taking action to fight climate change michael_ppp.pdftaking action to fight climate change the oil...

Presented by the Canadian Bar Association’s National Environmental, Energy and Resources Law Section and the Continuing Legal Education Committee in partnership with the American

Bar Association’s Section of Environment, Energy and Resources

THE 2008 NATIONAL ENVIRONMENTAL, ENERGY AND RESOURCES LAW

SUMMIT

TAKING ACTION to Fight Climate Change

Mike Beale Environment Canada (Ottawa)

May 15-16, 2008 Fairmont Château Laurier Hotel (Ottawa)

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TURNING THE CORNER:Taking Action to Fight Climate Change

Canada’s greenhouse gas emissions have grown steadily since 1990

• At Kyoto, Canada committed to a target of 6% below 1990 levels

– However, Canadian emissions have grown steadily since 1990

• Canada’s annual greenhouse gas (GHG) emissions are currently more than 25% higher than they were in 1990 and 32% higher than Canada’s Kyoto Protocol target

– This growth is due in part to the continued expansion of Canada’s production and export of oil & gas

• Without immediate action, our emissions from all sectors could increase by another 24% to reach 940 megatonnes in 2020

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Canada’s GHG emissions have grown steadily since 1990 and will continue to grow if action is not taken

550600650700750800850900950

1990 1995 2000 2005 2010 2015 2020

Meg

aton

nes

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Current GHG emissions in Canada

17%

16%

16%11%8%

6%26%

Electricity Oil & Gas Other IndustryBuildings Agriculture TransportationOther

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Canada is now taking aggressive action to achieve an absolute 20% reduction in GHGs by 2020

• The Government of Canada has now committed to reducing Canada’s total emissions, relative to 2006 levels, by 20% by 2020 and by 60-70% by 2050

• The level of effort required to achieve these goals will be significant, as Canada has a growing population, a growing economy and increasing energy exports

• To achieve these goals, the government is implementing a series of ambitious regulatory and technology initiatives

• Most recently, the government has announced further details of one of the world’s toughest regulatory regimes for industrial GHG emissions

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Canada’s contribution to a global solution

• Canada’s domestic action, including developing and deploying new technologies, will contribute to a global solution to the challenge of climate change

• Canada believes a new international climate change agreement should ensure global emissions are cut at least in half by 2050

• Canada is committed to playing an active and constructive role in the development of a new international agreement through the UNFCCC

• An effective new international agreement must include contributions from all major emitters, including the United States, China and India

– While major developing economies can obviously not be expected to make the same kind of contributions as developed countries, the science clearly demonstrates that they must be part of the solution

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Canada is taking measures to achieve a 330 megatonne reduction from projected levels by 2020

550600650700750800850900950

1000

2006

2008

2010

2012

2014

2016

2018

2020M

egat

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s

Business as Usual Emissions Turning the Corner Pathway

330 Mt

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Canada’s plan to cut GHG emissions consists of several elements including industrial regulations

Industrial GHG Regulation

Comprehensive regulations to force industry to cut GHG emissions•Focusing on key sources of emissions, including oil sands and coal-fired electricity plants•Setting up a carbon emissions trading market•Establishing a market price for carbon•Deploying new clean technologiesClean Electricity

Action to build one of the world’s cleanest electricity systems

Transportation

Regulation and investment to cut emissions from transportationBuildings and Appliances

Action to cut emissions from buildings, appliances and equipment

Working Together

Working with the provinces and territories

Industrial GHG Regulations

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Canada will require industry to reduce emissions by 21% from current levels by 2020

• Canada’s industrial greenhouse gas regulations will yield about half of the emission reductions required to meet our 2020 target

• These regulations will apply to all major industries, including oil sands, upstream oil and gas, electricity, petroleum refining, chemicals, pulp & paper, aluminum, cement, and iron & steel

• Regulated industries will be required to improve the emissions intensity of their existing facilities by 18% by 2010, and achieve 2% continuous improvement each year thereafter

– Intensity reductions of this magnitude will yield absolute emission reductions even as the economy grows

– Firms will, for a limited time, receive incentives to encourage them to invest in green technology development and deployment

• New facilities built by firms in regulated industries will have to meet stricter emissions standards based on the use of cleaner fuels

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Canada’s regulatory system will apply to all industries and get tougher over time

Regulations start tough and get tougher

TOUGH

TOUGHEST

TOUGHER

For old facilities in all industrial sectors: mandatory reductions starting in 2010 and becoming tougher every year

