canada backs off of 2020 GHG reduction target

Canada’s Conservative government has, in no uncertain terms latched its climate change wagon to that of the United States (most likely because they don’t think the U.S. will be successful in the near future at tackling climate change). Current Minister of the Environment Jim Prentice has announced that Canada is changing its 2020 greenhouse gas reduction target from 20% from 2006 levels to 17% below 2005 levels. Canada has stuck by the target for the last 3 years and but seems the government has finally jettisoned the last remnant of John Baird’s Turning the Corner framework.

Coincidentally, President Obama announced the same targets in late November.

So here’s the math…

2007 CDN GHG emission = 747Mt

2006 CDN GHG emissions = 718Mt

2005 CDN GHG emission = 731Mt

1990 CDN GHG emissions = 592Mt

20% reduction from 2006 levels (previous CDN target) takes us to 574Mt

17% reduction from 2005 levels (new CDN target) takes us to 584Mt … so the Conservatives lowered the reduction target yesterday by 10Mt

6% reduction from 1990 levels (Kyoto) takes us to 556Mt

Now that the Democrats in the United States have lost their ’super-majority’ in the Senate, there is only fleeting hope that they’ll be able to get new legislation through the Senate (thought we’re still hoping to soon see a draft bill from the Kerry Graham Lieberman group). Some Republican and Democratic Senators have made an attempt to stop any EPA action on climate change but the move seems to be more of a gesture than anything that will resemble an obstacle for the EPA.

With the obvious position of the Conservatives on this issue, all we can do as Canadians is sit-back and watch the U.S. climate soap opera unfold…. because our government it seems isn’t going to do anything but delay as long as it can.

February 2006 – Rona Ambrose named Minister of Environment

Plan 1 released… the Clean Air Act, with a focus on air pollutant and a bit of GHGs on the side… oh ya, and the bus credit.

January 2007 – John Baird named Minister of Environment

Plan 2 release… Turning the Corner… more focused on GHGs (the infamous intensity targets and birth of the 20% from 2006 by 2020 reduction target) but funny enough, despite a fancy framework announcement, never amounted to anything

October 2008 – Jim Prentice named Minister of Environment

Plan 3 (kinda)… Jim Prentice says no more intensity targets, we’re doing cap and trade… well maybe not cap and trade, it could be carbon tax… well it’s still going to be our 2020 target but we’re going to follow the U.S…. well maybe not our 2020 target but we’re definitely for sure following the U.S…. maybe.

Hit or miss…

We’ll there isn’t too much pointing towards climate legislation being established in the U.S. any time soon. Here’s a run down on the latest events in the U.S. climate debate. Pre-Copenhagen President Obama announced a 17% national reduction target (from 2005) by 2020. This lines up with the measures found in the H.R. 2454 (Waxman Markey). The Senate response to Waxman Markey was going to be a bill sponsored by Senators Kerry and Boxer. This bill has been stopped in its tracks as a result of Boxer’s move to force the bill through the Committee on Environment and Public Work. The Republicans had boycotted the committee vote but a majority of Democrats in the Committee were able to pass the bill – causing a deep divide between the two parties. Once this occurred, Kerry began working with the Republican Senator Graham and Independent Lieberman and they released a legislative framework that will form the basis of a new Senate climate bill.

Then Copenhagen blew up.

Now the U.S. is struggling to get climate legislation passed before the fall. The reason? Midterm elections for Congress occur in November, threatening the 60 seat Senate majority the Democrats currently enjoy. But this also likely means that unless a new Senate bill is passed by, say, May, no one up for re-election in November will likely have anything to do with climate legislation. What then, would be the fallout? The EPA is certainly likely to follow through on regulating GHGs under the current Clean Air Act provisions if no new federal legislation is passed. The President is not likely to let this year pass without some sort of climate law in place at the federal level… his credibility likely hinges on it.

So what’s next? We’ll it seems a little hit or miss. Everyone’s hoping that the Kerry/Graham/Lieberman trio will release a draft bill shortly and that there’ll be a big push to get something through the Senate by April/May… leaving a small window to reconcile the H.R. 2454 and the Senate bill before the summer BBQ circuit. If not… the EPA will likely take over regulating GHGs in what is generally agreed to be a problematic fashion.

