(by Tavia Grant - Globe & Mail) - Canada will most likely introduce a cap-and-trade system to curb greenhouse gas emissions — but only after the U.S. paves the way, a CIBC economist predicted Wednesday.

Setting a price on emissions is the best way to achieve sustainable reductions, Jeff Rubin, chief economist at CIBC World Markets told a Toronto audience of investors, executives and policy makers.

But history shows that’s unlikely happen until the U.S. formulates its own policies.

“When Washington adopts firm and hard emission reduction targets, you can rest assured that it will require that its major trading partner, Canada, do the same,” Mr. Rubin said.

CIBC economist Jeff Rubin says Canada is unlikely to introduce cap-and-trade curbs on greenhouse gas emissions before the U.S. takes the lead in formulating its own policies.

He expects the next U.S. administration to implement a national carbon-cap-and trade system amid growing public pressure and because such systems are already running in most U.S. states.

“Just as most environmental legislation in this country finds its genesis in earlier U.S. state legislation, Ottawa’s carbon polices for tomorrow is being drafted by U.S. state legislatures today.”

He believes the market-based approach is the best way to achieve a “sustainable reduction” in greenhouse gas emissions.

The concept has already taken hold in Europe and isn’t new to the United States. In 1990, the U.S. introduced a cap-and-trade program to combat acid rain. Under that system, power plants were given sulphur dioxide pollution allowances that could be bought and sold through a market.

The move won’t happen in Canada, however, without clearer government guidelines.

“The principles of profit maximization must be realigned with the task of de-carbonizing the economy,” he said. “That realignment is not possible as long as carbon emissions have no price and are effectively free to the emitter. What is still lacking today is a regulatory framework in which market forces can act.”

Under a cap-and-trade system, companies can choose to either buy emission credits in the open market or swallow the costs of carbon reductions themselves. It all hinges, however, on a government that sets clear targets on reductions.

The transportation sector, which accounts for a quarter of carbon emissions — won’t likely be a part of a cap-and-trade system. Mr. Rubin believes emissions in the sector will fall naturally as higher oil prices dissuade consumers from buying gas-guzzling vehicles.

“Ultimately, the task of decarburizing the economy must be about reducing the demand for energy itself, and that requires a radical change in the structure of our economies as well as in our economic behaviour.”

Mr. Rubin was speaking at the launch of the Carbon Disclosure Project, an initiative that saw global investors with $41-trillion in assets ask hundreds of companies for disclosure on their plans relating to climate change.