For new plants in key sectors coming on stream in 2004 and later: tougheremission targets to drive adoption of cleaner fuels and technologies

For oil sands and power plants coming on stream in 2012 and later:

• An end to new dirty coal plants

• Effectively requiring that oil sands use carbon capture and storage or other green technology to drastically cut greenhouse gas emissions

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Canada’s regulations will effectively require the use of carbon capture & storage

• The electricity generation and oil & gas sectors currently produce 33% of Canada’s greenhouse gas emissions

– The oil sands are one of Canada’s greatest natural resources, and a major engine of our economy

– The government recognizes, however, that we have a responsibility to future generations to ensure that they are developed in an environmentally responsible way

• New oil sands plants and coal-fired electricity plants that begin operation in 2012 or later will be required to meet targets based on carbon capture & storage or equivalent technology to significantly reduce their greenhouse gas emissions

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The Oil Sands Challenge

• Turning the Corner will result in national absolute greenhouse gas emission reductions by about 2010

– However, due to rapid growth production, oil sands emissions will continue to increase for several years, albeit at a slower rate than projected levels

• A tougher stance on oil sands is necessary to ensure environmentally responsible growth

• The 2018 target for new facilities based on carbon capture and storage will mean that oil sands emissions will be cut by more than half from 2020 projected levels

Oil Sands GHG Reductions

0255075

100125

2006

2010

2012

2014

2016

2018

2020

Meg

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Projected Emissions Turning the Corner Emissions

Emissions: 2006 - 2020

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2006 2008 2010 2012 2014 2016 2018 2020

Meg

aton

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Projected Emissions Turning the Corner Emissions

330 Mt

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Strengthening the cleaner fuel standard in the oil sands sector achieves greater emission reductions

• Cleaner fuel standard will be set to be equivalent to carbon capture and storage for all new upgraders and in-situ plants

– This would apply to facilities coming on stream in 2012 or after– This requirement would come into force in 2018– Our preliminary estimates – to be validated in the coming

months - are that approximately 70% of CO2 emissions of upgraders and 50% of in-situ plants could be captured

• If the oil sands industry implements carbon capture and storage, the infrastructure could also be used by other industries located in the area (refineries, chemicals, fertilizer)

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Implications of cleaner fuel standard for upgraders and in-situ oil sands plants

TOUGH TOUGHER TOUGHEST

Existing facilities Starting in 2010

New facilitiesStarting in 2004 to 2011

New facilitiesStarting in 2012 or later

• All upgraders that have been through approval process would meet the standard

• 7 in-situ plants that have been through approval process are not being designed capture ready

• All facilities currently under construction, approved, or at late planning stage would meet the standard

• Mandatory reductions becoming tougher every year

(18%/ 2%)

• Cleaner fuel standard based on natural gas; standard suspended until 2018 if built capture-ready

• 3-year commissioning period + 2% continuous improvement

• From 2012 to 2017: Cleaner fuel standard based on natural gas; standard suspended until 2018 if built capture-ready

• From 2018 on: Cleaner fuel standard based on carbon capture and storage technology

• Those under discussion have time to adjust their design

Green: in conformity with proposed targetsYellow: have time to make adjustments to their designOrange: have already received approval and could have to redo some of the approval steps as well as make adjustments to their design

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Strengthening the cleaner fuel standard in the electricity sector achieves greater emission reductions

• Cleaner fuel standard will be set to be equivalent to carbon capture and storage on new coal-fired electricity plants

– This would apply to facilities coming on stream in 2012 or after– This requirement would come into force in 2018– Our preliminary estimate – to be validated in the coming months

- is that approximately 75% of CO2 emissions of coal-fired plants could be captured

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Implications of cleaner fuel standard for coal-fired power plants


Existing facilities New facilities, starting in 2004 to 2011 New facilities, starting in 2012 or later

• Mandatory reductions becoming tougher every year

(18%/ 2%)

• Cleaner fuel standard equivalent to the emission-intensity of “supercritical” technology for coal-fired generation; standard suspended until 2018 if built capture-ready

• 3-year commissioning period + 2% continuous improvement

• From 2012 to 2017: Cleaner fuel standard equivalent to the emission-intensity of “supercritical” technology; standard suspended until 2018 if built capture-ready

• From 2018 on: Cleaner fuel standard equivalent to the emission-intensity of “Integrated Gasification and Combined Cycle with carbon capture and storage” technology

• All facilities operating or under construction meet the standard

• All facilities in planning stage, but not yet approved, would meet the standard