Without moves in the U.S., it isn’t likely the Canadian government will budge much… fearing that a price on carbon would harm competitiveness of domestic firms exporting to the U.S. market. No climate legislation in the U.S. means none in Canada and both our countries lose out on the race to be competitive in a new low-carbon economy… A race that China seems to be eager to win, I might add.

Boooo-urns… no binding deal in Copenhagen – why delay is disaster

So, aside from a ‘parting of the seas’ type of miracle, it seems most heading to Copenhagen for the UN climate talks don’t see any reasonable prospects of a binding deal being reached. ahem… gongshow…. ahem. Obama doesn’t seem to be even making the trip, read more here. PM Harper isn’t going either, but that’s no big surprise to anyone. Instead he’ll send Minister of the Environment Jim Prentice who, not only was absolutely trumpeting the rumours that a binding emission reduction deal is not going to happen in Copenhagen, but has also said that the Canadian domestic industrial regulations on GHGs will likely not be released for at least a year and as been fairly schizophrenic with his direction on climate policy.

What all this uncertainty means is that Canadian businesses (well, pretty much everyone) can’t make the proper investments in low-carbon technology, stranding millions (if not billions) of dollars in capital equipment that is not particularly practical in a world with a high price on GHG emissions. The longer people don’t know what price the government will put on GHG emissions  (or when they will put a price on emissions), the longer investment monies will be put into capital equipment that may actually end up being more expensive than originally thought when purchased… i.e. the cost of emissions is added to operating costs, decreasing the return on investment and in some cases effectively standing capital assets.

And that’s really just the immediate/practical concerns. Taking a step back, the Stern report (a very extensive climate change cost report) screams at policy makers that refusing to make the proper low-carbon investment today will mean paralyzing costs (magnitudes higher) for society in the future. Changes in weather, crops,… a little thing call livable land area, will all mean increased costs to society.

Canada needs to put a price on GHG emissions in order to spur investment and development of low/zero-emitting technology. This is the next big international ‘race’. Getting out ahead in the race for green technology will secure the financial well-being of the winning countries for decades if not longer. Any delay in setting this price will literally retard Canada’s ability to remain competitive…. we may not feel it in the next year or even the next five years, but 10-15-20 years from now we’ll be kicking our empty oil can down the streets of our economically crippled society.

blog action day – what does climate change law mean for Canada?

It is officially Blog Action Day 2009… this year’s topic is climate change. Here is a general post on some thoughts for climate change law in Canada.

Climate change law in Canada (a mythical creature, never seen… lives in places called the ‘near future’, ‘the coming year’, and ‘tomorrow’), WILL come down sooner or later – i.e. meaning whenever the U.S. passes its legislation.

For everyone, it means things will be more expensive. Ya, I know… who’da thought the Harper Conservatives would end up putting in their very own ‘TAX ON EVERYTHING’?!

Consumers need to protect themselves from goods that emit carbon (either in the way they are use or in the way they were made). Gas, home heating oil, lamb from Australia, bananas from South America, cars from China … you’ll pay a lot more for these things and most other things you buy, very shortly. Take a look at what you bring into your home, what you spend your money on… make the changes you need to in order to avoid carbon costs. Eat local, burn less gas, use renewable energy like solar and geothermal… just some of the small steps that you’ll need to take to avoid carbon costs.

Industry and business will have to engage in better carbon management… identifying what elements of their supply chain and industrial processes depend on carbon and making investments today to help avoid future cost increases. They also need to be able to navigate the complicated legal and technical requirements associated with any new Canadian climate law. Lastly, they’ll need advice to construct corporate policies for effectively managing and avoiding risk from increasing carbon costs.

Governments need to be organized. What would things look like if every province had its own climate law, each different? Mayhem, that’s what it’d look like. Different carbon prices, industries moving to provinces with the easiest climate law for their sector, individual provinces entering into multi-national climate agreements without Canada… nuts. If the federal government doesn’t get itself together and come out with something that will provide some sort of consistency, some sort of cohesion that can be used to open us up to US and EU carbon markets, the divisive climate law impacts will put even further strain on our federalism. ADDED 19/10/09: Click here for an article on how oil sands companies want to ‘pass-on’ their share of reductions required under Canada’s climate change regulation.

