Evidence of meeting #22 for Environment and Sustainable Development in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was c-377.
A recording is available from Parliament.
8:55 p.m.
Conservative
The Chair Conservative Bob Mills
I'm sorry to interrupt you, but I really think it's unfair to ask questions of someone who's filling in for their environment critic and wasn't here during any of the hearings.
8:55 p.m.
Conservative
The Chair Conservative Bob Mills
He's not in a position to answer, as you wouldn't be if you were attending another committee. If he cares to answer, that's fine, but I think it's rather unfair to ask him questions in that sense.
8:55 p.m.
NDP
Pat Martin NDP Winnipeg Centre, MB
If I have the floor, I will simply say it would be a foolish strategy on my part to help them with their filibuster of our bill. Why would I want to speak for five minutes and give him time to rest his vocal cords, when the obligation is on them to keep the floor and, I assume, keep us here all night. I want them to pay a price for filibustering this bill, and not give them some kind of freebie. He can keep asking me questions, but I'm not going to play into that game.
Thank you.
8:55 p.m.
Conservative
Luc Harvey Conservative Louis-Hébert, QC
I don't need to catch my breath, as I've only just begun speaking. We're talking about clause 10 of Bill C-377. Let me explain how this bill, specifically clause 10, is problematic in certain respects.
The April 2007 Regulatory Framework for Air Emissions laid out the broad design of the regulations for industrial emissions of both greenhouse gases and air pollutants.
This document sets out the final regulatory framework for industrial greenhouse gas emissions. It includes both an elaboration and a strengthening of the April 2007 regulatory framework. The federal government still intends to work to reach equivalency agreements with any interested provinces that set enforceable provincial emission standards that are at least as stringent as the federal standards. The final regulatory framework will contribute significantly to the commitment in the 2007 Speech from the Throne to implement a national strategy to reduce Canada's total greenhouse gas emissions by 20% below 2006 levels by 2020. The final regulatory framework strengthens the April 2007 regulatory framework in three key respects: All oil sands upgraders and in-situ plants that come into operation in 2012 or after will be required to meet a stringent target based on the use of carbon capture and storage by 2018. All coal-fired electricity plants that come into operation in 2012 or after will be required to meet a stringent target based on the use of carbon capture and storage by 2018. The federal government will establish a clean electricity task force to work with provinces and industry to meet an additional 25 Mt reduction goal from the electricity sector by 2020.
Let's move on to targets.
All covered industrial sectors will be required to reduce their emissions intensity from 2006 levels by 18% by 2010, with 2% continuous improvement every year after that. The target will be applied at the facility, sector or corporate level, as determined after consultations with each sector. Minimum thresholds will be set in five sectors to avoid imposing unreasonable administrative costs on small facilities. Fixed process emissions will receive a 0% target. The definition of fixed process emissions will be based on technical feasibility. To provide incentives to adopt the best available technologies for newer facilities, whose first year of operation is 2004 or later, a target based on a cleaner fuel standard will be applied. There will be an incentive until 2018 for facilities to be built carbon-capture ready. A special incentive will be provided through the target structure for high-efficiency co-generation.
Elaboration of April 2007 regulatory framework: compliance mechanisms
Canada's domestic offset system: The offset system will issue credits for incremental real, verified domestic reductions or removals of greenhouse gas emissions in activities outside the regulations. Offset credits may be used by regulated firms for compliance with their targets. The offset system will be administered in a cost-effective manner and will promote projects in as many sectors and for as many project types as practical.
Firms may use credits from the Kyoto Protocol's Clean Development Mechanism (with the exception of credits for forest sink projects) for up to 10% of their regulatory obligation.
Credit for Early Action Program:
Firms that took verified early action to reduce emissions will be eligible for a total one-time allocation of 15 Mt in credits. These credits will be bankable and tradable, and will be allocated based on clear criteria and a simple, transparent process.
Technology Fund:
Subject to the conditions set out in the April 2007 regulatory framework, firms will be able to make contributions to a technology fund as a means of complying with the regulations.
The technology fund will take a portfolio approach to investing in a range of technology deployment and development projects; the technology fund will own the emission reductions resulting from its investment, based on the cost of the project.
Subject to equivalent conditions as apply to the technology fund, firms will be able to invest directly in pre-certified investment projects, drawing from a menu of projects established by the federal government.
In order to ensure that carbon capture and storage is in widespread use by 2018, firms in sectors that can make use of this technology may be credited for investments in pre-certified carbon-capture-and-storage projects up to 100% of their regulatory obligation through 2017.
Emission reductions
The regulatory framework is expected to achieve approximately 165 Mt in direct and indirect emission reductions from the industrial sector by 2020; that is about a 37% reduction from projected levels or a 21% reduction below 2006 levels. This does not include the additional 25 Mt targeted reductions from the electricity sector.
