Canada launches consultation on vehicle emissions regulations under cloud of Trump rollbacks

pick up truckOn August 20, Canada’s Minister of Environment and Climate Change published a Discussion Paper  to launch consultations on the mid-term evaluation of Canada’s light-duty vehicle greenhouse gas emission regulations for the 2022–2025 model years.  Public comments may be submitted to ec.infovehiculeetmoteur-vehicleandengineinfo.ec@canada.ca by September 28, 2018. Once comments have been reviewed, if the government determines that regulatory changes are needed, it promises a second consultation period.  One of the first off the mark with a response: Clean Energy Canada, with “Canada should explore stronger vehicle standards to cut pollution and enhance competitiveness” .

The mid-term review is required by the 2014 regulations under which Canada currently operates, but it comes at a time when Canada must decide whether to continue to align its fuel efficiency standards with the U.S., as it has done for 20 years, or follow its own path.  The current Canadian trajectory is shaped by our GHG reduction commitments under the Paris Agreement, the Pan-Canadian Framework for Clean Growth and Climate Change  , and a 2017 commitment  to develop a  national Zero-Emissions Vehicle Strategy by 2018.

But in the  U.S. ,  on August 2, the Trump administration announced the Safer Affordable Fuel Efficient Vehicle Rule (SAFER) , which proposes weakening the EPA’s greenhouse gas emissions standards and Department of Transportation’s Corporate Average Fuel Economy (CAFE) standards for light duty vehicles in model years 2021 through 2025. The proposed rule  would also revoke a legal waiver which allows California and 13 other states to set their own pollution standards. Based on arguments made in the document  Make Cars Great Again , published by the Wall Street Journal, the Trump plan claims it will save $500 billion in “societal costs,” avert thousands of highway fatalities and save consumers an estimated $2,340 on each new automobile.   Most of the Administration’s arguments are refuted in  “Five Important points about the Safe Vehicle Rule”  by the Sabin School of Law at Columbia University. Other critiques: from Vox: “Trump is freezing Obama’s fuel economy standards. Here’s what that could do”  (Aug. 2); and “The EPA refuted its own bizarre justification for rolling back fuel efficiency standards” (Aug. 16);  “Trump administration to freeze fuel-efficiency requirements in move likely to spur legal battle with states” in the Washington Post (Aug. 2)  ; “Trump’s Auto Efficiency Rollback: Losing the Climate Fight, 1 MPG at a Time” by Inside Climate News (Aug. 2) .

What should Canada do? Technical analysis comes in   Automobile production in Canada and implications for Canada’s 2025 passenger vehicle greenhouse gas standards, released by the International Council on Clean Transportation in April 2018, which analyzes the Canadian vehicle manufacturing market and sales patterns and describes the possible impacts if Canada  aligns weakens its greenhouse gas emission standards with the Trump administration,  or maintains its existing standards and aligns with California.  Other opinions: From Clean Energy Canada on Aug. 2 ,  “Canada should hold firm and reject Trump’s efforts to roll back vehicle standards” ;  or “On vehicle emissions standards It’s time Canada divorced the United States”   in Policy Options (April 2018); and  “Trump’s plan to scare Americans into supporting car pollution” in the National Observer (Aug. 7) .

Federal government releases detailed proposals for Canada’s carbon pricing system, including output-based pricing for industrial emitters

On January 15, the Minister of Environment and Climate Change and the Minister of Finance issued a press release  announcing the full draft legislative proposals relating to the carbon pricing system. Public comment will be accepted until February 12, 2018.   The full text of  Legislative and Regulatory Proposals Relating to the Greenhouse Gas Pollution Pricing Act and Explanatory Notes are in English  and French versions . Comment on the legislative proposals will be accepted until April 9, 2018, with “structured engagement” and consultation with provinces and territories, Indigenous Peoples, environmental non-governmental organizations, industry, and business promised over the Winter/Spring of 2018.

Minister McKenna also released for comment the proposed regulatory framework for carbon pricing for large industrial facilities – an Output-based Pricing System (OBPS), with the aim “to minimize competitiveness risks for emissions-intensive, trade-exposed industrial facilities, while retaining the carbon price signal and incentive to reduce GHG emissions.   Emission sources covered by OBPS will include fuel combustion, industrial process, flaring, and some venting and fugitive sources – but notably, “Methane venting and methane fugitive emissions from oil and gas facilities will not be subject to pricing under the OBPS.”  The system will include emissions of all seven of the UNFCCC-designated greenhouse gases, “to the extent practicable” – carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride and nitrogen trifluoride. Details are  in Carbon pricing: regulatory framework for the output-based pricing system  (French version here) , and  build on the Technical Paper : Federal Carbon Pricing Backstop (French version here) , released in May 2017.