And then there’s the government’s role in managing costs. Which is so extremely important when using a cap and trade system. With a carbon tax, everyone can see the tax applied, they can figure out what the tax applies to, they can get a good idea upfront of how much more they’ll be paying. With a cap and trade system, all that certainty goes out the window. For what reason you ask? So that industry doesn’t have to pay such a high price. What happens in a cap and trade system is this… lets assume that there are only 2 companies that make widgets, Company A pays $50,000 for carbon credits (i.e. A’s carbon costs) and Company B pays $75,000. How much added cost will A pass on to the consumer? If B has to pass on $75,000, company A will pass on something just less than $75,000. This way A maximizes profits and develops a slight competitive advantage over B. So consumers get gouged for roughly $25,000 because the always touted ‘costs savings’ brought about by a cap and trade system are NOT passed on the consumers. So… how do we correct this? The government needs to mandate corporate carbon cost reporting measures. Make industry report how much they pay in carbon costs and how much they’ve increased consumer costs as a result. Consumers need to be protected against any gouging that could occur from cap and trade… and the government is, in my mind, obligated to provide this protection given that they seem to have chosen a cap and trade system (indirect tax) as opposed the a carbon tax (direct tax).

We need to protect consumers… small businesses and families. More than anyone, they will be the group that feels the pinch from all this. They will be the ones that won’t know if they’re paying appropriate carbon costs, as intended by the government, or inflated carbon costs so that a Bay Street CEO can get a fancy bonus. They need the protection, and its time all governments began to recognize this and take steps to ensure mandatory carbon cost reporting measures are established.

border measures and north american climate change alignment

Well, we’re starting to hear again how important it is for Canada to line up its climate change approach with the United States… see here. So, as I wrote earlier, the big question will be what does this mean? It could mean a full fledged mirror of the U.S. climate law… but this is would be a sea change from what’s been considered in Canada. The U.S. is currently proposing an economy-wide type of the approach where in addition to major industry being responsible for emissions from their facilities, fuel producers and importers along with local natural gas distribution companies are also held responsible for all emissions that would occur from the combustion of the fuel or gas that they produce, import, or distribute, as the case may be. How this would be accomplished in Canada is a bit of a mystery.

But aside from a full-on copy and paste, the Canadian approach could take other avenues to aligning with U.S. climate laws. In the proposed U.S. House bill and now in the most recently proposed U.S. Senate bill, there are two approaches that the U.S. looks to be using to engage other countries. One is through emissions trading… the U.S. is proposing only to recognize emission allowances (note that ‘credits’ is not used, which would seem to eliminate the use of international offset credits) from ‘qualifying international programs’. This means that if a country’s climate law doesn’t meet the bar set by the U.S., that country’s emission allowances can’t be used for compliance by U.S. companies… taking away what might be a lot of ‘buyers’ of emission allowances. Given the emphasis that the Canadian government has put on a North American emissions trading system, see here at page 4 and here, there might be a desire to ensure Canada is a ‘qualifying international program’. The current U.S. proposals require that a qualifying international program must be run by a national government, must set an “mandatory absolute tonnage limit on greenhouse gas emissions” and must be as stringent as the program established in the United States. In plain English, for Canada this means that there would have to be a maximum limit on GHG emissions from CDN industry that is roughly the same as the United States. If not, Canadian companies would not be able to sell any Canadian emission allowances (if any are created) to U.S. buyers.

The second way the U.S. is looking to ‘engage’ other countries on climate change is through the highly publicized boarder measures. The current proposal, which only looks like it will get stronger through the Senate review, allows the imposition of border measures to goods from certain countries that haven’t met certain criteria (i.e. signed onto a international climate agreement). On their face, border measures stir up immediate fears of trade wars and WTO violations. But in certain applications they can be legitimate instruments, particularly when they take the form of border adjustment measures (i.e. levying a border charge equivalent to a domestic charge paid by domestic companies)… see here at pg. 103.  So… what do the U.S. proposals say about border measures? Well the first, and what seems to be the most overlooked point is that as it stands now, these border measures wouldn’t come into play until around 2018-2020. The second big point is that these measures will only apply to goods from emission intensive-trade exposed sectors (see here for a list of qualifying U.S. EITE sectors). The proposed provisions currently require one of three things… (1) the country of origin has signed a climate change agreement with the U.S. (and/or others) and the country has a national reduction target at least as stringent as the U.S., (2) the country of origin has signed an emission reduction agreement with the U.S. (and/or others), or (3) annual energy or emission intensity of the sector in which the good in produced is less than or equal to the U.S. sector’s energy or emission intensity.  Again, in plain English, this means that either Canada signs an international climate agreement with the U.S., Canada signs a (likely smaller) multi-lateral (or bi-lateral) emission reduction agreement with the U.S., or Canadian industries that export to the U.S. have a better energy/emission intensity than their U.S. counterparts.

