Global warming concerns are about to force North American governments to declare war on carbon emissions, according to a CIBC World Markets report.

The report predicts all jurisdictions in Canada and the U.S. will have carbon dioxide (CO2) regulations in place by the end of the decade.

The report says every province and state will follow the lead of California and implement not only a CO2 emissions cap but also an emissions trading system that will allow larger polluters to buy emissions credits from other firms whose emissions are less than what is allowed under the cap.

"While North America has ignored implementing the Kyoto Accord, public concern about global warming is growing," says Jeff Rubin, chief strategist and economist at CIBC World Markets. "I expect this will force governments to declare war on carbon emissions on their own terms."

The report says carbon abatement policies will have the greatest impact on the energy sector. This will have a significant impact in Canada, where the sector accounts for 20 per cent of the country's CO2 emissions.

That percentage promises to rise steadily over the next decade as emissions-intensive oilsands production doubles and perhaps even triples, replacing depleting but less emission-intensive conventional oil production.

"What investors have to be wary of is not the future direction of oil prices, but what the eventual net backs to oil producers will be in a carbon-regulated environment," adds Rubin. "While we know that oilsands producers will have to be huge purchasers of emission credits, we don't know what the market-clearing price for those credits will be."

The report also notes that while the energy markets currently seem focused on the perceived demand impacts of global warming, it will be the supply impacts that will be far more important over time.

"Despite growing alarm of an oil price collapse, the demand impacts from temperature changes are surprisingly small," notes Rubin.