The enormous aluminum smelters at Alcan Inc.'s Kitimat operations are one of the single biggest sources of greenhouse gases in British Columbia.
Each day, the sprawling industrial facility emits nearly 4,000 tonnes of greenhouse gases, nearly as much as the average individual Canadian accounts for in an entire year.
Alcan might seem like a company that should be worried -- very worried -- about the idea of British Columbia cracking down on carbon hogs as the province seeks to slash emissions of greenhouse gases in the next decade.
The Kitimat facility is the second-biggest source of greenhouse gases in the province. And heavy industrial operations face the near certainty of having to pay for the right to emit greenhouse gases, although the precise form of new environmental rules could range from a tax on emissions to new regulations.
Instead of trying to oppose climate-change regulations, Alcan is busily figuring out how to transform its carbon stream into cash flow. "There are people looking at that very, very closely indeed," Alexis Segal of Alcan said.
The reason: The company has a $2-billion modernization project in the works to increase its efficiency and, as a side effect, also reduce its emissions of greenhouse gases by as much as a half-million tonnes every year.
By itself, that reduction doesn't make Alcan any money. But the company and others like it actually stand to profit if the push to regulate greenhouse gases takes the form of a cap-and-trade system.
In that type of regulation, limits are placed on the amount of emissions that an industry can generate, and permits are issued to individual firms.
But after that point, companies are free to buy and sell credits. Companies that implement new technologies, such as Alcan, will have credits to sell to firms that aren't as efficient.
Over time, the rising cost of those credits will -- at least in theory -- spur the creation of technologies that allow firms to reduce their emissions more cheaply.
In a world where carbon costs real money, Alcan's reductions would become an asset.
Those half-million tonnes could translate into $15-million (U.S.) a year for Alcan if greenhouse gases end up costing around $30 a tonne. (That is the cost that economists say governments should charge in such a system, since anything lower doesn't give businesses much of an incentive to adopt new technologies.)
There are many complexities in setting up such a system, centring on what point in time is used as a base against which to measure emissions reduction.
Alcan could live with its current output being used as that yardstick, since it has new technology that can pare greenhouse gases, assuming that it goes ahead with the project. The $2-billion initiative has been in limbo since December, when the British Columbia Utilities Commission quashed a power deal between Alcan and B.C. Hydro. However, a firm such as Teck Cominco -- which improved its energy efficiency and reduced emissions in the 1990s at its Trail smelter -- doesn't want to be penalized for acting earlier.
Spectra Energy, which is the single largest private-sector source of greenhouse gases in the province, is convinced that it will soon have to operate under a cap-and-trade system.
"There's definitely a system coming in place," said Sarah McCullough of Spectra, formed this January from the B.C. assets of Duke Energy.
Unlike Alcan, Spectra does not foresee dramatic reductions in its emissions. What the two companies have in common, however, is an acceptance that, very soon, industry will have to start paying for its emissions of greenhouse gases, and a willingness to start preparing for that.
"We have been looking at ways to manage the emergence of a carbon-constrained economy," Ms. McCullough said.
The cap-and-trade system is a proven tool for reducing pollution, says economist Jeffrey Rubin, chief strategist at Canadian Imperial Bank of Commerce.
Rather than dictating each step on the path to reducing greenhouse gases, governments should simply set up a trading system, and let the profit motive take care of the rest.
