Canada’s National Round Table on the Environment and the Economy (NRTEE) was created in October 1988 to explore new opportunities to integrate environmental conservation and economic development with the goal to sustain Canada’s prosperity and secure its future. Its members are drawn from leaders in business, labor, academia, environmental organizations, Aboriginal communities and municipalities.

In fall 2006, former Environment Minister Rona Ambrose formally requested an analysis of how Canada could meet the Conservative government’s 2050 targets to reduce air pollutants and greenhouse gases. The government is promising to reduce Canada’s emissions within the range of 45 percent to 65 percent from 2003 levels by 2050.

The NRTEE released its report yesterday. The key recommendation: a market-based approach such as a carbon tax, a cap-and-trade system, or a combination of both, which would serve as an economywide “price signal.” And Canada must act now or face higher costs in the future for reducing carbon-dioxide output linked to global warming. 

A carbon tax would be added to the price consumers pay for home heating fuel or gasoline for automobiles. It would have its greatest impact on Canada’s oil and gas industry, requiring it to bear almost half of the related costs.

Political leaders in oil- and gas-rich Alberta have long opposed any scheme that transfers wealth from the province to the federal government, and Premier Ed Stelmach dismissed the NRTEE’s recommendations out of hand yesterday.

A carbon-trading system sets a cap on the amount of pollutants companies can emit and then forces heavy polluters to buy credits from companies that pollute less, penalizing polluters and rewarding those who cut back on emissions.

The debate in Canada, as it will be in the US, China and the rest of the developed and developing world, is framed by the costs of action versus the costs of inaction.

The report’s recommendations earned qualified praise from business and environmental groups.

“The NRTEE has done all Canadians a valuable service in setting out the key principles that should guide our country’s efforts to address the climate-change challenge,” said Tom d’Aquino, president of the Canadian Council of Chief Executives, which has called for “economywide price signals to persuade businesses and individuals to change their behavior and reduce emissions of greenhouse gases and air pollutants.”

Pierre Alvarez, president of the Canadian Association of Petroleum Producers, said his group is “prepared to move” on a carbon tax. But Alvarez’s commitment wasn’t unconditional. “We have lots of questions because the report doesn’t provide a lot of details, either on the tax or the cap-and-trade system,” Alvarez said.

The Sierra Club of Canada said it was “tremendously significant” that the NRTEE “with its predominantly business membership has concluded that carbon emissions pricing is essential for Canada to meet its targets.”

The bottom line, according to the NRTEE, is that one way or another Canadians must start paying for carbon-dioxide emissions if the country is going to seriously reduce greenhouse gas emissions. The same can be said of Americans or citizens of any other country concerned about the environment.

The debate has moved beyond the Conservative government. Businesses, energy companies in particular, seem now to want certainty, a market signal that allows a rational response. The one caveat, though, is that the standard be fair across the board.

That’s easy as long as the board is defined by Canada’s borders. And it still avoids the matter of who will bear the ultimate costs of whatever system–carbon tax, cap-and-trade or a combination–is finally implemented.

Official US opposition to hard emissions caps is based on the fact that China and other emerging giants have thus far been exempt from the requirements of the Kyoto Protocol. Similarly, Canadian leaders won’t act if a domestic solution places the country’s global competitiveness in jeopardy.

Easy as it is to criticize the lack of movement by Canada and the US, the concerns North American political leaders express are legitimate. Moral exhortation has never shown to change behavior in any meaningful way, but prices have.

Citizen consumers in Canada and the US seem to want some sort of action on the environment. The question is: Which leader will stake his or her political career to a carbon tax?

Much as with government, you get the environment you deserve.

The Roundup

Oil & Gas

Canetic Resources Trust (NYSE: CNE, TSX: CNE-U) is making a 9-cents-Canadian per-unit distribution, effective Jan. 10, related to Penn West Energy Trust’s (NYSE: PWE, TSX: PWT-U) CAD3.6 billion stock-swap takeover. The special distribution is in addition to the regular monthly January distribution of 19 cents Canadian per unit, which will be paid Jan. 15 to unitholders of record as of Dec. 31.

On Oct. 31, Canetic announced it had entered into an agreement with Penn West Energy providing for a merger in which each Canetic trust unit will be exchanged for 0.515 of a Penn West trust unit. The deal needs approval by at least two-thirds of the votes cast at a special meeting of Canetic unitholders, which will take place Wednesday. Hold Canetic Resources Trust.

Enterra Energy Trust (NYSE: ENT, TSX: ENT-U) has struck three deals for the sale of oil and gas properties that will generate total gross proceeds of CAD40.925 million; all three should close by mid-February. Enterra also closed another sale in December for total proceeds of CAD5.34 million.

All properties included in the four transactions are in Alberta, with total production of approximately 1,450 barrels of oil equivalent per day (boe/d), a little more than 11.3 percent of the nearly 12,798 boe/d in average production Enterra reported for the third quarter of 2007. The assets are evenly split between oil and gas on a boe basis.

Proceeds will be used to reduce debt, which totaled CAD186.7 million at the end of the third quarter. Enterra suspended its cash distribution until further notice last September. Sell Enterra Energy Trust.

Gas/Propane

Superior Plus Income Fund (TSX: SPF-U, OTC: SPIJF) has entered into a long-term natural gas supply agreement with Constellation Energy Commodities Group (CECG), which holds the energy marketing and trading operations of parent Constellation Energy, a major North American electricity and natural gas provider.

CECG will supply natural gas to back the fixed-priced natural gas marketing business of Superior Energy Management Gas LP, a gas and electricity trading unit of Superior Plus. The five-year deal allows Superior Energy Management to buy natural gas from Constellation for customer contracts of terms up to five years. Superior Plus Income Fund is a buy up to USD15.

Wellco Energy Services Trust (TSX: WLL-UN, OTC: WLLUF) has sold its service rig division to Central Alberta Well Services Corp for CAD11.3 million in cash. The sale follows last month’s agreement to merge Wellco into Peak Energy Services Trust (TSX: PES.UN, OTC: PKGFF) in a deal that will leave Wellco unitholders with 37 percent of the combined business.

The sale of the service rig division won’t affect the Peak merger. The proceeds of the divestment to Central Alberta Well Services will be used to pay down long-term debt. Both Wellco Energy Services Trust and Peak Energy Services Trust are sells.

Business Trusts

Parkland Income Fund (TSX: PKI-UN, OTC: PKIUF) will pay a previously announced special distribution to unitholders through a combination of units and cash. Parkland will pay 35 cents Canadian cash per unit plus 0.02617 fund units per fund unit owned.

A nominal value of 42 cents Canadian for the unit portion was based on the fund’s 10-day weighted average trading price at Dec. 31, 2007, or CAD16.05 per unit. The fund had previously announced the special distribution would be.77 cents Canadian per unit but hadn’t determined whether that would be totally in cash or a combination of cash and units.

The distribution will be made on Jan. 15 to unitholders of record as of Dec. 31. Hold Parkland Income Fund.