There's a great deal of misconception with regard to Canada's potential withdrawal from the Kyoto Protocol. Here are three key facts to keep in mind.
First, can Canada withdraw from the Kyoto Protocol, and why is December, 2011 an important date?
There is a provision for formal withdrawal from the Kyoto Protocol, in Article 27, which states that Canada has to give one year's notice, in writing, to withdraw. As a result of this notice requirement, the window for withdrawal closes on Dec. 31 of this year. Canada's Kyoto obligations cover the years 2008-2012, so withdrawal would only be meaningful if it were initiated before the end of December, 2011, so as to take effect before the end of our compliance period.
Second, does withdrawal from Kyoto imply that Canada is withdrawing from the United Nations process for negotiation of a global climate change agreement?
No. Article 27 of the Kyoto Protocol also states that, "any Party that withdraws from the (UN Framework Convention on Climate Change, or UNFCC) shall be considered as also having withdrawn from this Protocol," but not vice versa. By withdrawing from Kyoto, Canada would not be withdrawing from the international process for negotiating a global climate change accord. Withdrawal would not affect requirements for annual emissions inventory reporting under the UNFCC.
Finally, what are the penalties for non-compliance with Kyoto, should Canada choose not to withdraw?
This document (credit to Craig McInnes at the Vancouver Sun for the link) outlines the process. Briefly, a country can only be found to be in non-compliance after a review of emissions inventory data takes place. This will happen after Canada submits its final inventory report in 2014 (covering emissions through the year 2012). In its latest filing under the Kyoto Protocol Implementation Act, the Federal Government estimates that Canada will exceed its Kyoto target of 558Mt/yr by an average of 161 Mt/yr, or 28.8 per cent. Assuming this proves accurate, Canada would be given 100 days after the 2014 review of our emissions inventories to buy international credits to make up the 805 Mt shortfall -- this potential for compliance through permit purchases is behind statements like this one assessing Canada's Kyoto Debt at up to $19-billion.
Assuming that Canada would not move to purchase billions of dollars worth of international credits, Canada would potentially face penalties for non-compliance, but these are likely to be irrelevant. There are no financial penalties for non-compliance under the Kyoto Protocol. The penalty for non-compliance implies that Canada would be responsible to make up the shortfall of 805 Mt, plus 30 per cent, in a second commitment period after 2012. Our emissions allocations over the second commitment period, which have yet to be negotiated, would be decreased by 1050 Mt to make up for our non-compliance between 2008 and 2012. Since Canada has made it clear they will not be signing on to a second commitment period of Kyoto, this non-compliance penalty is largely moot.
Long story short -- by withdrawing from the Kyoto Protocol before the end of December, 2011, Canada would protect itself against an explicit finding of non-compliance and the penalties which go with that. That said, the risk that these penalties would have material implications for Canada is quite small. The question which remains is whether the effect on Canada's international reputation would be greater as a result of withdrawal or non-compliance. We'll find out what the government thinks between now and Dec. 31.