So there you go… two possible areas of alignment with the U.S. (1) emission trading, and (2) border measures. Two different sets of requirements. Two different sets of outcomes. The (hopefully forthcoming) Canadian path forward on climate change will depend greatly on the approach the Canadian government chooses to move forward with for aligning with the United States. Stay tuned for more on the climate debates leading up to Copenhagen this December.

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oil across lake superior

So, I’m reading some articles on the recent climate change rabble coming out of New York and I see at least two, count’em two, articles in a week from Calgary journalist Don Martin (a regular read of mine) on climate change…. here and here. Even more, I read that the U.S., despite the hard talk on the oil sands, approves a pipeline from Alberta to Wisconsin. Superior Wisconsin to be exact. What’s in Superior Wisconsin? Ya… Lake Superior. Now, I guess I never put my mind to the idea of oil tankers in Lake Superior but I’m not surprised that it goes on in the Great Lakes.  Not surprised but it definitely scares the crap out me. Can you imagine? An oil spill in the gitchee gumee? Absolutely devastating. Read more about Lake Superior here.

And to boot, I’m no fan of oil sands oil either. I bet I’ll like it less if it washes up on my beach. Past that, literally, is the Soo and St. Mary’s River. The river’s polluted enough already between the heavy industry and the municipal sewage. Navigating the rocky bottom of the river is white-knuckle at the best of times… ever more when you’re carrying a load that would stop a local ecosystem in its tracks.

Something tells me that this is a bad idea. The fresh water, the salmon runs, the whitefish, plus all mammals in the surrounding ecosystems. It would be a disaster as bad as any oil spill we’ve seen on the big oceans. This lake chews ships up…. worse than oceans given how shallow and rocky some parts are. An oil sands spill in largest freshwater lake? How’s that for headline news. I think I’ll start taking some water quality records for my shoreline this fall. Like all good environmental lawsuits… a good baseline is invaluable. You can read more about Enbridge’s Alberta Clipper pipeline here and here and here.

fall election

Well, another election is brewing in Canada… is this another dead end for Canadian climate policy? The Conservatives killed the Liberal’s Project Green when they won the 2005 election. They introduced the infamous Clean Air Act through then Minister Rona Ambrose in 2006. That was shifted when Johnny Baird took over as Minister and introduced the Turning the Corner plan in 2007. Now, with the new economy and the new administration in the US, there is a new minister and a new plan… or at least we hope there is. While nothing has been released by Jim Prentice, there are strong signals that a new climate policy is being brewed up for Copenhagen in December… here and here.

But now with the threat of an election in the Fall… and it’s only a threat right now… where does that leave Canadian climate policy? Hopefully better off… Any election discussion would be, quite frankly, more than the backroom chatter that climate discussions in this country have been relegated to over the past year. If the Conservatives win, they likely follow behind the US all the way to Copenhagen… or they’ll lead them if some groups have their way… see here. If the Liberals win… its another uncertainty. Hopefully they’ll have a strong climate policy as a main election plank… read here. The NDP will… and the Bloc will hopefully fuel the debate fire in any election that takes place ahead of Copenhagen.

Regardless of whether there’s an election this fall or not, we can expect a bit more discussion on climate policy in the month’s leading up to the big December summit. If the debates (and misinformation) in the US are any indication, the climate back-and-forth in Canada will be hitting the headlines high and hard this fall.

Looking forward to posting more… election or not. Stay tuned.

economy-wide cap and trade in canada?

Lots of talk lately about how Canada will likely line up its climate change policies and regulations with the US. And there’s good reason for this talk – alignment avoids trade issues, keeps Canadian firms competitive, and paves the way for a North American (and perhaps global) carbon market. More recently, Canada’s Minister of the Environment spoke of aligning with the US’s economy wide approach to climate regulation. This would be a sea change for Canadian climate policy and likely add a considerable amount of emissions to the regulatory coverage.

