February 28, 2005

Proposed rule will set NOX, SO2 caps for seven industry sectors

A proposed regulation under Ontario's Environmental Protection Act will set caps on emissions of nitrogen oxides (NOX) and sulfur dioxide (SO2) for seven industry sectors for the year 2006.The draft regulation for industry emissions also sets out how these caps will be further reduced in future years, i.e. 2007, 2010 and 2015. The sectors covered include petroleum, iron and steel, pulp and paper, glass, cement, non-ferrous smelting and carbon black.

In addition to stipulating the number of emission allowances to be allocated to these sectors, the regulation establishes how these caps will be allocated to individual facilities within the industry sectors, and details the methods and systems for allocating the facility allowances. It includes a new source set-aside provision as well, to address new sources and facility expansions.

The regulatory proposal sets out rules for new and expanding facilities to access the new source set-aside (based on the province's Best Available Control Technology Economically Available (BACTEA) guideline), along with rules governing emissions trading (allowing facilities to bank or sell unused allowances) and rules for reductions in allowances for facilities which reduce production or close.

The draft rule establishes requirements for the use of continuous emission monitors (CEMs) at large source facilities, as well as the use of NOX (as NO2, representing the sum of NO and NO2) as the reporting metric. This marks a change from the reporting of NOX as NO alone.

To reflect this change in the NOX reporting metric, the Ministry of Environment (MOE) will amend Ontario Regulation 397/01 (the emissions trading regulation) and O Reg 153/99 (limiting SO2 and NOX emissions from Ontario Power Generation facilities).

The MOE is further proposing to remove a potential barrier to cogeneration by industry by excluding emissions from cogeneration from the draft regulation for industry emissions requirements. These cogeneration facilities will, however, be subject to regulatory requirements under O Reg 397/01.

An amendment to this regulation would allow cogeneration systems in industrial facilities to claim and retire allowances for electricity generation-based emissions from the O Reg 397/01 pool. As a result, emissions due to electricity generation would be addressed under the existing regulation 397/01, while emissions due specifically to manufacturing processes and non-electricity emissions from cogeneration would be addressed by the new industry emissions regulation.

The draft regulation is intended to help Ontario ensure that the Canada-Wide Standards for particulate matter and ozone are met by setting regulatory limits on emissions from industrial sector facilities. This will bring them into line with other major emitting sectors, such as transportation and electricity generation, which are already subject to regulatory controls on their emissions.

The draft rule also follows from regulatory proposals for controlling SO2 and NOX emissions set out in Ontario's Industry Emissions Reduction Plan, released for comment last June (ELW June 28, 2004). The MOE received a total of 31 comments on its proposal dealing with aspects such as more aggressive caps, Ontario's planned coal plant phase-out, leakage, links to the electricity sector and facility-specific concerns.

Both the final policy decision, summarizing the comments received and the Ministry's response, and the draft regulation have been posted on the Environmental Bill of Rights registry, www.ene.gov.on.ca, reference Nos PA02E0031 (for the policy) and RA05E0002 (for the draft regulation). Comments on the regulation may be submitted until March 12, 2005.

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