Canada has reason to be content with President Barack Obama's speech on Tuesday about limiting carbon emissions; it should not, however, be complacent. Mr. Obama is likely to become more environmentally activist in his second term – now that he is no longer seeking electoral votes in high-carbon-emitting states such as Pennsylvania.
On the Keystone XL project, Mr. Obama was on the whole encouraging. He said that climate change has "got to be more than about building one pipeline," and that he would approve it if the State Department concluded that Keystone would "not significantly exacerbate carbon pollution." That department has already said the pipeline's construction would probably not have a substantial environmental impact, and that it would not heighten the rate of development in the oil sands.
What Mr. Obama actually announced was a direction to the Environmental Protection Agency to set limits on carbon emissions from existing and future coal and gas-fired power plants, the source of about 40 per cent of such emissions in the U.S. This exercise of regulatory power does not present any threat to Canada's economic interests, unlike the unsuccessful Waxman-Markey bill in Mr. Obama's first term.
Nonetheless, Canada's federal and provincial governments should be prepared with plans so that climate-related protectionism is not inflicted on this country. If Mr. Obama becomes more militant and if the United States does adopt a cap-and-trade system or a carbon tax, Canada needs to be in a position to show it has equivalent and effective policies. Otherwise, there would be a real danger of "border adjustments" – a euphemism for tariffs – such as those that were in Waxman-Markey. More than ever, the U.S. and Canada constitute a distinct, increasingly integrated energy area. If this trend is reversed, the Canadian economy would suffer serious harm.