It’s the first time a national bill that attempts to put a price on carbon has been passed by either House.

Some, including President Barack Obama, heralded the bill’s passage as a major step forward on tackling climate change.

In a radio and Internet address that aired late yesterday, Obama said the bill was designed to spur innovation, rather than hamper economic growth. He called on senators to disregard its critics. “We must not be prisoners of the past,” he said. “Don’t believe the misinformation out there that suggests there is somehow a contradiction between investing in clean energy and economic growth. It’s just not true.”

The president said the bill’s passage is a testament to a changing dynamic in both the scientific community and in the public, which he said have become far more convinced of the dangers of global warming. “There is no longer a debate about whether carbon pollution is placing our planet in jeopardy. It’s happening,” he said. “And there is no longer a question about whether the jobs and industries of the 21st century will be centered around clean, renewable energy. The question is, which country will create these jobs and these industries?”

In the long term, Obama is right. Global warming is happening, whether we choose to ignore the fact or not. In relatively short order — a matter of decades — the economic impact of legislation such as this will seem like nothing in comparison to what’s in store for those companies that don’t figure out how to hedge their energy costs, or those coastal cities that don’t figure out how best to reduce their exposure to rising sea levels. As the Sir Nicholas Stern and other reports have shown, if left unchecked, business as usual’s economic costs will render debates about the short-term economic impact of carbon-pricing legislation entirely academic.

However, that analysis leaves aside the very salient question of whether now is the right time to bring in new legislation to price carbon on a significant scale. There is no question that attempting to price carbon during a fledgling economic recovery, when fossil fuels still power 95 percent of the U.S. economy, is going to result in severe economic dislocation – for industrial polluters, sure, but also for average American consumers who are existing on marginal incomes. (According to MASSPIRG, a Massachussetts-based public interest research group, Americans on average spend an astounding 20 percent of their annual income on transportation, more than they pay for food or even health care. Approximately 10 percent of Americans spend more than 50 percent of their annual income on transportation costs.)

Given the economic pain the United States is already experiencing, the timing of dramatic new legislation designed to push up the price of emitting carbon is inevitably going to complicate the recovery. What’s more, critics charge new green technology and transportation infrastructure is not yet at a point where it would be able to offset the shock of newly spiking crude oil and fossil-fuel-fired electricity prices.

As for Canada, the implications are even more severe. When oil hit US$63 a barrel, back in summer 2005, our economy tilted dramatically in favour of developing high-carbon unconventional fuels such as oilsands syncrude, as opposed to lower carbon energy plays such as wind farms and solar power plants. This bill, if passed, will amount to a form of economic shock therapy on the increasingly carbon-rich economy those and other decisions created. (It’s also not good news for other, more prosaic reasons, that have to do with new protectionist measures in the bill, covered in yesterday’s blog post here.)

The core of the legislation is a cap-and-trade system that sets a limit on overall emissions of heat-trapping gases. It would allow utilities, manufacturers and other emitters to trade pollution permits, or allowances, among themselves.

President Obama campaigned on a pledge to auction off all the pollution permits as a means of raising revenue that would then go to help industries adapt to the challenges of a world where carbon is priced. However, in order to get the bill passed, bill co-sponsors Henry Waxman (D-Calif.) and Edward Markey (D-Mass.) made significant concessions to industry: for the first five to ten years, many industrial players, including coal producers, will qualify for such permits for free. (From an economic perspective this is a good thing, as the increased costs coal-fired electricity producers would incur from purchasing those permits would most likely be passed on to struggling consumers. Environmentalists, however, charge that giving permits out for free to the largest polluters will function in practice as an incentive to pollute – the opposite of the intended goal.)

Another key part of the bill is the Renewable Energy Standard. Bill co-sponsor Henry Waxman started out with a plan that would require 25 percent of the country’s energy to come from wind, solar and biomass by 2025, with some compliance possible through efficiency measures.

The cap would grow tighter over the years, pushing up the price of emitting carbon. The goal is for industry to find cleaner ways of making energy.

Many in the U.S. are surprised the bill has gotten as far as it has, given the range of forces opposed. And the bill has yet to pass the Senate, where opinion on its merits is even more stark than in the House. Regardless of whether it passes the Senate, though, the bill can be considered a marker for the United States’ position when international negotiations on a new climate change treaty begin later this year.

Outside the formal political process, opinion on the bill in the U.S. is also sharply divided. Greenpeace opposed it, and many charge it is a hodgepodge of moves that will not ultimately achieve the goal of lowering emissions sufficiently to prevent cataclysmic climate change. The National Association of Manufacturers and the U.S. Chamber of Commerce also opposed it. It was, however, supported by many large corporations, including Ford.

