Canadian Federal Government
The change in federal government last fall from Steven Harper’s Conservative Government to Justin Trudeau’s Liberal Government appears to make the outlook for regulation of climate change in Canada more optimistic.
Mr. Trudeau, the new Canadian Prime Minister, made commitments at the Paris COP 21 “to establish a “Pan-Canadian framework for combatting climate change”, that accommodates different provincial strategies and that “set a truly national target that the federal government and the provinces can work together to achieve” and “ensure that the provinces and territories have targeted federal funding and the flexibility to design their own carbon pricing policies”. The current federal government proposal is a minimum price on carbon of at least $15 a tonne either through a federal legislation or provincial carbon tax or cap and trade plan. On March 3, 2015 Prime Minister Trudeau and the provincial and territorial premiers announced, after a First Ministers’ meeting on climate change and the environment, that they were working toward a national climate change plan that included a carbon trading mechanism. No specifics of how it would work were provided. A working group has been struck to determinewhich of the mechanisms would be most effective and appropriate for each of the jurisdictions.
The federal government is reviewing the environment assessment process under the Canadian Environmental Assessment Act 2012 and the National Energy Board Act to add two factors impacting the approval of project including upstream impacts and greenhouse gas emissions. It is also advocating for more Aboriginal involvement in reviewing and monitoring major resource development projects. The federal government has also announced that Canada will reduce its GHG emissions to 30 per cent below 2005 levels by 2030. To date no legislation has been proposed by the federal government limiting emissions. The following is a summary of federal Canadian legislation in this area:
The Reduction of Carbon Dioxide Emissions from Coal-Fired Generation of Electricity Regulations (2012) (under the Canadian Environmental Protection Act 1999 (CEPA)) set performance standards for carbon dioxide emissions from coal-fired electricity generation units. The performance level will be set at 420 tonnes of generation, such as high efficiency natural gas, renewable energy or fossil fueled power with carbon capture and storage.
The Regulations Amending the Passenger and Light Truck Greenhouse Gas Regulations (2014) under CEPA build on the standards established under pre-exiting regulations which set GHG emission standards covering models years 2011–2016. The new Regulations set GHG emission standards for Canadian vehicles of model years 2017– 2025.
The Heavy Duty Vehicle and Engine Greenhouse Gas Emissions Regulations (2013) under CEPA establish GHG emission standards for on-road heavy-duty vehicles and engines (e.g. buses, tractors and refuse trucks).
The Renewable Fuels Regulations (2010) under CEPA are a key element of the Federal Government’s Renewable Fuels Strategy. The objective of the Regulations is to reduce GHG emissions by mandating an average 5 per cent renewable content based on the gasoline volume.
The Federal Gas Tax Fund imposes as federal tax on gas which goes into a fund to provide funding to Canadian municipalities for local infrastructure projects.
Quebec’s Climate Change Action Plan and Adaption Strategy (2013-2020) (2012) sets out its initiatives in the climate change area. The Quebec targets are 20% below 1990 levels by 2020, 37.5% below 1990 by 2030. Quebec has been a member of the Western Climate Initiative (“WCI”) since 2008 and linked its system with the California system on January 1, 2014. The Quebec cap and trade system applies to businesses that emit 25,000 metric tonnes or more of CO2e per year and will cover about 85% of Quebec’s emissions by 2015.
The first compliance period (2013-2014) applied to the industrial and electrical sectors. The second compliance (2015-2017) and third compliance periods (2018 – 2020) will add distributions and importation of fuels used for consumption in the transport and building sectors as well as in small and medium sized businesses.
Covered emitters buy 100% of their allowances at auction (or on the market). Allowances are auctioned up to four times per year (joint auctions are held with California). Some sectors subject to international competition will receive free allowances. Quebec set a floor price of $10.75 per tonnes in 2013 which increases at a rate of 5% plus inflation. With 2% inflation rate the price would be $17.20 a tonne in 2020.