Leading up to the January release, the federal government had released clarification about the timing of  the planned backstop carbon pricing mechanism on December 20, 2017 – it  will come into effect by January 2019, bringing the carbon price to $20 per tonne in any jurisdiction that doesn’t meet the federal benchmark.  Full details are set out in:  Supplemental Benchmark GuidanceTimelines , and the Letter to Ministers . Generally positive reaction followed, from the Pembina Institute  and  Clean Energy Canada.

Initial reaction/summary of the proposed legislation released on January 15:  “Ottawa’s new carbon pricing plan will reward clean companies” from CBC,  and from the Globe and Mail, “Ottawa prepares to relax carbon-pricing measures to aid industry competitiveness” .  More substantive comment comes from the National Observer, in  “Trudeau government explains how it will make polluters pay” (Jan. 15).  Reaction from Environmental Defence came from Keith Brooks , who calls the proposed plan “an effective and fair pan-Canadian carbon pricing system.”  Reaction from  Clean Energy Canada is similar.

Meanwhile, in Alberta: Note also that the province of Alberta released their new Carbon Competitiveness Incentive Regulation (CCIR) for large industrial emitters in December 2017, also based on an output-based allocation system.  Carbon Competitiveness Incentive regulations replaced the current Specified Gas Emitters Regulation (SGER) on Jan 1, 2018, and will be phased in over 3 years.  It’s expected to cut emissions by 20 million tonnes by 2020, and 50 million tonnes by 2030.  Favourable testimonials from the oil and gas, wind energy, and cement industry are quoted in the government press release on December 6.

To explain output-based carbon pricing, the Ecofiscal Commission published Output-Based Pricing: Theory and Practice in the Canadian context , by Dave Sawyer and Seton Stiebert of EnviroEconomics in early December.  The highlights of the paper are summarized here, with a discussion of the pros and cons and challenges of implementation, with special attention to Alberta’s provisions.

Canada’s Clean Fuel Standard Framework released

On December 13, the Government of Canada released its  Clean Fuel Standard Regulatory Framework, the latest stage in the  development of regulations to complement the Pan-Canadian Framework on Clean Growth and Climate Change, by achieving  30 megatonnes of annual reductions in GHG emissions by 2030.  The standard will apply to all fuels – gasoline and diesel, but also aviation fuel, natural gas for heating, and metallurgical coal. It  will also apply to the full life cycle of fuels –  the first jurisdiction in the world to do so, according to the Pembina Institute .  The Clean Fuel Standard process began in November 2016, with consultations held throughout 2017,  largely focused on the government’s Discussion Paper (February 2017).   Comments received in that consultation were compiled  in a November report:  Clean fuel standard: Summary of stakeholder written comments on the Discussion Paper.   In response to the December Framework release, comments on the technical details will be accepted from  industry, provincial  governments, non-governmental organizations until January 19, 2018. Draft regulations are promised for  late 2018.

The Pembina Institute reaction  highlights three noteworthy aspects of the proposed Canadian Fuel Standard Framework:  1. Sustainability and indirect land-use change issues are sidelined –  which is “concerning and unacceptable” ;  2. Canada’s existing  federal Renewable Fuels Regulations will remain in place for a short-term transition period, and the new GHG-intensity-based clean fuel standard will eventually replace them – ( an approach  Pembina has previously recommended in its April 2017 submission to the government ); and  3.  Pembina urges  “the importance of timelines” – i.e. the longer it takes to implement these regulations, the more stringent they must be if Canada is to meet its emissions reduction target for 2030.

How important is the Clean Fuel Standard?  It has been called the single most important policy tool to achieve Canada’s emissions reductions target for 2030.  And in November 2017, Clean Energy Canada published “What a Clean Fuel Standard can do for Canada”  in which Navius Research used two in-house models to simulate the impact of different Clean Fuel Standard designs on Canada’s economy.  The report concluded, among other beneficial effects :  “The policy would increase economic activity in clean fuels in Canada by up to $5.6 billion a year in 2030. It would also create up to 31,000 jobs for the skilled workers needed to build, operate and supply new clean fuel facilities.”   A separate Technical Report  explains the modelling and provides much more detail about all projections, including employment projections.

Also of interest: From the EcoFiscal Commission,  A delicate (im)balance: policy interactions and the federal clean fuel standard  and an April 2017  Submission to the Clean Fuels Standard  consultations  from the Pembina Institute, Equiterre, Environmental Defence, and the Conservation Council of New Brunswick.

Methane regulations: a path to lower emissions and more jobs for Alberta

Dont Delay BlueGreen 2017 coverA July 2017  report by Blue Green Canada,   argues that the Alberta government should implement methane regulations immediately, rather than wait for the proposed federal regulations to take effect in 2023.    Speeding up regulations “could reduce air pollution, achieve our climate targets more cost-effectively, and create thousands of high-paying jobs in a single step”, according to Don’t Delay: Methane Emission Restrictions mean Immediate jobs in Alberta .  Blue Green estimates that Alberta’s oil and gas operations release $67.6 million worth of methane annually, and recovering it for energy use could create more than 1,500 new jobs in the province – well paid jobs,  including work in engineering, manufacturing, surveying, and administration.