So what does economy wide mean? In the current US Bill (Waxman-Markey), in addition to major industry being responsible for emissions from their facilities, fuel producers and importers along with local natural gas distribution companies are also held responsible for all emissions that would occur from the combustion of the fuel or gas that they produce, import, or distribute, as the case may be. Regulating these companies will allow the government to capture all emissions from the end use of the fuel/gas, for example from transportation and home heating.

How will Canada achieve this? Its definately a mystery as to how the Canadian government plans on regulating climate change, particularly given the speed of changes going on in the US. Previous government policy only sought to regulate emissions that occurred at the facilities (i.e. emissions from an industrial activity or process). There has been commentary on the powers that the government would use to enact climate laws – that GHG regulations under the Canadian Environmental Protection Act, 1999 would be enacted under the federal government’s criminal law power. But would this allow the economy wide regulation that aligning with the US would require? My opinion… no.

Typically, holding one person (or company) liable for the actions of another runs afowl of the basic principles of criminal law. Trying to do this under CEPA, 1999 would no doubt ensure a healthy barrage of constitutional challenges.

But a couple of things still hang on my mind… Does the federal government HAVE to use criminal law power for regulations under CEPA, 1999? No, but the Hydro Quebec case gives the feds power to regulate substance on CEPA’s Schedule 1 (Toxic Substances) under the criminal law power. The court just doesn’t really limit the federal regulatory power to criminal law, leaving the door open to regulating environmental issues under the Peace, Order, and Good Government head of power. Regardless, the feds put greenhouse gases on the list of Toxic Substances back in 2005. Despite some arguably ‘non-criminal’ provisions of the 2008 regualtory framework (namely the Technology Investment Fund), the general feeling seems to be that regulations under the criminal law power are (or at least have been) the way forward.

One option is to use the POGG power to try and enact an new piece of legislation… one that would give the government proper authorities to properly establish and regulate a price on carbon through regulation. Given the perpetual minority government situation in Ottawa, this scenario seems a bit unlikely, though its likely the best solution.

We have to wait and see what comes of the federal government’s review of the economy wide approach. Its seems a big gamble… likely placing the country’s most important piece of environmental law in a very weak position, open to serious lawsuits and constitutional challenges by companies and others.

canada to give carbon rebates to big industry?

In what appears to be perhaps a significant alignment of Canadian policy with what has been proposed in the Waxman Markey Discussion draft, Jim Prentice, Minister of the Environment has implied that his Conservative government could follow the US lead and give rebates to industry to offset costs of climate regulation. 

Plain english explanation: When domestic companies pay for their emissions and other international competitors don’t it creates an unequal playing field. To level the field, the US is proposing to give these companies money to cover most of the cost of buying carbon allowances at auction. This will reduce the overall cost burden on these sectors, helping them maintain their competitiveness. Canada seems to be poised to do the same. 

Indepth discussion: The Waxman Markey draft, while still changing, will likely always have some form of rebates for emission intensive (high emissions per tonne of product) and trade intensive (exposed to trade competitiveness issues) sectors. For eligible sectors, the US government would provide free allowances for roughly 85% of direct (from sector activity) AND indirect (from electricity) emissions. The rebates are limited to 15% of the overall industrial cap and would be carved out of that emissions cap. 

Assuming Canada looks to move lockstep with the US on climate policies in order to avoid trade issues, it would first need develop criteria for this emission intensive/trade exposed assistance. Emission intensity (as a function of production) would be easy but there would need to be some measure of trade exposure. In the US and other jurisdictions proposing simliar rebates/free allowances, trade exposure is typically a ratio of the value of imports/exports of a sector to some measure of domestic sector activity (production, shipments).

The problem here is once you’ve identified some eligible sectors, what does Canada give them. Under the government’s current  Turning the Corner (TTC) framework, all entities would receive about 82% free allocation. But because the targets are based on emission intensity, there is no cap and no limit to the amount of free allowances given out – as production rises, so does the amount of free allowances. So is that the answer? Will eligible Canadian sectors will just get the TTC treatment? What about indirect costs/emissions? What about an overall cap on emissions?

These questions will hopefully be answered in time. But I think its safe to say, that if you’re an emission intensive, trade exposed industry in Canada (likely Iron and Steel, Oil and Gas, etc…) your going to see a simliar free allocation as set out in the TTC. If you’re not… time will tell what the government will do (keep in mind those in the US will likely need to buy most allowances at auction).