California will also allow at least 600 industrial emitters across the state to use offsets to satisfy up to eight per cent of their compliance obligation. For the moment, those offsets are restricted to investments in four sectors: forestry, urban forestry, "dairy digesters" and the destruction of ozone-depleting substances. (The latter targets the destruction of a wide range of waste refrigerants and air conditioning substances -- which not only deplete ozone, but have profound global warming potential impacts, ranging between 100 and 11,000 times the greenhouse gas potency of carbon dioxide.)

Assuming a company gets 90 per cent of its allowances for free, and can meet eight per cent of its remaining commitment through offsets, it could meet its compliance obligation either by a minimal two per cent reduction in its emissions, or the purchase of an equivalent number of allowances.

And at the outset, only U.S.-based offset projects will be eligible for purchase by California participants, even though California's only partner in the system is Quebec, and the closest jurisdictions to joining are B.C., Ontario and Manitoba.

"It is absolutely not a problem that California's actual regulation restricts the emission of offset credits to the U.S.," says Hélène Simard of Quebec's Ministère du Développement Durable, de l'Environnement et des Parcs. "Technical work has to be done on California's offset protocols to adapt them to Canada. This work will be done in the upcoming months."

The case for waiting

One expert who believes that B.C. has more to lose than gain by rushing off the bench to join the California-led scheme is Mark Jaccard, a Simon Fraser University economist best known as a member of the Nobel Prize winning UN Intergovernmental Panel on Climate Change.

First of all, he argues, joining too soon could unravel B.C.'s carbon tax. If allowance prices for industry suddenly crashed to something like $5 dollars per tonne, while the rest of British Columbians were stuck paying $30 per tonne through the carbon tax, Jaccard says, political pressure to axe the tax could become overwhelming. (Thomson Reuters has projected a WCI carbon price of $30 per tonne for 2013-20 -- exactly the dollar figure that B.C.'s carbon tax is scheduled to hit next July.)

Then there is the juggernaut California economy. Even if no other jurisdiction signs up, California's cap and trade system alone will be the second largest on the planet, covering about 400,000 tons of annual CO2 (by 2015) and 350 businesses -- representing 85 per cent of the state's greenhouse gas emissions. (Initially the program will cover just electric utilities and large industrial facilities; by 2015 distributors of transportation, natural gas and other fuels will also participate)

Jock Finlayson, executive vice president for policy at the Business Council of B.C. (representing many of B.C.'s biggest companies), says some of his members in aluminum and concrete production see advantages in cap and trade versus carbon taxes, but too many questions remain unanswered. "Will the eventual rules for such a scheme be largely set by California, whose economy is 10 per cent larger than all of Canada and 10 times bigger than B.C.'s?" (B.C. mining giant Teck, Shell Canada and aluminum producer Rio Tinto Alcan declined comment when contacted for this story.)

Jaccard says two things need to happen before B.C. considers joining cap and trade: more jurisdictions must be part of it, forming a critical mass to counteract California's dominance, and a "floor" must be imposed on the carbon price to ensure it never dips below the value of our carbon tax.

A new realm of enterprise

Despite the uncertainty of design and growing pains, there are significant advantages to the cap and trade approach -- which B.C. might reap if it participates.

Unlike carbon taxes, cap and trade actually sets a hard limit on emissions that must be achieved over the short and longer term. The private sector is then set loose to innovate any way it sees fit, freeing government from dictating the winning and losing technologies. Compared to a carbon tax imposed from above, this approach appeals to the enterprising spirit of the private sector, personified by the likes of Shell Oil Company president Marvin Odum, who in 2009 expressed his company's preference for a market approach.

"There's an argument often that a carbon tax is more simple, it's more direct, more predictable," Odum said, "but the question has to be, do you get the environmental result that you're really looking for?"

Even the complexities of developing and administering the system, often cited as a negative, have a silver lining. Creation of such a system in B.C. would grow a vast new bureaucracy of brokers, analysts, pundits and auditors. But is this a bad thing? Aren't these the "green collar jobs" we've all heard so much about, which will accompany the leap to a low carbon economy?

What's more, cap and trade may be the world's best hope in putting a global price on carbon pollution. China has already announced plans for a nation-wide emissions trading system by 2015; India plans to set emission levels for its 563 biggest polluters by 2014. And Australia's daring new carbon tax will transform into a "market-set carbon price" within four years.

In North America, the most promising attribute of cap and trade is that it is not a tax, and thus not instantly anathema to most of us from the outset. (This did not stop the Republican Party from misrepresenting -- and ultimately derailing -- U.S. President Obama's 2009 effort to launch a national cap and trade system there as a "cap and tax," but the point stands.)

The cap and trade devil may reside in the details, but as the creeping recovery of once-sterilized North American acid lakes testifies, we already know it can work.

[Tags: Energy, Environment, Politics.]