Next steps
The regulatory framework for industrial greenhouse gas emissions will now be translated into regulatory language. Draft regulations are expected to be published in the Canada Gazette, Part I for public comment in fall 2008. Final regulations are expected to be approved and published in the Canada Gazette, Part II in fall 2009. The 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.
On April 26, 2007, the Government of Canada released Turning the Corner: An Action Plan to Reduce Greenhouse Gases and Air Pollution. This plan set out an ambitious agenda to improve the environment and the health of Canadians through a series of concrete, innovative measures to reduce emissions of greenhouse gases and air pollutants. Rather than relying solely on the voluntary measures used in the past, for the first time, the government is introducing mandatory and enforceable actions across a broad range of sectors. In addition, the government committed to reducing Canada's total emissions of greenhouse gases, relative to 2006 levels, by 20% by 2020 and by 60% to 70% by 2050. The Turning the Corner action plan has several components, including:
a regulatory framework for industrial emissions of greenhouse gases and air pollutants;
the development of a mandatory fuel-efficiency standard for automobiles, beginning with the 2011 model year, as well as action to reduce emissions from the rail, marine, and aviation sectors, and from on-road and off-road vehicles and engines; the implementation of new energy performance standards to strengthen existing energy-efficiency standards for a number of products that consume electricity, including light bulbs, in order to reduce emissions from the use of consumer and commercial products; and the development of measures to improve indoor air quality. Since the release of the Turning the Corner action plan, the Government of Canada has made significant progress in all of these areas. The April 2007 regulatory framework, entitled Regulatory Framework for Air Emissions, laid out the broad design of the regulations for industrial emissions of both greenhouse gases and air pollutants. This document provides a detailed description of the final regulatory framework for industrial greenhouse gas emissions. The framework for industrial emissions of air pollutants will be finalized in spring 2008. Section 2 summarizes the broad regulatory framework for industrial greenhouse gas emissions as set out in April 2007 in the Regulatory Framework for Air Emissions. In Section 3, a brief overview of the consultations undertaken is provided. In Sections 4 and 5, the final greenhouse gas regulatory framework is elaborated, first with respect to the application of the target, and secondly, with respect to the design of the compliance mechanisms. Section 6 reiterates the government's intention to move from an emission-intensity based system to a fixed emission cap system in the future. In Section 7, a summary of the estimated economic impacts of the regulations on industrial greenhouse gases is given. Section 8 outlines the steps in finalizing the regulations.
The regulatory framework for industrial greenhouse gas emissions proposed that the following sectors would be covered by the regulations: electricity generation produced by combustion; oil and gas (including oil sands, upstream oil and gas, natural gas pipelines, and petroleum refining); pulp and paper; iron and steel; smelting and refining (including base metals smelting, aluminum and alumina, and ilmenite (titanium) smelting; cement; lime; potash; and chemicals and fertilizer.
The targets for greenhouse gas emissions will set reductions in emission intensity from 2006 levels that will come into force in 2010. The government has committed to review the regulations every five years in order to assess progress in reaching the government's medium- and long-term emission reduction objectives. The first such review would take place in 2012 and would entail an assessment of the effectiveness of measures taken to reduce greenhouse gas emissions and of advances in industrial technology in order to determine the potential for further emission reductions.
The framework for industrial greenhouse gas emissions has two key components: (1) stringent, mandatory short-term emission-intensity reduction targets, relative to 2006 emissions; and (2) compliance mechanisms that provide firms with flexibility in how they meet their targets. Each of these components will be addressed in turn.
The April 2007 framework set an initial required reduction of 18% from 2006 emission-intensity levels in 2010 for existing facilities. Every year thereafter, a 2% continuous improvement in emission intensity would be required. By 2015, therefore, an emission-intensity reduction of 26% from 2006 levels would be required, with a further reduction to 33% by 2010. The emission-intensity approach ties the emission reduction targets to production. This allows emission reductions to be achieved while accommodating economic growth. New facilities, which are those whose first year of operation is 2004 or later, would be granted a three-year commissioning period before they would face an emission-intensity reduction target. After the third year, new facilities would be required to improve their emission intensity each year by 2%. A cleaner fuel standard would be applied, thereby setting the target as if they were using the designated fuel. A flexible approach would be taken in special cases where the equipment or technology used in a new plant facilitates carbon capture and storage or otherwise offers a significant and imminent potential for emission reductions. The purpose of this policy is to provide an incentive for new facilities to choose cleaner fuels or to invest in the technology needed for carbon capture and storage in other less emission-intensive technologies. For both existing and new facilities, fixed process emissions, which are emissions tied to production and for which there is no alternative reduction technology, would receive a 0% target in the regulations. In other words, for these types of emissions, there is no way, with current technology, for them to be reduced except by shutting down production. In order to provide flexibility and to minimize the economic impact of the regulations, firms could comply with the regulations either by reducing their own emissions through abatement actions or by making use of one of the framework's compliance mechanisms, detailed below.