What’s next out of this extraordinary country? Watch this space.

Discussions of relative stressedness aside, US$75 billion is a lot of money.  That’s probably why Nouriel “Dr. Doom” Roubini was on CNBC at market close Friday, attempting to put a lid on the market euphoria that’s bubbling up all around him.

Meanwhile, Dow Jones Industrials closed up 165 points, capping a strong week. That indicates for this week at least, much of Wall Street has been getting back to what it likes doing best: piling into stocks, bonds and everything in between.

Likewise, the Bureau of Labor Statistics reported earlier today that the U.S. economy dropped 539,000 non-farm jobs in April. This is also apparently something to celebrate — analysts were expecting far worse.

Best of all, however, at least for the regrettably small number of us who despair of the lack of genuine competition in Canadian banking, is tidings of a new force heading north this year. Its mission: to boldly go where few international investment banks have gone before. Its goal: to set up a profitable I-banking business in the foreign-bank-averse Great White North. Its name: Barclays Capital.

The path BarCap is embarking upon is one littered with failure. But BarCap’s leader, Jerry Del Missier, is good at spotting opportunity where most see problems. He’s the guy whose deal-making skills helped BarCap eat Lehman Brothers’ most profitable divisions for lunch last September. And he’s Canadian—originally from Sudbury, ON. He’s worked in Toronto and understands the proclivities and eccentricities of our market—not to mention the profits to be had in such an uncompetitive environment.

All of which explains why JDM, as he’s affectionately known by his staff, is coolly confident BarCap will succeed.

Del Missier laid out the basics of his Canada strategy on a day that saw his parent bank, Barclays LLC, report eye-popping first quarter results (income up 42%, largely driven by the division he runs.) The core of their value proposition is global financing products and services available to Canadian businesses on all five continents. It’s to be an incremental build-out, with offices in Toronto and Calgary. More details will come to light later this summer.

Of course, it wasn’t so long ago that BarCap’s parent, Barclays, was selling off the crown jewels—in the form of iShares, a profitable and valuable exchange-traded funds division—in order to shore up its capital cushion and keep nosy British regulators out of its business. Analysts warn that the very real possibility of fresh shocks to Barclays’ business—say, more losses to the £77 billion in UK mortgages it holds on its books—bode ill for the parent bank’s prospects.

But with Barclays’ stock closing today at 161 pence, up from 95 pence just one month ago, investors are apparently willing to give the bank the benefit of the doubt. Which, of course, helps when planning new initiatives in places like Canada.

The other major risk in BarCap’s plan is that international capital won’t want to play. Historically, international capital has avoided making direct investments in Canada. That’s because our patchwork of securities regulators, lack of enforcement of securities laws, and all-around bad reputation as the Wild West of North American financial markets means it has historically been hard for Canadians to guarantee the security of such investments. Presumably this reputation could pose a problem to any investment bank looking to come into the Canadian space.

Many have treaded this path, only to retreat from the Canadian market in shambles. It’ll be interesting to see how this particular effort fares. More news this summer.

The issue du jour? How protectionism has crept into draft climate change legislation in the United States. How it’s likely to affect Canada. And how best to head it off—before it becomes law, and real damage is done to our economy.

Last week, Page’s round table released a new report on how Canada needs to tackle the issue of climate change. Entitled Achieving 2050—A Carbon Pricing Policy for Canada, it sensibly rejected much of the Canadian federal and provincial governments’ efforts to date—including the piecemeal provincial approach and the federal government’s favouring of “intensity” targets on only the largest emitters.

Instead, Page’s report favours one clear national standard to price carbon across the country. (This is a solution Canadian Business’s editorial board has long preferred.)

Page has been at pains to stress that Canada’s future economic health depends on making these changes—as quickly as possible. And it comes not a minute too soon.

Like Page, everyone who exports energy and manufactured goods to the U.S. should be paying close attention to the wording of draft legislation tabled by Congressmen Henry Waxman of California and Edward Markey of Massachusetts on March 31 of this year.

That’s because the current wording of the new bill, titled the American Clean Energy and Security Act 2009, has major implications for Canada.

Under the segment titled Transportation Efficiency, for example, the bill proposes what amounts to a low-carbon fuel standard across the United States. If implemented in current form, that move would likely cut exports of oilsands syncrude out of the U.S. marketplace.

Worse yet, says Page, is the creeping protectionism embedded in the bill’s current wording—particularly the segment titled Ensuring Domestic Competitiveness. “The gist of the bill is that if any U.S. company complains that this program puts them at a competitive disadvantage, it will become eligible for rebates from the U.S. government that will allow it to continue to compete,” Page explains.

