U.S. Climate Legislation Implications and Prospects: Challenges for Canada

Proposed U.S. federal and state legislation on climate change envisions a highly complex emissions cap-and-trade system, punitive measures against U.S. trading partners that do not undertake similar climate action, pre-emption of regional climate initiatives (which could affect Canadian provinces), and low-carbon fuel standards that will negatively affect Canada’s oil sands projects. China—not Canada—is the intended target of punitive border measures. But if the legislation eventually passes, and if Canada does not adopt similar measures, Canada’s energy-intensive industries could face carbon tariffs at the U.S. border. This briefing provides background for Canadian policy makers and businesses as they reflect on these major strategic questions.