Technology fund:Firms could obtain credits for compliance purposes by contributing to a technology fund. The fund would be a means to promote the development, deployment, and diffusion of technologies that reduce emissions of greenhouse gases across industry. A third-party entity, at arm's length from government, would be created to administer the fund. A key principle is that there would be no inter-regional transfer of wealth. Contributions to the deployment-and-infrastructure component of the fund, aimed at investments with a high likelihood of yielding greenhouse gas emission reductions in the near term, would be limited to 70% of the target in 2010, falling to 65% in 2011, 60% in 2012, 55% in 2013, 50% in 2014, 40% in 2015,10% in 2016 and 10% in 2017. No further contributions would be accepted after 2017. The research and development component, which would focus on projects aimed at supporting the creation of transformative technologies, would be limited to 5 Mt each year, also ending after 2017. From 2010 to 2012, the contribution rate for the fund would be $15 per tonne of carbon dioxide equivalent. in 2013, the contribution rate would be $20 per tonne. Thereafter, the rate would escalate yearly at the rate of growth of nominal GDP to 2017.
[...] Firms whose actual emission intensity in a given year is below their target would receive tradable credits equal to the difference between their target and their actual emission intensity, multiplied by their production in that year. These credits could be banked for future use or sold to other parties, including other regulated firms.
Offset System: Offsets are projects that result in incremental real, verified domestic reductions or removals of greenhouse gas emissions in activities that are not covered by the federal greenhouse gas regulations. These projects would generate credits that firms could use for compliance purposes. [...] Firms could use certain credits from the Kyoto Protocol's Clean Development Mechanism. Access to these credits for compliance purposes would be limited to 10% of each firm's total target. [...] Firms that took verified action between 1992 and 2006 to reduce their greenhouse gas emissions would be eligible to apply for a share of a one-time credit for early action. A maximum of 15 Mt worth of credits would be allocated, with no more than 5 Mt to be used in any on year. Firms would be required to submit evidence of changes in processes or facility improvements they had undertaken that resulted in verifiable, incremental greenhouse gas emission reductions. The maximum allocation for emission reductions would be one credit for each tonne of carbon dioxide equivalent reduction. If the total tonnage of emission reductions applied for were to exceed 15 Mt, the credits would be distributed to individual firms in proportion to their contribution to the total emission reduction achieved.
Application of the industrial regulatory framework is expected to result in significant absolute reductions in greenhouse gas emissions from 2006 levels. This would put Canada on the path to meeting its national emission reduction target of 20% below 2006 levels by 2020. Under the April 2007 analysis, the economic costs of regulating industrial emissions of both greenhouse gases and air pollutants were estimated not to exceed 0.5% of GDP in any given year up to 2020. At the same time, the environmental and health benefits were estimated to exceed $6 billion per year in 2015. Following the release of the framework in April, 2007, the government consulted extensively with provinces and territories, as well as with non-governmental organizations, Aboriginal peoples, industry, and other stakeholders, on key policy and regulatory development issues in the framework that remained to be elaborated. The federal, provincial, and territorial governments have initiated a cooperative process to work through the regulatory issues, through the Environmental Protection and Planning Committee of the Canadian Council of Ministers of the Environment. Some provinces have indicated an interest in negotiating equivalency agreements with the federal government. The consultations focused on the following issues: Coverage Whether small facilities should be excluded from the regulations in order to minimize administrative burden, and if so, on what basis? Targets How the greenhouse gas target should be applied in different sectors? Whether certain sectors face special circumstances that would require a different application of the framework? Finalization of the definition of fixed process emissions in each sector. How to treat major expansions and transformations? How to incorporate a cleaner fuel standard in the target for new facilities in each sector? How the regulations could provide an appropriate incentive for co-generation?
With regard to the Technology Fund, the consultations focused on the structure of the fund; the eligibility of pre-certified investments in specific projects; emission reductions resulting from fund investments; and the ownership of emission reduction that result from fund investments.
Facility-specific: Each facility within a sector receives an individual target of an 18% reduction from its own 2006 emission intensity. This approach is applied in sectors where factors beyond the control of a facility operator affect emissions. For example, terrain characteristics, elevation, configuration, and diameter of pipe all have an impact on emissions from natural gas pipeline facilities, yet these are features that cannot be altered by existing pipeline facilities. Facility-specific targets are also used in sectors with complex and diverse facility structures. Facility-specific targets will be applied in the following sectors: iron ore pelletizing, potash, base metal smelting, chemicals, fertilizers, iron and steel, ilmenite (titanium), oil sands, petroleum refining, natural gas pipelines, and upstream oil and gas. Sector-wide: All facilities within a sector face the same target, which is an 18% reduction from the sector's average 2006 emission intensity. This approach is applied in sectors where facility structures are more homogeneous in structure across the whole sector and less complex. It will be applied in the lime, pulp and paper, aluminum and alumina, and cement sectors. 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. This approach will be used in the electricity sector, as it provides a strong incentive for investment in new non- and low-emitting power generation since the entire fleet of facilities will include all types of electricity generation. With this approach, electricity companies can reduce their emission intensity by replacing high-emission intensity facilities (for example, coal and other fossil fuels) with non-emitting or lower-emission intensity facilities (for example, wind and other renewable energy, hydro, nuclear).