The bill goes on to state that if…

….the President finds that these rebates do not sufficiently correct competitive imbalances, he would be directed to establish a “border adjustment” program, under which foreign manufacturers and importers would be required to pay for and hold special allowances to cover the carbon contained in U.S. bound products.

What this amounts to is new tariffs on goods from countries whose climate change legislation is deemed by the U.S. to be somehow inadequate to its own standards. Explains Page: “This represents both a direct threat for products from the oilsands, and a threat to any Canadian product that represents a high fuel intensity — steel, cement, auto parts.” You can read a draft summary of the bill here.

Page acknowledges that we don’t yet know what kind of an economic hit this legislation is likely to represent. And it’s also important to stress that the legislation remains in draft form. Powerful entrenched constituencies in the United States — ranging from the coal mining industry, to advocates for those on low incomes, to consumer groups, to the Department of Defence—will be working overtime to get these bills changed.

But Page insists that the threat is real. “The protectionist elements of this are really aimed at China,” he says. “Canada’s getting caught in the downdraft.”

In Page’s view, the best way to head off the impact of this legislation is by bringing Canada’s climate change legislation in line with what the U.S. is considering. But that, of course, is likely to mean major economic pain and dislocation for businesses and consumers right across the country. So his report recommends a series of measures to offset that pain.

For example, it suggests the government continue with an idea Alberta is already implementing: that the proceeds from the sale of pollution credits at auction go towards a technology fund. That fund would then invest in technologies—carbon capture and storage, thermal power, energy-efficient technologies and renewables—that can help bring down the carbon content of Canada’s fuels and products.

Another likely offshoot: spiking oil prices, as high-carbon fuels are legislated out of the fuel supply. So Page’s report recommends some funds from the sale of credits be spliced off to help low-income Canadians most at risk from higher oil prices.

As for possible job losses: though the report doesn’t comprehensively tackle job training, Page says his group is closely following initiatives such as the Green Jobs corps currently championed by the White House’s green jobs czar Van Jones (see yesterday’s blog post—Meet Mr. Jones.) “The infrastructure program in the last federal budget should be looking at the green jobs area,” Page says.

Toronto-based cleantech investor Andrew Heintzman has also been watching these developments. He applauds Van Jones’ green jobs training idea in theory, but points out “you can’t put training for green jobs in place without clear markets for those jobs in the first place.” That’s why he’s been investing in cleantech start-ups.

Heintzman also serves on Ontario Premier Dalton McGuinty’s task force for greening Ontario’s economy. He acknowledges when it comes to finding clear leadership on climate change policy, Canada’s approach has been a bit of a mishmash. Ontario has feed-in tariffs to encourage the use of renewable energy. B.C. has a carbon tax. Alberta’s working with a form of cap-and-trade — capping emissions on the largest polluters and investing the sales of pollution credits into a tech fund. And as for booming Saskatchewan, well, according to an article published this morning in the Globe and Mail, that province’s environment minister Nancy Heppner said recently that it just doesn’t make economic sense for the province to attempt to meet its climate change targets— at least not for this year.

It adds up to a policy of madly off in all directions. And with Canada’s greenhouse gas emissions continuing to skyrocket, it clearly isn’t working.

“What amazes me is that we aren’t further along with this process yet,” Heintzman says. “We’ve known this was coming.”

Pragmatists hope that Page’s recommendations—which some in the oilpatch applaud for their clarity—will help Canada get its act together on the climate change file. For as Page sees it, some form of emissions reduction is going to have to happen in Canada, and it’s going to be painful anyway. Might as well figure out a clear policy now, to help businesses and consumers mitigate the pain—before the economy gets slammed with new green tariffs down south.

Canadian Business first wrote about Jones back in January 2008, when he was running the Ella Baker Center, a non-profit he set up in Oakland to help the urban poor find ways to participate in what Jones envisioned as the new green economy. A tall, charismatic man with a talent for boiling complex ideas into street-rhyme sound bites, Jones talked of a national training program to help the recently incarcerated and recently-laid-off find jobs weatherizing homes, installing solar panels, helping construct new public transit networks, and installing a new smart grid across the country.

Jones is also the author of The Green Collar Economy, a book that came out last fall. A bestseller on this side of the border, it set out Jones’ vision of training the underemployed as green tradespeople. Jones sees the green-collar economy as a way to solve urban poverty through making the United States more energy efficient. Think of it as a Green New Deal.

Now, Jones is on the inside, with the clout to make his vision a reality.