Green: in conformity with proposed targets

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Target structure by sector and type of facility


Sector Existing facilities18/2 from 2010

New facilities On stream 2004 or later

3-year commissioning period 2% continuous improvement

Additional requirements for new facilities

On stream 2012 or later

Oil Sands As above Process-specific cleaner fuel standards for mining, in situ, and upgrading• based on natural gas• incentive for carbon capture and storage

until 2018

Target based on carbon capture and storage for in situ and upgrading• effective 2018

Electricity As above Fuel-specific cleaner fuel standard for coal, gas, and oil• Incentive for carbon capture and storage

until 2018

Target based on carbon capture and storage for coal• effective 2018

Petroleum refining, Chemicals and fertilizers

As above Process-specific cleaner fuel standards• based on natural gas• incentive for carbon capture and storage

until 2018

Upstream oil and gas, Natural gas pipelines, Potash

As above Process-specific cleaner fuel standard• based on natural gas

Iron ore pelletizing, Lime, Ironand steel, Titanium, Pulp andpaper, Aluminum and alumina,Cement, Base metal smelters

As above Process-specific technology

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Target application by sector• Three approaches to target

application:– Facility-specific: Each facility

within a sector receives an individual target of an 18% reduction from its own 2006 emission intensity

– Sector-wide: All facilities within a sector face the same target – an 18% reduction from the sector’s average 2006 emission intensity

– Corporate-specific: Each company within a sector receives a target of an 18% reduction from the average 2006 emission intensity of its entire fleet of facilities

Target ApplicationSectorFacility-based

Sector-wide

Corporate

Iron Ore Pelletizing X

Lime X

Potash X

Base Metal Smelting X

Chemicals X

Fertilizers1 X

Iron & Steel, Titanium X

Oil Sands X

Pulp & Paper X

Petroleum Refining X

Aluminium & Alumina X

Cement X

Natural Gas Pipelines X

Upstream Oil & Gas X

Electricity X

1) Indicative until decisions are made post Task Force

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A carbon emissions trading market is a key A carbon emissions trading market is a key element of the planelement of the plan

• Canada is setting up a domestic carbon trading market and plans to eventually link up with international markets

– Beginning in 2010, firms that fall short of their targets will be able to buy credits on Canada’s domestic carbon emissions market

• Canada will also create a domestic offset system that will create market incentives for incremental, real and verified emission reductions in other sectors of the economy, such as agriculture and forestry

• Firms will be able to purchase credits from the Kyoto Protocol's Clean Development Mechanism to meet up to 10% of their target, but the Government of Canada will not buy international emission credits to meet its 2020 target

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Technology Fund

• Firms may contribute to a technology fund as a means of compliance for the 2010-2017 period, subject to limits

– As percent of total regulatory obligation: 70%, 65%, 60%, 55%, 50%, 40%, 10%, 10%

– Contribution rate in $/tonne: $15, $15, $15, $20, $20 escalating with GDP

• A further 5 Mt/year of credits will be available through the research and development component

• Technology fund will take a portfolio approach to investment in a range of deployment and development projects

• Fund will seek ownership of resulting emission reductions based on project cost

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Maximizing the use of the pre-certified investments will facilitate the uptake of carbon capture and storage

• Firms will be eligible to receive credits for investing directly in large-scale and transformative projects, either its own or joint-venture projects, selected by the firm from a menu set out by the federal government

• Eligible firms may contribute up to 100% of their regulatory obligation in pre-certified investments in carbon capture and storage projects

– Eligibility limited to firms that can make direct use of the technology in the following sectors: oil sands, electricity, chemicals, fertilizers, and petroleum refining

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Offset System• Credits will be issued for incremental real, verified domestic reductions or

removals of greenhouse gas emissions in activities outside the regulations

• Only emission reductions or removals that take place after January 1, 2008 may generate credits

– And only projects that began to achieve reductions after January 1, 2000 will be eligible

• The Offset System has been launched– Companion document on the design of the Offset System has been released

• Guide for protocol developers will be published this spring, with guide for project proponents and verification bodies following in summer

• Government will begin reviewing project applications in the fall

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Credit for Early Action and theClean Development Mechanism• Credit for Early Action Program

– Firms that took verified early action to reduce emissions will be eligible for a one-time allocation of 15 Mt in credits▪ 5 Mt credits issued in each of the years 2010, 2011, and 2012

– Reductions must have been achieved between 1992 and 2006 and be the result of an incremental process change or facility improvement

