Canada, the country furthest from meeting its commitment to cutcarbon emissions under the Kyoto Protocol, may save as much as $6.7billion by exiting the global climate change agreement and notpaying for offset credits.

The country's greenhouse-gas emissions are almost a third higherthan 1990 levels, and it has a 6 percent CO2 reduction target forthe end of 2012. If it couldn't meet its goal, Canada would have tobuy carbon credits, under the rules of the legally bindingtreaty.

Canada, which has the world's third-largest proven oil reserves,would be the first of 191 signatories to the Kyoto Protocol toannul its emission-reduction obligations. While EnvironmentMinister Peter Kent declined to confirm Nov. 28 that Canada ispreparing to pull out of Kyoto, which may ease the burden foroil-sands producers and coal-burning utilities, he said thegovernment wouldn't make further commitments to it.

“Canada is the only country in the world saying it won't honorKyoto,” said Keith Stewart, an energy and climate policy analystfor Greenpeace in Toronto. Under a previous Liberal government,Canada was one of the first countries to sign Kyoto in 1998. Thecurrent Conservative government made a non-binding commitment at2009 United Nations talks in Copenhagen to reduce emissions by 17percent by 2020 from 2005 levels, in line with a pledge by theU.S., its biggest trading partner.

The biggest polluters in the nation of 34 million say they'llcut emissions without a treaty. “Kyoto no longer works,” said RickGeorge, chief executive officer of Suncor Energy Inc., Canada'slargest oil producer. “Whatever happens with Kyoto won't change ourdirection” of reducing the environmental impact of oil production,he said.

For Suncor and Canadian Natural Resources Ltd., technologyimprovements will have a bigger impact on Canada's greenhouse gasoutput than an international climate-change treaty, said JackMintz, director of the school of public policy at the University ofCalgary.

“Technology is the only way we're going to make significantprogress,” Mintz said in an interview. “A lot of companies arealready anticipating that the federal government will look at newregulations. Kyoto hasn't been a strong treaty.”

Canada would likely avoid penalties if it exits the treatybefore the end of the year, said Matt Horne, climate change policydirector at the Pembina Institute, a Canadian think-tank focused onsustainable energy. Kyoto's first commitment period from 2008 until2012 requires reductions only from so-called Annex I countries, theworld's wealthiest and most developed. It doesn't includedeveloping nations including India and China, the world's biggestCO2 emitter.

Reputation Tarnished

“Penalties apply in the second commitment period,” said Horne.“More importantly though, Canada's international reputation will betarnished.”

The $6.7 billion cost of complying with Kyoto compares with anestimated C$75.9 billion ($74.8 billion) in combined budgetdeficits projected through the fiscal year ending March 2015. Byrejecting the accord, Prime Minister Stephen Harper is putting thecountry's economy at risk, Elizabeth May, leader of Canada's GreenParty, said in an interview.

“We're condemning ourselves to rising costs from extreme weatherevents as well as opportunity costs like the failure to have arenewable-energy industry,” she said. “The world would be gratefulfor Canada to be constructive instead of the governmentconsistently repudiating Kyoto.”

Canadian delegates, including Kent, are in Durban, South Africafor United Nations climate talks. Negotiators are struggling toagree to a successor to Kyoto, which expires at the end of 2012 andis also opposed by Japan and Russia.

Negotiators from host South Africa urged Canada on Dec. 1 toreconsider its position about not entering another commitmentperiod, highlighting the risks to the developing world with risingtemperatures and sea levels.

“Our government believes that the previous Liberal governmentsigning on to Kyoto was one of the biggest blunders they made,”Kent said Nov. 28. “Kyoto is the past, Copenhagen and Cancun arethe future,” he said, referring to the 2009 Copenhagen Accord.

Canada will have likely emitted about 890 million tons of CO2above its Kyoto target by the end of the first commitment periodnext year, based on annual emissions data compiled by Bloomberg.Carbon Emission Reduction credits, or CER, cost 5.62 euros ($7.55)a ton on Nov. 30, according to Bloomberg data.

No Policy

Unlike countries such as Germany, Canada has implemented nopolicy to reach its targets and will find it difficult to reacheven the Copenhagen Accord goals, said Greenpeace's Stewart.

Already 60 percent of the country's electricity is generated byhydroelectric power plants, which emit fewer gases than coal ornatural gas, while the government's plan to become an energysuperpower by exporting crude oil from Alberta's oil sands meansthe country faces “steep” increases in emissions in the comingyears, Stewart said.

Emissions of carbon from oil sands production has risen to about6.5 percent of Canada's total from about 1 percent in 1990,according to the Pembina Institute. That figure will likely doubleby 2020 as companies such as Exxon Mobil Corp., Suncor and RoyalDutch Shell Plc expand operations to refine bitumen with annualinvestments of C$20 billion.

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