Environmental organizations, labour groups and technology companies sent a joint Open Letter to Premier Rachel Notley in August, urging her to view the proposed federal methane regulations   as a floor, not a ceiling, and reiterating the argument for economic opportunity: “There are a number of innovative companies in Alberta ready to supply methane capture and detection technologies and services and a large majority of these companies report being poised for strong growth given the right regulatory signals.” The letter, from Blue Green Canada, Canadian Association of Physicians for the Environment, Iron and Earth, Keepers of the Athabasca, Pembina Institute, Peace River Environmental Society, Progress Alberta, Questor Technology, Unifor, and United Steelworkers is here.

Accelerating the target date for regulations is not the only concern.  “Five Ways Alberta Can Raise the Bar on Methane Regulations” at DeSmog Blog, (August 1) makes recommendations for tighter rules for venting and flaring, improved monitoring, and expanded scope. Also in August, the Environmental Law Centre of Alberta released Methane Reduction under the Climate Change Leadership Plan , the latest paper in its Climate Change Legal Roadmap series, which makes recommendations for improvements to both the provincial and federal regulations.  The task of developing methane regulations in Alberta falls to the Alberta Energy Regulator (AER), which has said that it is currently reviewing the feedback from its draft regulations, and will release a document for public comment in Fall 2017.

Alberta’s Climate Leadership Plan in 2015 called for 45 per cent reduction in methane emissions from the oil and gas industry by 2025. The Pan-Canadian Framework included a commitment to reduce methane emissions from the oil and gas sector by 40 to 45 per cent from 2012 levels by 2025, and in May 2017, the federal government released draft regulations beginning in 2020, with a second phase beginning in 2023.

Earlier, related reports:  In April, Environmental Defence released  Canada’s Methane Gas Problem: Why strong regulations can reduce pollution, protect health and save money , which demonstrated that methane emissions are higher than reported by industry: 60% higher in Alberta. Research funded by the David Suzuki Foundation and released in April, found that methane emissions in B.C. are 250% higher than reported.  The Cost of Managing Methane Emissions,  a June blog from the Pembina Institute, sheds light on the GHG savings to be had by instituting regulations.

Recommendations to change the U.S. Social Cost of Carbon, and possible impact for Canada

The U.S. National Academies of Science Press released an important report in January 2017, suggesting changes to the methodology of the Social Cost of Carbon (SCC), an economic metric used to measure the net costs and benefits associated with the effects of climate change- including changes in agricultural productivity, risks to human health, and damage from extreme weather events.  U.S. government  agencies such as the Environmental Protection Agency  are required by law  to estimate SCC when  proposing regulations such for vehicle emission standards or energy efficiency standards for appliances.  One of the most recent, thorough, and important applications of the U.S. Social Cost of Carbon appears in the 2015  Regulatory Impact Analysis Report for the Clean Power Plan Final Rule.    The U.S. updated the SCC to $37 U.S. per tonne of carbon dioxide in September 2015, a value often criticized as too  low, and economists continue to differ about the methodology.  A study by researchers at Stanford University, published in Nature Climate Change  (2015) estimated a more accurate  SCC of $220 per tonne – six times higher.

The January  report from the National Academy of Science, Valuing Climate Damages: Updating Estimation of the Social Cost of Carbon Dioxide  , suggests restructuring the Integrated Assessment Models framework used to ensure greater transparency, and  recognizes new research  which should be incorporated into the  models (e.g. the effect of heat waves on mortality) . It also recommends a regular 5-year updating schedule,  “to ensure that the SC- CO2 estimates reflect the best available science.”  For a summary of proposed changes and the political context, see “Scientists have a new way to calculate what global warming costs. Trump’s team isn’t going to like it” in the Washington Post  . Noting that the new report has no legal force, The Post article quotes expert reviewer Richard Revesz, Dean emeritus of the New York University School of Law: “If the metric is revised, then the incoming administration would have an obligation to explain why it’s departing from the current approach… Any changes made without adequate scientific justification would likely be struck down in court.”   But see also “How Climate Rules might Fade away”     in Bloomberg Business Week.

What are the implications for Canada?  Canada, like the U.K., Germany, France, and other countries, already uses its own Social Cost of Carbon, pegged at a $28 per tonne in 2012, according to  Canada’s  Regulatory Impact Analysis Statement issued with the vehicle emissions regulations for passenger cars and light trucks.  The Leaders Statement from the North American Leadership Summit in Summer 2016 ,  ties Canada more closely to U.S. and Mexico, when it pledges to “ … align analytical methods for assessing and communicating the impact of direct and indirect greenhouse gas emission of major projects. Building on existing efforts, align approaches, reflecting the best available science for accounting for the broad costs to society of greenhouse gas emissions, including using similar methodologies to estimate the social cost of carbon and other greenhouse gases for assessing the benefits of policy measures that reduce those emissions.”