Some banking of allowances is allowed but no borrowing. Three domestic offset types are accepted as compliance units originating from projects carried out according to three “protocols”: CH4 destruction as a part of projects to cover manure storage facilities, capture of gas from certain landfill sites and destruction of certain ozone depleting substances contained in insulating foam recovered from appliances. There is a qualitative limit to 8% of each entity’s compliance obligation. Offsets issued by jurisdictions linked with Quebec will be recognized. The Quebec market is currently linked with California with special rules governing joint auctions for carbon credits.
The Quebec Regulation Respecting Mandatory Reporting of Certain Emissions of Contaminants into the Atmosphere took effect in 2007. The Regulation applies to facilities that emit a contaminant listed in a schedule to the regulation. Any facility that emits more than 25,000 tonnes of CO2e must send in a verification report carried our by an accredited organization.
The Ontario Government released its Cap and Trade Regulatory Proposal (Proposal) and Revised Guideline for Greenhouse Gas Emissions Reporting on 25 February 2016 for a 45-day comment period. The Proposal follows a MOU signed by the Ontario and Quebec Provincial Governments in April, 2015 to create a joint cap and trade system and a second MOU signed in the fall of 2015 to harmonise regulations needed to link the two carbon markets and develop common protocols for carbon offset credits.
The Proposal covers two pieces of legislation, The Climate Change Mitigation and Low Carbon Economy Act(Act) and The Cap and Trade Program Regulations(Regulations) which prescribe a cap and trade system for Ontario (Cap and Trade Program) scheduled to come into force on January 1, 2017. The Act and Regulations are subject to consultation.
The Act prescribes that proceeds from the Cap and Trade Program will be deposited into a Greenhouse Gas Reduction Account which will fund projects related to the reduction of emissions. The Act also enshrines GHGemissions reduction targets for Ontario: 15 per cent below 1990 levels by 2020, 37 per cent below 1990 levels by 2030 and 80 per cent below 1990 levels by 2050.
Under the Act, large industrial emitters will get free allowances to produce GHGs at roughly current levels (2017) which are reduced each year to 2020. Only registered participants will be able to sell, trade or deal in the allowances and offset credits. The Act and the Regulations set out the details of the Cap and Trade Program: capped and uncapped (market) participants; compliance periods; registration rules; auction and sale rules; strategic reserve of allowances; market rules such as holding limits and purchase limits; compliance requirements; and allocations and credit for early action. A separate regulation will be introduced regulate offset credits. Amendments will be made to the Regulations to provide for linking with Quebec and California markets.
To support the Cap and Trade Program, the Greenhouse Gas Emissions Reporting Regulation will be revoked and replaced with a new GHG reporting regulation under the Act.
GHG emissions reduction targets in Ontario are: 15% below 1990 levels by 2020, 37% below 1990 levels by 2030 and 80% below 1990 levels by 2050.
In the fall of 2015 the Ontario and Quebec governments signed MOU’s in the power and climate change areas (which built on MOU’s signed in 2014) to exchange electricity capacity, on market based mechanisms including harmonizing regulations needed to link the two carbon markets, and develop common protocols for carbon offset credits.
Regulations under the Ontario Environmental Protection Act (“Green Diesel – Renewable Fuel Content Requirements for Petroleum Diesel Fuel”) require Ontario fuel suppliers to include at last 2% bio-based diesel to renewable bio-fuel made from soy and cooking oils in their products. The amount will rise from 3% in 2016 and 4% in 2017.
In December of 2015 Manitoba joined Ontario, Quebec and California and introduced a linked cap and trade system for 20 large emitters (Memorandum of Understanding between the Government of Quebec, Ontario and Manitoba Concerning Concerted Climate Change Actions and Market Based Mechanisms 2015). Manitoba has also set a new target of reducing carbon emissions by 1/3 by 2030 and to be carbon neutral by 2080. The previous targets were set under the Climate Change and Emissions Reductions Act (2013) were not met.