As Obama’s green jobs czar, Jones is directly responsible for deploying US$500 million in recovery funds for green-collar job training. The U.S. federal government’s Employment and Training Administration estimates—probably overly optimistically—that the US$787 billion stimulus Congress authorized in February in the American Recovery and Reinvestment Act could result directly in 3 million green jobs. Jones is the guy responsible for making those jobs happen.

A recent McKinsey report estimates governments and private enterprises could leverage already-existing technology to generate thousands of green collar jobs. The report, Pathways to a Low Carbon Economy, lists more than 200 opportunities, spread across ten sectors and twenty-one geographical regions. It claims they have the potential to cut global greenhouse gas emissions by 35 percent below 1990 levels by 2030, a reduction of 70 percent from the business as usual scenario.

There are plenty of problems with what Jones is trying to do. The most obvious is how to define a green job. Arguably the most successful green job initiative in North America to date has been the Bush-era corn ethanol subsidy — which scientists and environmentalists charge isn’t exactly green. (Studies from Cornell University and elsewhere show producing a barrel of corn ethanol requires significant inputs of traditional fossil-fuels. There are also major economic and ethical issues involved in diverting land from growing food to fuel.)

This issue, however, isn’t going to go away. According to a piece in Slate by Michael Levi, a senior fellow on energy and the environment at the Council of Foreign Relations in D.C., a recent United Nations report estimated that the heavily subsidized U.S. ethanol industry provides employment for 154,000 Americans. That’s about five times as many as the wind power industry and nearly 10 times as many as the solar industry. Argues Levi:

At its base, corn ethanol is not a green policy so much as a jobs policy—and its success in that respect has made it almost impossible for the government to change course.

What’s more, as David Pellow, a professor of sociology at the University of Minnesota who specializes in environmental conflict, points out, given the toxins and carbon footprint involved in manufacturing solar panels, for example, it’s likely other supposedly green initiatives of the green-jobs revolution may not seem quite so green once run through a rigorous filter.

Asked to explain how corn-ethanol-related jobs might fit into his green-collar vision for America on a White House conference call yesterday, Jones dodged. “We’re in a transitional stage with this,” he said. “Definitions are going to be fought over. What was once acceptable as environmentally sound may not be in the future.” The problem is, Jones’s boss, President Barack Obama, is a vocal supporter both of ethanol subsidies and of the clean coal constituency — the group that believes that it is possible to create a form of emissions-free coal-fired electricity, through carbon capture and sequestration. How those green-job definitions evolve will likely be more a matter of politics than anything else.

The second sticking point with Jones’s plan is, how to encourage the private sector investment necessary to fund demand for the green collar jobs the Administration is touting. From this point of view, it’s hard to see developers or under-water homeowners lining up to invest in expensive retrofits in the current economic environment.

Working in Jones’s favour, however, is new support at both the federal and state level for massive incentive programs encouraging developers to build green. Consider the generous system of tax credits to offset the upfront costs of green homes currently being piloted by the Republican state administration of Gov. Bobby Jindal in Louisiana. The first home built to standard under this new system is a single-family-dwelling constructed by Brad Pitt’s Make It Right foundation in the Lower 9th Ward in New Orleans. According to New Orleans, LA-based architect Gerry Billes, whose firm designed the home, that homeowner’s energy bill last month was US$3.

This raises one last question around Jones’s initiative—one that’s well known to those in Canada’s oilpatch. What happens to those employed in polluting industries, whose jobs may well be threatened or made redundant by a more energy-efficient America? As Levi points out:

… Every unit of energy generated from alternative sources displaces a similar amount generated by traditional means, so forgoing those other energy sources means giving up whatever jobs they were providing. This doesn’t mean that greening the economy will have no net impact on jobs, but it muddies the math considerably.

Right now, and perhaps unsurprisingly, given the questions it raises, there are few equivalent Canadian initiatives to Jones’ green-jobs effort. Andrew Heintzman is the chief executive officer of InvestEco,  a Toronto-based fund that invests in green businesses. He’s also a member of Ontario Premier Dalton McGuinty’s task force on greening Ontario’s economy. Speaking off the cuff, Heintzmann pointed me to Ontario’s new Green Energy Act, which, among other initiatives, offers funds to match those of private investors interested in seeding technology start-ups.

Green jobs will, of course, result as part of these efforts, as Tyler Hamilton of the Toronto Star points out in this report on EverBrite Solar’s new plant near Kingston, Ontario. And there’s a few other efforts—according to Jane Almeida, a spokesperson for the premier’s office, Ontario has invested recently in a training program for wind technicians. However, a comprehensive jobs-training effort aimed at ensuring those at the bottom of the economic food chain can participate in the new green economy is not part of the equation. It all adds up to an approach of wait-and-see.