– Companion document has been released for public comment until May▪ Phase 1 submissions will be accepted until late June▪ Allocation decisions will be made by summer 2009

• Clean Development Mechanism– Firms may use credits from the Kyoto Protocol's Clean Development

Mechanism – with the exception of credits from forest sink projects –for up to 10% of their regulatory obligation

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The price of credits on Canada’s carbon market is expected to hit $65/tonne by 2018

0

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2010 2012 2014 2016 2018 2020

$/to

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Marginal Emissions Price

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Reporting requirements

• Under CEPA 1999, a Section 71 Notice was published on December 8, 2007 requiring specified industrial sectors to provide information on emissions of air pollutants and greenhouse gases for 2006

– The information collected will support the development and implementation of regulations

– The deadline to comply with the Notice is May 31, 2008

• Reporting and quantification requirements will be part of the proposed regulations

– Provinces, industry and NGOs will be engaged

Clean Electricity

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Clean electricity could deliver an additional 25 Mt of reductions

• The government will convene a task force to work with provinces and utilities with a goal of designing a path to reduce an additional 25 Mt by 2020 through a combination of new nuclear, new hydro, and other renewables linked by a national grid

• Actions could include:– East-West Grid– Development of more hydroelectric projects– New nuclear reactors – Retirement of fossil-fuel plants at the end of their expected life

recognizing that it would also substantially reduce air pollutants

• The expected reductions would be in addition to those imposed bythe regulatory framework

Working Together

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Federal government will work towards equivalency agreements on industrial regulations• The federal government will work to reach equivalency

agreements with any interested provinces that have enforceable regimes providing equivalent or better environmental outcomes to the federal regime

• Initial discussions focusing on information sharing and cooperation have already taken place with Alberta and B.C.

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The federal government is working with the provinces to meet Canada’s 2020 target

• The Government of Canada provided $1.5 billion in funding in 2007 to support new provincial projects to reduce greenhouse gas emissions

• Canada’s provinces and territories have committed to targets that require almost 300 megatonnes of greenhouse gas reductions by 2020, and have put in place over 200 initiatives in a wide range of areas including electricity, buildings and transportation

• The government has also provided over $1.8 billion in funding to provinces and territories to improve public transit

– Additional long term funding for public transit projects is available under the $33 billion Building Canada Plan.

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Expected Emission Reductions by 2020

REQUIRED 2020 REDUCTIONS FOR 20% BELOW 2006 LEVELS ~330 Mt

Cumulativefrom 2006

Levels

Turning the Corner: Transportation and Consumer and Commercial Products

~ 65 Mt

~ 165 Mt

~ 40 Mt

Clean Electricity ~ 25 Mt 18.0%

~ 35 Mt

FEDERAL ACTIONS

4.0%

Turning the Corner: Industrial Regulations14.0%

Provincial actions announced to date 16.5%

New Measures 20.0%

PROVINCIAL ACTIONS

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Action by all levels of Government will enable Canada to reach its national goal

Projected Emissions Reductions from Federal, Provincial, and Territorial Measures

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2006 2008 2010 2012 2014 2016 2018 2020

Mt

Provincial & TerritorialActions *

Clean Electricity

Federal Actions

Projected Emissions20% below 2006

* Incremental after accounting for overlap in federal-provincial/territorial measures

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Canada’s emissions reduction pathway to 2020 will engage all sectors of the economy

Projected Emissions Reductions to 2020

550

600

650

700750

800

850

900

950

2006 2008 2010 2012 2014 2016 2018 2020

Mt

Others

Buildings

Transportation

Mining andManufacturingConventional Oil andGasOil Sands

Electricity Generation

Projected Emissions20% below 2006

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Our actions will result in major changes in the way Canadians produce and use energy

• Achieving an absolute reduction of 20% by 2020 will place Canada on the pathway to reduce emissions by 60%-70% by 2050

• Canada’s energy efficiency will improve by some 20%

• 90% of electricity will be produced from sources that do not produce greenhouse gases

• Canada will be a world leader in carbon capture and storage and clean energy production

• Canada will have an active domestic carbon market, with permit prices expected to hit $65 per tonne by 2018

Path Forward

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Next steps

• Draft regulations are expected to be published in Canada Gazette, Part I for public comment in fall 2008

• Final regulations are expected to be approved and published in Canada Gazette, Part II in fall 2009

• Greenhouse gas provisions of the regulations are to come into force, as planned, on January 1, 2010

• Air pollutant elements will be added to the draft regulations once the regulatory framework for air pollutants has been finalized in spring 2008

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