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 progress on emissions reduction: New reports from OECD, UNFCCC , and policy discussion

An excellent overview article about Canada’s  “staggering challenge” and policy options to meet its emissions reduction targets appeared in The Conversation on January  11, 2018),  written by Warren Mabee, Director of the  Institute for Energy and Environmental Policy at Queen’s University and a Co-Investigator in  the Adapting Canadian Work and Workplaces to Respond to Climate Change (  ACW) project.   “How your online shopping is impeding Canada’s emissions targets”  outlines  the issues of clean electricity, transportation emissions (where your online shopping can make a difference), greener homes,  and rethinking fossil resources, and concludes that  “If we’re to succeed, Canada will need an integrated, holistic suite of policies – and we need them to be in place soon.”

oecd-environmental-performance-reviews-canada-2017_9789264279612-enOther recent publications take stock of Canada’s emissions reductions in greater detail.  In its  3rd Environmental Performance Review for Canada released on December 19, the OECD warns that  “Without a drastic decrease in the emissions intensity of the oilsands industry, the projected increase in oil production may seriously risk the achievement of Canada’s climate mitigation targets… …“Canada is the fourth-largest emitter of greenhouse gasses in the OECD [in absolute terms], and emissions show no sign of falling yet.”  Canada’s emissions actually did decrease since the last report was issued in 2004, but only by 1.5 per cent compared to reduction of 4.7 per cent by the OECD as a whole.  In addition to the impact of oil sands production, the OECD singles out a regime of poor tax incentives: “Petrol and diesel taxes for road use are among the lowest in the OECD, fossil fuels used for electricity and heating remain untaxed or taxed at low rates in most jurisdictions, and the federal excise tax on fuel-inefficient vehicles is an ineffective incentive to purchase low-emission vehicles.”

The OECD analysis finds support in a report from two researchers from the University of Toronto, in “How the oil sands make our GHG targets unachievable”   in Policy Options.  They state: “… only with a complete phase-out of oil production from the oil sands, elimination of coal for electricity generation, significant replacement of natural-gas-fuelled electricity generation with electricity from carbon-free sources, and stringent efficiency measures in all other sectors of the economy could Canada plausibly meet its 30 percent target.” The authors recommend a  gradual (12-to-15-year) phase-out of oil sands operations, with workers and capital redeployed to emerging sectors  such as renewable energy and building retrofits, and contend that  the importance of oil sands production is overstated. “….  the direct contribution of the entire oil, gas and mining sector to Alberta’s 2016 GDP was 16.4 percent, of which oil sands mining and processing was likely about one-third (or 5 to 6 percent of total provincial GDP)” ….and oil sands oil production is estimated to account for only 2 percent of Canadian GDP.”

Yet the federal government continues the difficult balancing act of a  “have-it-all” approach – for example, in a speech by Natural Resources Minister Jim Carr  in November 2017, in which he defended the approval of the Trans Mountain Pipeline with: “We need to prepare for the future, but we must deal with the present …..That means continuing to support our oil and gas resources even as we develop alternatives – including solar, wind and tidal…. new pipelines will diversify our markets, be built with improved environmental safety and create thousands of good middle-class jobs, including in Indigenous communities. They were the right decisions then and they are the right ones now. ” A recent blog by Patrick DeRochie of Environmental Defence, “Trudeau Thinks We Can Expand Oil And Still Reduce Carbon. Let’s Put That To A Test” , challenges this view .

On December 29, Canada issued a press release announcing that it has submitted its Seventh National Communication and Third Biennial Report to the United Nations Framework Convention on Climate Change , required by the UNFCCC to document progress towards its 2030 greenhouse gas emissions reduction goal of 30% reduction from 2005 levels.  The title of the government press release, “Canada’s Climate action is Working, Report to United Nations Confirms” is justified by including estimates of the effects of policies still under development in a “with additional measures scenario”. Under that scenario, the government forecasts an emissions decline across all economic sectors,  equivalent to approximately a third of Canada’s emissions in 2015 by 2030… ”

Meanwhile, the federal government has released a number of announcements and legislative proposals in December 2017 and January 2018. Regarding  the planned carbon pricing backstop under the Pan-Canadian Framework, which will come into effect by January 2019:  Details are set out in:  Supplemental Benchmark Guidance   Timelines ,  and the Letter to Ministers in December, and on January 15, the  proposed carbon backstop  legislative framework was released as Legislative and Regulatory Proposals Relating to the Greenhouse Gas Pollution Pricing Act and Explanatory Notes (French version here) .  Also on January 15, the federal government released for comment the proposed regulatory framework for  carbon pricing for large industrial facilities – an Output-based Pricing System (OBPS) described in more detail in a separate WCR post here.