We may not have to wait long, however. Recent developments in the U.S. indicate Jones may find his green-jobs programs deployed at scale—rather faster than he anticipates.

First, there’s the eye-popping unemployment numbers of the past few months. According to the U.S. Bureau of Labor Statistics, non-farm employment fell by another 663,000 in March. That’s 5.1 million people out of work since the recession officially started in December 2007. Clearly, the number of Americans in need of employment is piling up faster than Jones can generate the support to get his Green Jobs Corps set up.

Second, an Environmental Protection Agency ruling announced April 19 found that the rise of greenhouse gases in the atmosphere is directly linked to human activity. It’s the first time the EPA has acknowledged this link.  This should shore up Congressional support for cap-and-trade legislation in the United States—which is also closer than many realize. A draft version was introduced in March by Henry A. Waxman of the Energy and Commerce Committee, and Edward J. Markey of the Energy and Environment Subcommittee in the House of Representatives. This bill would establish a U.S. national cap-and-trade program for greenhouse gases, one whose impact will likely be to burden polluting industries with higher costs, while making energy-efficient solutions more economic. It would also impose border duties on imports from countries deemed to have lax climate-change rules.

That news, of course, has major implications for Canada. It’s no secret our country has, to date, been behind the eight ball when it comes to figuring out the job- and wealth-creation piece of the green economy.

However, the news out of the EPA and Henry Waxman’s climate change legislation indicates Canada’s focus is also about to change. The chairman of Canada’s National Round Table on the Environment and the Economy (NRTEE), Robert Page, strongly recommended last week that the country should also implement a national cap-and-trade system to reduce greenhouse gas emissions blamed for climate change. Figuring out some kind of intelligent green jobs strategy will be an important piece of that puzzle.

I’ll have more on that after I speak with Page tomorrow. But his findings—in tandem with the implications of the U.S.’s green shift—could mean Jones’ ideas do have some relevance for Canada, after all.

He also mentioned the need for investment in the mining sector (“We can hardly think of mining in Mexico without thinking of Canada,” he says) and tourism. “For the first time more than one million Canadians visited last year,” he says. “For us, that’s an important number.”

In response to a question about the spate of violence in his home state of Chihuahua, he made it clear the government is taking new and more forceful action in the drug war currently being waged there.  “The decision President Calderón has made to fight a real war against the drug lords is the right one. This should have been done long ago. We could have avoided many problems,” said Barrio. But he suggests things are likely to get worse before they get better, “I think we are going to have to pay some costs. There is difficult time ahead. But finally the state will prevail.”

He went on to say that he was surprised to see anti-gang demonstrations taking place in Vancouver. Noting he didn’t think he’d encounter that kind of thing here, he suggested the drug trade is a continental phenomenon. “It seems criminal gangs in our three countries are going to be more connected,” he says.

When it comes to the state of the Mexican government’s finances Canadians might be surprised to learn that Mexican fiscal health is in better shape than the United States these days, a reversal from the mid-’90s when Bill Clinton led an initiative to bail out the Mexican peso. That era is past, says Barrio. “We survived and reorganized.

And now the Mexican banks are very stable. We are in a very good position,” he says. In fact, public finances in Mexico are doing pretty well. The leverage ratios at Mexican banks are lower than those at Canadian ones. As well, the government depends to a great extent on revenues from the national oil company, PEMEX for its revenues. And in a great example of successful hedging, the Mexican government had the foresight to lock in 2009 oil revenue through futures contracts at $71 a barrel. With oil headed to $30 that decision was a smart one as it has preserved state finances. “We are in a good position with respect to stimulus,” says Barrio.

When asked about some of the worries around the flow of seasonal workers between Mexico and southern Ontario (where Mexican labour is a big part of the greenhouse industry), he was circumspect. Some workers have complained that they are heavily taxed, yet cannot draw on government services.

Others have complained they are badly treated and have been forced to live in dismal conditions. “We have found some problems with seasonal workers. But I think that the problem is very small,” says Barrio. “The benefits for workers and for employers far outweigh any of the problems.” He points out that 80% of workers in the Seasonal Worker Agricultural Program (SWAP) come back. “That level tells you about the level of satisfaction,” he says.

The workers come to Canada through SWAP have become a fixture in Essex County in southwestern Ontario, where Mexican stores and restaurants have popped up to serve the population. Leamington, Ont., a small municipality on the shores of Lake Erie. Better known as the tomato capital of Canada, Leamington even has its own Mexican consulate these days. It’s an example of the kind of continental integration between Canada and Mexico that Barrio hopes to foster.

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