The Manitoba action plan – “Manitoba’s Climate Change and Green Economy Action Plan”(2015) calls for the province to use more renewable resources to reduce GHG’s including adopting green heating alternatives to fossil fuels such as geothermal technology.
The Emissions Tax on Coal and Petroleum Coke Act (2014) imposed an emissions tax on the use of petroleum coke in industrial facilities.
The Coal and Petroleum Coke Ban for Space Heating Regulation (under the Environment Act) phases in a ban on petroleum coke and coal for heating purposes beginning July 2014 with full compliance required by July 2017.
British Columbia (“BC”)
The BC government published its Climate Change Leadership Team’s Recommendation Report in late 2015which made 32 recommendations to reduce GHG emissions. BC has had a revenue neutral carbon tax since 2008 (Carbon Tax Act). The tax rates are based on a price of $30 per tonne of C02e. Further regulation in this area is expected in 2016.
The Greenhouse Industrial Reporting and Control Act (2016) (“GGIRCA”) sets intensity based targets for certain industrial facilities including in the coal and liquefied natural gas industries. GGIRCA provides the authority for the Emission Offsets Regulations (2008) and the Carbon Neutral Government Regulation (2008).
The Greenhouse Gas Emission Reporting Regulation (2016) under GGIRCA ensures that industrial polluters over 10,000 CO2e tonnes per year report their GHG emissions annually. Those operations emitting over 25,000 tonnes per year are required to have their reports independently verified.
The Greenhouse Gas Emissions Control Regulation under GGIRCA establishes infrastructure and requirements for issuing emission offset units and funded units. The regulation also established the British Columbia Carbon Registry which will enable the issuance, transfer and retirement of compliance units (emission offset units, funded units and earned credits) on an electronic platform.
The Clean Energy Act is designed to make BC self sufficient in electricity generation by 2016 with a clean and renewable energy target of 93%. The Greenhouse Gas Reduction (Renewable and Low Carbon Fuel Requirements) Act and the regulation thereunder require minimum fuel content by volume.
In late 2015, the Alberta government announced a new Climate Change Plan (“Climate Change Leadership Discussion Document”) including an industry wide carbon tax which maintains the existing $30 per tonne level on large emitters and also introduces accelerated phase out of coal by 2030 which the new found capacity to be filled by renewable power, an economy wide carbon levy of C$20 per tonne beginning in 2017 to be increased C$30 per tonne in 2018 and followed by a 2% inflation rate thereafter and an absolute limit on oil sands emissions of 100 MT , a new methane gas emissions reduction plan (45% by 2025) and to phase out coal in the next 15 years.
The Alberta government has had an intensity based carbon trading system in place since 2007 when it introduced the Climate Change and Emissions Management Act and the Specified Gas Emitters Regulation. The Specified Gas Emitters Regulation originally imposed incentive based limits on industrial GHG emissions by requiring reductions in emissions by large emitters (more than 100,000 tonnes of C02e annually) below a 2004-2005 baseline intensity or pay C$15.00 for each tonne exceeding the target. Compliance can be achieved by a number of methods: operating improvements; emission performance credits; purchases of verified emission offsets from private sellers; or the purchase of fund credits from the provincial government.
In 2015 the Alberta government announced that by 2017 large emitters will have to reduce their GHGs by 20% and that the carbon levy will rise to C$30.00 per tonne. The Alberta government has not updated the existing targets of 50 MT below the business as usual projection by 2030.
Saskatchewan has a Climate Change Plan, which is designed to reduce GHGs by setting annual reductions targets for industry and encouraging investments in low carbon technologies. Under a the proposed framework, compliance mechanisms such as the Technology Fund, Recognition for Early Action, Pre- Certified Investments, and Emission Intensive Trade exposed credits and carbon offsets will be established to provide flexibility for regulated emitters to meet their GHG reduction obligations. Targets are 20% below 2006 levels by 2020 to be revised once a national strategy is put in place.
