April 30, 2007

Federal climate change plan to address GHG emissions, other air pollutants

The federal government's climate change plan, released April 26 by Environment Minister John Baird, calls for mandatory greenhouse gas (GHG) reduction targets for major industrial sectors in order to achieve the goal of an absolute reduction of 150 megatonnes by 2020. Turning the Corner: An Action Plan to Reduce Greenhouse Gases and Air Pollution will also impose targets to cut overall releases of air contaminants from industrial operations in half by 2015, Baird said.

The government notes that industry accounts for about half of Canada's GHG emissions. Its strategy will allow companies to choose the most cost-effective way to meet their targets from a range of options: in-house reductions, contributions to a capped technology fund, domestic emissions trading and offsets and access to the Kyoto Protocol's Clean Development Mechanism. Companies that have already reduced their greenhouse gas emissions prior to 2006 will receive credit for early action.

In addition to measures to reduce air emissions from industry, the government's regulatory framework for air emissions will address emissions from transportation by regulating, for the first time, the fuel efficiency of cars and light-duty trucks, beginning with the 2011 model year. Energy efficiency standards will be strengthened for a number of energy-using products, including light bulbs, regulatory measures will be introduced to improve indoor air quality.

The regulatory framework specifies a 2010 implementation date for major industrial sectors to begin rolling back their GHG emissions intensity (i.e. GHG per unit of production). These intensity targets will be stringent and tightened on an annual basis.

In 2010, facilities existing in 2006 will be required to reduce their GHG emissions to meet stringent targets. Fixed process emissions will be exempted from these targets. These are emissions that are tied to production and for which there is currently no alternative technology that will reduce them. The only way to reduce these emissions would be to reduce production. The government says the targets will be ambitious enough to yield absolute reductions in emissions as early as 2010.

New facilities using cleaner fuels and technologies will have a three-year grace period. Given that new plants always take a few years to get running efficiently, this grace period will allow such facilities to reach full production and establish their initial emissions levels.

Companies will have a choice of several options for meeting their reduction targets in most cost-effective way. Theses options, which can also encourage innovation and the adoption of cleaner technologies, include:

* In-house reductions: such as energy efficiency measures, improved energy management systems, or investments in carbon capture and storage or other emission-reducing technologies.

* Contributions to a technology fund: Technological advancement and innovation are critical to achieving deep, long-term reductions in greenhouse gas emissions. Companies will be able to meet part of their regulatory obligations by contributing to a technology fund that will be used to develop and deploy technologies to reduce GHG emissions now and in the future across industry and regions.

* Emissions trading: Companies whose emissions are below their target will receive credits that could either be "banked" for future use, or sold to other companies who had not met their target. Emissions trading will initially be done domestically but future linkages with emissions trading systems in the U.S., and possibly Mexico, will be explored.

* Offsets: As part of the domestic emissions trading mechanism, companies could acquire offset credits by purchasing emissions reductions from activities that are not regulated (e.g. emissions from agriculture). The offsets system is a way to engage other sectors of the Canadian economy to make greenhouse gas reductions.

* Access to Kyoto's Clean Development Mechanism: This will generate real reductions globally through emissions reductions from projects in developing countries.

Under the plan's early action component, companies that took verified action to reduce GHG emissions between 1992 and 2006 will be eligible to receive a one-time credit that could be applied towards their regulatory obligations or traded. Credits for early action will represent a maximum of 15 megatonnes of carbon dioxide across industry.

Enforcement of the plan will be through the compliance and penalty provisions of the Canadian Environmental Protection Act, 1999. More information is available on Environment Canada's Web site, www.ec.gc.ca.

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