Period (2008-2013) national target will: (1) bear a 30% penalty, i.e. the FC period emission exceedance is multiplied by 1.3 and added to any second commitment period reduction obligations the party accepts, and (2) the party has to buy Kyoto Protocol compliance instruments (AAUs, CERs or ERUs) to address the penalty at the earliest opportunity.

Canada’s FC period exceedance will be at least 1.2 billion TCO2e. It is fair to estimate that the market price for KP compliance instruments will increase to CAD$40 to 80/TCO2e in the event that Canada remains in the KP market and is assigned the non-compliance penalty. So the one-time cost to Canadian taxpayers of any such a Canadian court ruling would be between CAD$48 billion and CAD$96 billion.

What would Canadian taxpayers buy for that price? We can only comply by acquiring hot-air AAUs that were originally issued to Russia, Ukraine, Belarus, etc. and/or CDM/JI Board-issued CERs. 77% of CERs issued to date have been issued to Asian HCFC22 manufacturing plants. HCFC22 is a highly potent ozone-depleting substance and GHG that is illegal to make or import into Canada, due to its significant environmentally-damaging effects.

CERs from HCFC22 manufacturing so dominate the UN/CER credit market that it is not possible for Canada to implement a Kyoto compliance strategy while avoiding HCFC22 plant-originating CER purchases. Though on a side note, it is impossible to stop brokers from laundering HCFC22 CERs through CER/AAU swaps with market participants—most notably the World Bank—who are heavy traffickers in HCFC22 plant-originating CERs.

How do you think Canadian taxpayers will react to a ruling that compels us to subsidize 30 Asian plants that make a chemical that is so damaging to the global environment that it is illegal to make or import into Canada?

At this time, largely due to the largesse of the World Bank Carbon Fund, Asian HCFC22 manufacturers are earning $2 for CER sales for every $1 they earn for product sales. One US EPA study found that the UN CDM/JI Board’s decision to approve this massive new KP-based subsidy for HCFC22 production will add some 2 billion TCO2e to the earth’s atmosphere by 2020, which incremental GHGs would not have been discharged in the absence of the UN decision to issue these CERs.

And while the UN/CDM-JI Board is comfortable issuing CERs to HCFC22 manufacturers, they have decided not to issue CERs to developers of wind power in China.

How are these decisions rationally explained to Canadians?

Does FOE really think that the Canadian taxpayers will support any political party or NGO that acts to impose such a large cost on the Canadian tax base—a cost that can only be mitigated by hot-air Kyoto compliance instrument purchases? I think Canadians do want to finance environmental progress. But CAD$50+ billion for no global environmental gain?  I don’t think so.

Note that under the provisions of the KP, Canada does not have any alternative compliance options—meaning the treaty does not permit us to elect to address the KP penalty by, say, committing to deliver CAD$50 billion in funding to mitigate climate change impacts in developing nations over, say, a 10 year-period.

Note, as well, that (theoretically) if we shut down 100% of oilsands production, we would reduce Canada’s KP liability by less than 5%. To the extent that oilsands sales are replaced by new crude oil sales from Nigeria, and or California heavy oil sales, global GHGs go up, not down, as a result of the decision to shut down the oilsands.

My guess is that any ruling that backs Canada into the KP penalty situation—especially given that the EU27’s Copenhagen commitment is to cut GHGs only 2.7% from 2005 levels by 2020, after increasing EU27 GHGs every year since 1994—will turn the majority of Canadian voters entirely against both the Kyoto and Copenhagen processes.

Regardless how the Supreme Court rules, it seems to me that Canada’s PM (Conservative or Liberal) has no choice but to formally file the permitted one-year’s notice of Canada’s intention to withdraw from the Kyoto Protocol—and do so pretty soon. The only question is whether or not this necessary and inevitable administrative action will garner good or bad polls for the PM/party that initiates it.

My guess is that if/when Canadian voters understand the CAD$50+ billion liability associated with the KP, as well as the HCFC22/CER story—both easy stories to tell—there will be general support for withdrawal from the KP. But the risk is that Canadians will also lose faith in our ability to address GHGs. This is the worst possible environmental outcome.

It would be best, I feel, for Canada and the global environment for the FOE to back off and for the parties to the KP to agree that the Copenhagen accord is a new treaty, replacing and not an extension of the KP.  Then the FOE and others should focus on what parliament needs to do to ensure that Canada keeps our Copenhagen commitment.

Aldyen Donnelly, Marych 25, 2010