On April 3rd Environment Minister Barry Penner introduced Bill 18, 2008 Greenhouse Gas Reduction (Cap and Trade) Act. Get ready for the world of BCAUs, BCERUs and RCUs. BCAUs are BC Allowance Units representing one tonne of carbon dioxide equivalent emissions. BCERUs are BC Emission Reduction Units, issued only by the director or on direction by the director, and also representing one tonne of carbon dioxide equivalent emissions. RCUs are Recognized Compliance Units, units from another system that are recognized by regulation, with each RCU representing the amount of carbon dioxide equivalent emissions that is prescribed for the applicable type of compliance unit. If you are getting the idea that the world of cap and trade for greenhouse gases is complicated, you're right.

BC's Legislation was introduced before the Western Climate Initiative finalized how cap and trade will work amongst the signatories to the Initiative. A cynic might think that is in order to avoid a fall sitting of the legislature, when legislative drafters might have a better idea of what is required to fulfill BC's obligations. For example, Section 4 of the Act deals with emissions reporting. It may come as no surprise that the reporting system is essentially the one advocated by BC's forest industry, one where industry submits reports which may be audited as opposed to the model in the European Union where independent third parties verify emissions.

Just a week before BC's legislation was tabled, recommendations from the Western Climate Initiative's subcommittee on reporting were made available for public comment. The subcommittee came down firmly on the fence when it wrote:

"WCI Recommendation: WCI will establish essential quality assurance elements for reported data that will be consistent across jurisdictions. Each jurisdiction will have an oversight mechanism to ensure compliance with the reporting requirements. As part of this mechanism, each jurisdiction will establish procedures to ensure that the quality assurance elements are met, which could include requiring 3rd party verification, rigorous compliance audits or other appropriate approaches."

In the absence of third party verification, any cap and trade system is open to abuse. When the compliance units (permits to pollute) become traded for millions of dollars, there will be the same kind of incentives to cheat that spawned the Enron fiasco. It is inconceivable that a market can develop for compliance units unless participants in the market can be assured that there is no fraud. At this stage, the Campbell government has sided with an unworkable approach, and its partners in the WCI are sitting on the fence.