4.2 Minimum thresholds
Some sectors have a large number of facilities, often including many small facilities that contribute little to the sector's overall emissions. Other sectors have only a few, but large, facilities. It may make sense to exclude very small facilities from coverage by the regulations. The approach taken balances threshold levels to ensure: (1) that the loss in emission reductions will be minimized; (2) that the regulatory burden on both industry and government will be minimized; (3) that similar facilities within a sector will face similar regulatory treatment; and (4) that facilities with similar levels of emissions in different sectors will face similar regulatory treatment. Minimum thresholds will be established for facilities in the chemical, nitrogen-based fertilizer, natural gas pipeline, upstream oil and gas, and electricity sectors.m oil and gas, and electricity sectors.
The upstream oil and gas sector comprises a very large number of facilities with a wide variety in size. The proposed threshold is much more stringent than what is currently used by the Government of Alberta in its July 2007 regulations for emissions in this sector. The government is committed to achieving a common threshold and common reporting regime in Alberta. It will continue discussion with the Government of Alberta on these issues, seeking a common practical approach to emissions coverage, including the phasing of thresholds and the identification of additional measures that could be implemented to address emissions in the rest of the sector. The federal government will also engage in discussions with the Governments of Saskatchewan and British Columbia. These discussions will be informed by the additional information to be provided to the government in response to its December 8, 2007, Section 71 Notice.
In all other sectors, all facilities will be covered by the regulations. 4.3 Fixed process emissions The April 2007 framework stated that fixed process emissions would receive a 0% target in the regulations, and included a general definition of fixed process emissions. After sectoral analysis and consultation with industry, the definition of fixed process emission has been made more precise. Fixed process emission are those emissions that are:
from chemical processes that produce carbon dioxide emissions and are fixed to production; and created in a process where: carbon that is chemically bound in the raw materials is removed from these materials to produce a carbon-free product (that is, less than 1% carbon by mass); carbon is used to remove an undesired component from the raw material and where the raw material is not substitutable; or unintentional oxidation of hydrocarbon feedstocks results from the catalytic conversion of these feedstocks into products; or carbon dioxide entrained in ethane gas feedstock is removed and released to the atmosphere in order to process the feedstock. Fixed process emissions do not include the result of: combustion, where combustion is the exothermic reaction of a fuel with gaseous oxygen; or a process that is for the purpose of reducing emissions of air pollutants from the facility; or the release of formation carbon dioxide from the processing of crude oil or natural gas.
How is a new facility defined?
In the April 2007 framework, new facilities were defined as those whose first year of operation was 2004 or later, but the framework did not specify how major expansions or transformations of existing plants would be treated. New facilities will include facilities that came into operation in 2004 or later and include greenfield facilities, major expansions and major transformations: Greenfield facilities are those built where no facility existed before. Major expansions are defined as a 25% increase in the physical capacity of an existing facility. Major transformations are those in which there have been significant changes to process (further details will be provided in the regulations). Only the expanded or transformed portion of the facility would be treated as new, unless the integrated nature of the facility requires that the entire facility be treated as new. Re-opened facilities would be treated as existing facilities, unless they met one or more of the above conditions.
The application of a cleaner fuel standard will be achieved as follows:
A sector-specific approach will be used to specify a cleaner fuel standard for the determination of targets for new facilities. In sectors where fuel choice is an important factor in a facility's emission intensity, an explicit cleaner fuel standard is needed to ensure that the emission intensity of the sector continues to decrease over time. This approach will apply to the potash, natural gas pipeline, upstream oil and gas, oil sands and electricity sectors. A fuel-specific cleaner fuel standard will apply to the electricity sector which will be equivalent to the emission-intensity performance of: “supercritical” technology for coal-fired generation; “natural gas combined cycle” technology for gas-fired generation; and “oil-fired gas turbine” technology for oil-fired generation.
In the other sectors, the cleaner fuel standard will be based on natural gas. In the case of oil sands, the cleaner fuel standard will be [...]
Mr. Chairman, would the committee be amenable to adopting an adjournment motion?
9:35 p.m.
Conservative
9:35 p.m.
Some hon. members
Agreed.
9:35 p.m.
Conservative