Canada's Kyoto Plan: An Overview of "Project Green
Alexandria Pike*
On April 14, 2005, the federal government unveiled its plan for meeting Canada's Kyoto obligations. The "Project Green" plan proposes a range of measures to achieve Canada's target of 6% greenhouse gas ("GHG") emission reductions below 1990 levels between 2008 and 2012. The plan admits that the original reduction target (240 megatonnes annually) was inaccurate and it is now estimated that Canada must reduce its GHG emissions by approximately 270 megatonnes annually in 2008 — 2012 to meet its Kyoto commitment.
One of the central platforms of the Project Green plan is the emission reductions of large final emitters ("LFEs") including mining, oil and gas and thermal electricity industries. The plan has been criticized for requiring only 45 megatonnes of annual reductions (reduced from the 2002 target of 55 megatonnes annually) from LFEs as those industries contribute almost 50% of Canada's GHG emissions. LFEs may achieve their reduction target by implementing technology to reduce emissions in their facilities, purchasing reductions from other LFEs or purchasing domestic and international emission credits. In addition, investments in technological development (through the new Greenhouse Gas Technology Investment Fund) will be accepted as a compliance measure to a maximum limit of 9 megatonnes.
While the LFE system has not yet been developed (the regulation under the
Canadian Environmental Protection Act, 1999 ("CEPA") is currently being prepared), the plan provides a few details: (a) the LFE system will involve the establishment of regulatory requirements under Part 5 of CEPA instead of the voluntary covenant and regulatory backstop system considered in 2002; (b) new and upgraded facilities will be assessed on a "Best Available Technology Economically Achievable" basis; (c) fixed process emissions (those created by chemical reactions in production, not fuel combustion) will have a 0% reduction target; and (d) the government has confirmed its earlier commitment that LEEs will pay no more than $15 per tonne CO2 equivalent to achieve compliance.1
With light-duty passenger cars and trucks accounting for over 12% of Canada's GHG emissions, the government has focused particular attention on emissions reductions from the auto industry. The Project Green plan includes a voluntary commitment on the part of auto manufacturers to reduce GHG emissions by 5.3 megatonnes by 2010. This voluntary arrangement was undertaken (instead of imposing a regulatory requirement) as the emissions relate to the manufacturers' products, not processes. It is not clear to what extent this commitment will lead to technological improvements and consumer incentives to reduce vehicle emissions. Reduction of vehicle GHG emissions is also to be achieved through the federal government's New Deal for Cities and Communities which is intended to encourage sustainable infrastructure improvements, particularly through the development of public transit. The Project Green plan refers to the New Deal's proposed gas tax transfer to municipalities for such infrastructure spending but no estimate is provided for GHG reductions from this program.
Renewable energy such as wind power, solar energy, biomass and tidal power are considered to be an important component of Canada's Kyoto compliance plan. The plan details the enhancement of the Wind Power Production Incentive and the creation of the Renewable Power Production Incentive as well as tax incentives for capital investments in generation equipment.2 Canada's agricultural lands and forests will also play a role in emissions reductions as the development and efficiency of these "carbon sinks" would be encouraged through the development of an emissions credit system and federal ecological protection programs. The agricultural sink is estimated at a reduction equivalent of 10 megatonnes annually and the forest sink is thought to be up to 20 megatonnes.
Emissions reductions from government activities and the efforts of individual Canadians are estimated to achieve a total reduction of 6 megatonnes and existing programs are estimated to achieve 40 megatonnes annually. Even when existing reduction programs, renewable energy and sequestration programs and LFE obligations are combined, Canada will have made only marginal progress in achieving its reduction obligations. This leads to the most significant element of the Project Green plan: the "Climate Fund". This entity is effectively a purchasing agent of the federal government with over $1 billion to spend on domestic and international offset credits. Canadians with substantial emissions reductions will apply to the federal Ministry of Environment for recognized credits and may then be funded by the Climate Fund. Additional funding opportunities may also be available for such reduction projects from the Partnership Fund: an enhanced federal-provincial-territorial funding entity with $2 to $3 billion to invest in technologies and infrastructure development of benefit to key sectors of the economy.
International offset credits will have to satisfy: (1) Kyoto's Clean Development Mechanism or Joint Implementation requirements, (2) represent real and verified reductions and (3) benefit Canada's sustainability interests (by applying Canadian technology or advancing trade, competitiveness or international development interests). It is predicted that the Climate Fund will achieve emissions reductions in the magnitude of 75 to 115 megatonnes annually while the Partnership Fund is expected to contribute 55 to 85 megatonnes of emissions reductions annually. Commentators have noted that no other government has made such a significant commitment to climate change as Canada has in proposing the Climate Fund.
The Project Green plan sets Canada's course for Kyoto obligations in the context of a transformed and sustainable economy. In addition to reduced GHG emissions, resource productivity is to be enhanced, Canadian technologies developed and lifestyles improved as our cities become more pleasant. Such a grand vision requires significant citizen acceptance and commitment but the government has already identified success in the public arena. The "One-Tonne Challenge", once viewed as a desperate attempt to augment emissions reductions, has proven to be successful in raising awareness and interest in climate change. Whether the Project Green plan will be successfully implemented and can achieve Canada's Kyoto obligations, as well as the broader environmental and economic goals, remains to be seen.
*
Alexandria Pike is a partner at Davies Ward Phillips & Vineberg LLP, (416) 367-6989, apike@dwpv.com.
1 The plan estimates a cost to the federal government of $l0 per tonne of reductions (CO2 equivalent).
2 The WPPI is to receive an investment of $200 million over 5 years with a target of 4000 megawatt generating capacity. The RPPI has a target of up to 1500 megawatts through an investment of $97 million over 5 years.