The Management and Reduction of Greenhouse Gases Act (2010) once brought into force will require facilities that emit 50,000 or more tonnes of GHGs to reduce emissions to certain provincial standards which are to be determined. Industries that emit less than 50,0000 tonnes of GHGs annually are considered to be non regulated emitters.
New Brunswick (“NB”)
NB’s 2014-2020 Climate Change Action Plan (2014) establishes 2020 and 2050 GHG emission reduction targets of 10% below 1990 levels by 2020 and 75-85% below 2001 levels by 2050. The NB government has been publishing “progress reports” since 2007, which describe emission reduction activities across the province and developments on the adaption side.
The NB government published Guidelines for Greenhouse Management for Industrial Emitters in New Brunswick, (2015) which are designed to assist industrial facilities in developing and adopting a GHG Management Plan as specified in approvals to operate under the Air Quality Regulation under the New Brunswick Clean Air Act. The NB Electricity Act requires that the provincial power authority secure 40% of its power acquired within NB from renewable sources by 2020.
The Greenhouse Gas Emissions Regulations (2009) established caps on the electricity sector and creates incentives for new transmission of carbon emission electricity. The Renewable Electricity Plan included a community feed in tariff program. Nova Scotia has a Climate Change Adaption Fund, is participating in the Atlantic Climate Adaption Solutions, which is a partnership between the four Atlantic Provinces and municipal associations and the federal government to deal with costal impacts and ground water changes from climate change. Nova Scotia also developed an Adaption Work plan and a five year work plan (2014-2019) to enhance the government’s ability to address climate change. Nova Scotia has finalized “An Agreement on the Equivalency of Federal and Nova Scotia Regulations for the Control of Greenhouse Gas Emissions form the Electricity Producers of Nova Scotia”.
Prince Edward Island (“PEI”)
The PEI Climate Change Strategy (2008) was designed to improve educational and public awareness around climate change issues, and reduce GHG emissions through the Office of Energy Efficiency, and enhance carbon sinks. PEI is developing wind as a renewable source of electricity and has fuel efficiency standards for government vehicles.
Newfoundland and Labrador
The Office of Climate Change and Energy Efficiency which has the lead responsibility for strategy and policy development in the areas of climate change, energy efficiency, and emissions trading, has published two planning documents: Charting our Course – Climate Change Action Plan (2011) which sets out a five year plan and develops a GHG strategy for the Energy Intensive Sector and prepares a climate change adaption plan for northern Labrador and Moving Forward: Energy Efficiency Action Plan (2011), which sets out sets an energy policy that is designed to reduce GHG emissions and local air contaminants.
Newfoundland has also published a “Greening Government Sustainability Innovation Collaboration 2015 Action Plan” which is designed to demonstrate provincial leadership in the areas of climate change and energy efficiency and provides the provinces general framework for reducing greenhouse gas emissions.
While each of the three territories: The Yukon, Northwest Territories and Nunavut have expressed plans to implement legislation to combat climate change, to date none of them have done so. Yukon published a climate change strategy in 2006 and two progress reports – one in 2012 and a second in December of 2015. The Yukon has also published a “Pan Territorial Adaption Strategy” and established the Northern Climate Exchange. The Northwest Territories has published a “Northwest Territories Greenhouse Gas Emission Summary Report 2015” as well as a “ Greenhouse Gas Strategy for the Northwest Territories” Nunavut has published “Upagiaqtavut Setting the Course Climate Change Impacts and Adaption in Nunavut” and opened a Climate Change Centre.
Barbara Hendrickson has extensive experience in the carbon trading and offset development area in both the regulated and voluntary markets. Barbara has been ranked as one of the top 10 environmental finance lawyers in Canada by Law Day Leading Practitioners. For more information please see Our Practice Climate Change.