On December 12, the  Clean Fuel Standard Regulatory Framework was released for comment.  The government has also committed to developing a national strategy for zero emission vehicles in 2018 to increase the supply of zero-emission vehicles.

Also on December 12, and capping six months of consultation under the banner Generation Energy,  the Minister of Natural Resources announced the creation of a 14-member Generation Energy Council to be co-chaired by Merran Smith,  Executive Director of Clean Energy Canada, and Linda Coady, Chief Sustainability Officer at Enbridge. (Bios of all members are here ). The council is tasked with preparing a  report to advise the government on an “ energy policy that ensures meaningful engagement with Indigenous peoples; aligns with Canada’s Paris Agreement commitments and the Pan-Canadian Framework on Clean Growth and Climate Change; and complements the work being done by the provinces and territories, building on the shared priorities identified at the Federal, Provincial and Territorial Ministers Meeting at the Forum.”

 

 

 

 

New Brunswick’s new Climate Change Act unlikely to meet the federal carbon pricing benchmark

The government of New Brunswick introduced its Climate Change Act on December 14, 2017. According to the government press release ,   the province will adopt the federal government’s intensity targets for the 10 large industrial emitters in the province,  and  will redirect existing taxes on gasoline and diesel fuel – but not heating fuel –  to a new Climate Change Fund.  It forecasts that in 2018, 2.33 cents per litre of existing gasoline taxes and 2.76 cents per litre of existing diesel fuel taxes will be transferred to the Climate Change Fund, amounting to about $37 million, to be invested in infrastructure adaptation and energy efficiency improvements for homes, business, industry and transportation.  For details, see the government Backgrounder  and see the CBC analysis “Liberals’ sleight-of-hand carbon tax formally proposed in climate bill “(Dec. 14) for summary and reaction.  In  “Legislation misses mark on protecting families and communities from worst of climate change impacts in N.B.” , the Conservation Council of New Brunswick calls the government plan “an uninspiring follow-up to last December’s climate change action plan , which was a smart road map for climate action and job creation that was among the best in the country…. we have legislation that largely maintains the status quo and sets us on a race to the bottom when it comes to protecting the health and safety of New Brunswickers and taking advantage of the economic opportunities that come with ambitious climate action.”

The National Observer summarizes the reaction from the federal government  in “New Brunswick defends climate plan against McKenna’s concerns”, quoting the Minister’s  Facebook post which reiterated the federal position that it will impose a carbon tax on any jurisdiction which falls short of federal carbon pricing benchmarks under the Pan-Canadian Framework on Clean Growth and Climate Change.  In a separate statement on December 15 , the Minister extended the deadline for provincial compliance till the end of 2018.

First year progress report on the Pan-Canadian Framework lacks any mention of Just Transition

pan-canadian framework on clean growth coverOn December 9th, the Governments of Canada and British Columbia jointly announced the first annual progress report on the implementation of the Pan-Canadian Framework on Clean Growth and Climate Change – officially titled,  the First Annual Synthesis Report on the Status of Implementation – December 2017 (English version)  and Premier rapport annuel du cadre pancanadien sur la croissance propre et les changements climatiques (French version).     The report summarizes the year’s policy developments at the federal and provincial/territorial  level – under the headings pricing carbon pollution ; complementary actions to reduce emissions;  adaptation and climate change resilience ; clean technology, innovation and jobs; reporting and oversight; and looking ahead.  It is striking that the report is up to date enough to include mention of the Saskatchewan climate change strategy, released on December 4, as well as the Powering Past Coal global alliance launched by Canada and Great Britain in November at the Bonn climate talks – yet in the section on “Looking Ahead”, there is no mention of another important outcome of the Bonn talks: a Just Transition Task Force in Canada.  As reported by the Canadian Labour Congress in “Unions applaud Canada’s commitment to a just transition for coal workers”,  “Minister McKenna also announced her government’s intention to work directly with the Canadian Labour Congress to launch a task force that will develop a national framework on Just Transition for workers affected by the coal phase-out. The work of this task force is slated to begin early in the new year.”  No  mention of that, nor in fact, any use of the term “Just Transition” anywhere in the government’s progress report.

