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March 30, 2009

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PAGE 8 NEW An online resource tool 1.800.263.3269 Bestcase earlug.indd 1 3/26/08 11:52:01 AM Focus On ENERGY/ENVIRONMENTAL LAW U.S. trade worries may force action Climate change not just about greenhouse gas laws BY GLENN KAUTH Law Times D ealing gas emissions. It also means crafting new rules on interna- tional trade, lawyers say. "Politically it's going to hap- pen. Especially with today's economy, it's not even hidden protectionism," says change isn't just about regulating greenhouse with climate Jones LLP partner Milos Barut- ciski, speaking of probable U.S. moves to safeguard its own com- panies' competitive positions through trade barriers. At issue is the disadvantage U.S. companies will likely face once the new U.S. administra- tion makes good on its prom- ises to bring in a cap-and-trade program to reduce greenhouse gas emissions. Regulating car- bon will fi nally signal prog- ress on climate change but will make products made in the United States more expen- sive than goods from countries without rules and targets. Th e issue is particularly relevant since agreements such as the Kyoto Accord specifi cally ex- empt developing countries such as China and India from having to do much on climate change. Bennett are worried about two potential problems. Th e fi rst is that do- mestic producers will suff er un- duly as their costs rise due to the need to buy emissions allowanc- es or invest in new technology. Secondly, they worry about the eff ectiveness of the regulatory regime since production — and greenhouse gas emissions — can simply shift elsewhere in what is called leakage. "Future invest- ment will be skewed to countries that don't have the same rules," says Barutciski, adding that the result could be no net reduction in pollution. But the risk of trade sanc- As a result, U.S. policymakers tions isn't just a worry for the industrializing developing coun- tries, says Elisabeth DeMarco, a partner and head of the energy practice at Macleod Dixon LLP in Toronto. With Canada per- ceived as a laggard on climate change, it could be a target for tariff and non-tariff barriers by the United States and elsewhere, she notes. As a result, Canada should be careful "to ensure that our goods are not prejudiced in the world market," she argues. Already, the oil-sands in- dustry has faced challenges from legislation such year's U.S. Energy Security Act. as last have threatened more aggressive import tariff s on Canadian goods over the lack of action on climate change, she adds. Canada and the United States from discriminating amongst their trading partners through measures such as import 'Future investment will be skewed to countries that don't have the same rules,' says Milos Barutciski. Aimed at preventing U.S. feder- al agencies from buying oil from sources that emit more carbon dioxide than conventional pro- duction, the legislation repre- sented a veiled threat to Can- ada's petroleum industry over its record on greenhouse gases. Now, DeMarco points out that President Barack Obama has been musing about a clean en- ergy dialogue with Canada, something that could represent a similar approach to the act. Other countries, such as France, have, of course, both changed their tunes recently with both Obama and Prime Minister Stephen Harper announcing their inten- tions to develop a North America- wide cap-and-trade system. But, Barutciski notes, those good vibes don't necessarily signal the end of threats against Canada's access to the U.S. market, especially since a number of bills proposing trade sanctions against countries that don't go far enough on climate change have been making their way through Congress. One of them, the Warner-Lieberman bill, would have imposed a tariff on imports at the border based on the amount of greenhouse gas emis- sions it took to produce a good. Th at legislation died recently in Congress, but Barutciski expects similar proposals to emerge. "Th is isn't just a Democrat or Republi- can issue. It's bipartisan," he says. Of course, any trade restric- tions run the risk of challenges through international bodies such as the World Trade Or- ganization. Th e most-favoured nation principle in the WTO, for example, forbids members strictions. In the so-called shrimp-turtle case, in fact, the WTO sanctioned the United States for arbitrarily imposing import restrictions on coun- tries that it deemed to be harm- ing turtle populations through the shrimp catch. So key to en- suring that any carbon import tariff s stand up to scrutiny will be applying the rules fairly. As a result, the U.S. government will likely give countries time to adapt before the tariff s take eff ect, Barutciski says. But international trade agree- ments do make a number of ex- ceptions to the general ban on import restrictions. Th e General Agreement on Tariff s and Trade, for example, contains two ar- ticles that could apply to barriers erected in the name of stopping climate change, Barutciski notes. Th ey include one dealing with measures "necessary to protect human, animal, or plant life and health," and another on actions "relating to the conservation of exhaustible natural resources if such measures are made eff ec- tive in conjunction with restric- tions on domestic production or consumption." It's the latter article Barutciski re- Energy Regulation in Ontario Glenn Zacher and Patrick Duffy Original author: The Honourable Mr. Justice David M. Brown Energy Regulation in Ontario is your most authoritative source for gaining an appreciation of the laws, regulations and policy directives governing the Ontario energy market and industry. In fact, it's the only publication available that analyzes the legal regime affecting each segment of the market and industry – i.e., generation, transmission, distribution, wholesaling/trading and marketing/retailing. Energy Regulation in Ontario contains everything you need to understand the intricacies of the open market for natural gas and electricity. Regularly updated to reflect the latest changes, this book explores: the frequent amendments made since 1998 to both the • • Electricity Act, 1998 and the Ontario Energy Board Act, 1998 the substantial revisions, repeals and additions made to the regulations under both Acts • the significant changes to the Market Rules made by the Independent Electricity System Operator • the major decisions made each year by the Ontario Energy Board on both the natural gas and electricity fronts, keeping you up to date This is a must-have resource for anyone in the energy sector who wants to successfully navigate through this complex regulatory landscape. ORDER your copy today Looseleaf & binder • $290 • Releases invoiced separately (1-2/yr) P/C 042603000 • ISBN 0-88804-333-3 Shedding light on the complex legislative and regulatory framework governing the Ontario natural gas and electricity industries For a 30-day, no-risk evaluation call: 1.800.263.2037 Canada Law Book is a Division of The Cartwright Group Ltd. Prices subject to change without notice, to applicable taxes and shipping & handling. www.lawtimesnews.com Zacher_Energy Regulation in Ontario (LT 1-3x4).indd 1 3/25/09 11:44:43 AM LT0330 believes the United States will turn to in formulating a trade re- gime against countries that don't impose equivalent greenhouse gas regulations on their domestic industries. A likely justifi cation would argue that by threatening the shorelines through the melting of the polar ice cap, for example, the lack of aggressive action on cli- mate change represents a harm to natural resources such as endan- gered species. It's a move Barutcis- ki says would be clever since it es- sentially compels other countries to do something they've been re- luctant to embrace or from which they've had exemptions under in- ternational agreements. In many ways, it would accomplish what frameworks such as the Kyoto Ac- cord failed to accomplish through negotiations. "It's targeted at imports to cajole all our trading partners to adopt greenhouse gas regimes to the benefi t of the global com- mons," Barutciski notes. Besides a carbon tariff im- posed at the border, other po- tential trade restrictions include selling allowances similar to the type domestic producers pay through cap-and-trade systems, subsidies, import restrictions, and licensing and labelling re- quirements. Under an allow- ance program, importers would have to pay to bring products in from outside. Th e allowances See Regulations, page 12 march 30, 2009 • Law Times

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