Environment Canada touts ‘good progress’ on climate after scathing audit” appeared in the National Oberserver (Dec. 11), summarizing some of the progress report highlights and pointing out that not everyone agrees with the government’s self-assessment that “While good progress has been made to date, much work remains”. Recent criticism has come from the Commissioner of the Environment and Sustainable Development in her October report ; from Marc Lee at the Canadian Centre for Policy Analysis in “Canada is still a rogue state on climate change”  (Dec.11) ; and from the Pembina Institute in  State of the Framework: Tracking implementation of the Pan-Canadian Framework on Clean Growth and Climate Change .  The Pembina Institute report calls on the federal government to speed up on all policy fronts, with specific recommendations including: “extend the pan-Canadian carbon price up to $130 per tonne of pollution by 2030, implement Canada-wide zero emission vehicle legislation, ban the sale of internal combustion engines, and establish long-term energy efficiency targets.”

Saskatchewan’s new Climate Strategy maintains old positions: No to carbon tax, yes to Carbon Capture and Storage

Prairie Resilience: A Made-in-Saskatchewan Climate Change Strategy was released by the government of Saskatchewan on December 4,  maintaining the province’s  position outside the Pan-Canadian Framework  agreement  with this introductory statement:    “A federal carbon tax is ineffective and will impair Saskatchewan’s ability to respond to climate change.”  A summary of all the strategy commitments appears as  a “Backgrounder” from this link.  An Opinion column in the Regina Leader Post newspaper summarizes it as  a “repackaging” of past policies, and “oil over the environment”.

The provincial government defends their plan as “broader and bolder than a single policy such as a carbon tax and will achieve better and more meaningful outcomes over the long term” by encouraging innovation and investment – and yes, that Prairie spirit of independent resilience.  The strategy includes provisions re protecting communities through physical infrastructure investment,  water system management, energy efficiency for buildings and freight, and disaster management.   It commits to “maintain and enhance partnerships with First Nations and Métis communities to address and adapt to a changing climate through actions that are guided by traditional ecological knowledge.”   In the electricity sector, which at 19% is the third largest source of emissions, it proposes  to introduce regulations governing emissions from electricity generation by SaskPower and Independent Power Producers; meet a previous commitment of up to 50 per cent electricity capacity from renewables; and “determine the viability of extending carbon capture use and storage technology to remaining coal power plants while continuing to work with partners on the potential application for  CCUS technology globally.”    The Strategy is still open to consultation on the regulatory standards and implementation details, with a goal of implementation on January 1, 2019.  Consultation is likely to reflect the state of public opinion on climate change issues as revealed by the Corporate Mapping Project  in Climate Politics in the Patch: Engaging Saskatchewan’s Oil-Producing Communities on Climate Change Issues. The participants in that  study “were largely dismissive over concerns about climate change, were antagonistic towards people they understood as urban environmentalists and Eastern politicians, and believed that the oil industry was already a leader in terms of adopting environmentally sound practices.”      The oil and gas industry is Saskatchewan’s largest emitter, at 32% of emissions in 2015.  For an informed reaction, see Brett Dolter’s article in Policy Options, “How Saskatchewan’s Climate Change Strategy falls short”  (December 11).

sask-power-boundary-damOn the issue of carbon capture and storage:  The Climate Strategy document released on December 4 states a commitment to:  “determine the viability of extending carbon capture use and storage technology to remaining coal power plants while continuing to work with partners on the potential application for  CCUS technology globally.” On December 1, CBC reported that Saskatchewan had signed a Memorandum of Understanding with Montana, North Dakota, and Wyoming  to “share knowledge, policy and regulatory expertise in carbon dioxide capture, transportation, storage and applications such as enhanced oil recovery.”  By late 2017 or early 2018, SaskPower is required to make its recommendation on whether  two units at the Boundary Dam will be retired, or retrofitted to capture carbon and storage (CCS) by 2020.  As reported by the CBC , the research of economist Brett Dolter at the University of Regina has found  that conversion to natural gas power generation would cost about 16% of the cost of continuing with CCS ($2.7 billion to replace all remaining coal-fired plants with natural gas plants, compared to  $17 billion to retrofit all coal-fired plants with carbon capture and storage.)  The final decision will need to  consider the economic implications for approximately 1,100 Saskatchewan coal workers, and isn’t expected until a replacement for Premier Brad Wall  has been chosen after his retirement in late January 2018.

For more details:  “Saskatchewan, 3 U.S. states sign agreement on carbon capture, storage” at CBC News (Dec. 1) ; “SaskPower’s carbon capture future hangs in the balance” at CBC News (Nov 23)  , and  “Saskatchewan Faces Tough Decision on Costly Boundary Dam CCS Plant” in The Energy Mix (Nov. 28).