Lawyers in Canada: Davis LLP - Legal Advisors Since 1892

Cap and Trade - Will the Feds Move Soon On Emission Trading

The provinces have begun to make announcements regarding emission trading. British Columbia recently signed agreements with both California and Washington to address climate change. These and other initiatives have continued to fuel a growing market in a growing market in emissions credits.

Now the National Roundtable on the Environment and Economy has produced a report (PDF) on the impact of a cap and trade system for greenhouse gas emissions in Canada. The interesting part is that they repeat Mark Jaccard’s recent comments that a price signal has to be sent to the market, and they stress that action sooner rather than later will help minimize the costs. For more information on the study see the article at the Globe and Mail. Hopefully the federal government will follow the lead of the provinces and send a clear message on the price of carbon in the Canadian economy. Until that time speculation and uncertainty will continue to lead the way in this developing field.

Innovative Clean Energy Fund Legislation Enacted

The legislation which implements the Innovative Clean Energy Fund (“ICE Fund”), which was announced in the 2007 BC Budget, was recently proclaimed as effective the Lieutenant Governor. This legislation 1) authorizes a levy on energy products in BC in an effort to raise funds for the ICE Fund; 2) establishes the fund and 3) sets out the criteria for projects that will be eligible for money from the fund. The minister has been directed to consider “projects, programs or incentives” that will:

1. address specific British Columbia energy issues, or related environmental issues that have been identified by the government and

2. do one or more of the following:

• support the development or adoption of pre-commercial clean energy technologies, or of clean energy technologies not currently used in British Columbia;
• reduce the environmental impact of the use, production, generation, storage, transmission, delivery, provision or conversion of energy;
• demonstrate or promote British Columbia clean energy technologies that have good potential for market demand in other jurisdictions;
• reduce the cost or improve the reliability of clean energy sources or associated technology;
• support energy efficiency or conservation.

The 2007 BC Budget allotted $25 million for this fund, although the legislation stipulates that the amount will be equal to any levies charged for this purpose, which is currently proposed to be 0.4%. It is also worth noting that the Minister has the authority to consider ‘projects, programs or incentives’ as these ensures a wide range of policy tools can be used, from a premium for payments on clean energy, to tax incentives and fiscal grants, to the creation of industrial parks, demonstration sites or other infrastructure to facilitate green industries.

Standing Call for Power: BC V. Ontario

BC Hydro released draft rules and a draft energy power agreement on June 20, 2007. In comparison to Ontario Power Authority’s Standing Offer Program it would appear that BC Hydro is unwilling to pay to be green. Both programs are designed to purchase power from renewable energy sources with a capacity of 10MW or less. However, BC Hydro’s focus is clearly on the size of the project, while Ontario focuses on the source of the energy. Under the BC program, energy is paid for at a price of between 6.5 cents and 7.9 cents depending on the location of the facility within British Columbia. If the project meets the EcoLogo clean energy guidelines, an additional premium of 3.05 cents will be paid. This means green power can be bid into the BC Hydro process as high as 10.95 cents per kWh.

The problem however lies in the fact that BC Hydro’s price varies depending on location. Although green power from Vancouver Island pays 10.95 per kWh, power from the Peace Region, where much of BC’s wind power is currently being built, is only paid 9.55 cents per kWh. In Ontario, wind power receives 11 cents per kWh regardless of location. Admittedly, this is a result of the imbalance between the location of the demand and the resources in British Columbia, however another bias against renewable energy appears in the BC Hydro offer as well. For example, both solar and ocean energy are not technologies which will be generating clean energy under the BC Standing Offer.

In Ontario, a price of 42 cents is being offered for solar power, which makes this technology not only a viable alternative, but a technology which has been bid into the process. Given the relatively low price solar would receive in BC, do not expect any solar power projects to be developed under this offer.

In addition, under the BC program only ‘proven’ technologies can be used for generation. This is defined as a technology which is commercially available and which has been producing energy from at least three units for three years. This therefore also knocks out any demonstration or near commercial projects, and prevents this program from being a method of partially funding the development of new areas, such as wave and tidal energy.

Sound emissions limits imposed for wind turbines in British Columbia

On June 7, 2007, the British Columbia government adopted a "Sound emissions regulation for wind turbines sited on Crown land." The regulation specifies a maximum sound emission from wind turbines of 40 dB(A) on the outside of a residence or residential zoned land not owned by the wind project proponent.

The regulation will provide greater certainty for BC wind developers as well as additional comfort for other stakeholders and residents that wind developments will be undertaken in a way that take their concerns into account.

The regulation does not apply to excessive sound resulting from mechanical malfunction or wind turbine damage, but malfunctioning or damaged turbines must cease operation until repairs are completed.

The regulation also makes exception for circumstances where changes to vegetation cover (e.g. forest fires) cause an increase in dB readings. In such cases, the tenure holder must expend reasonable efforts to work with the appropriate responsible parties to restore vegetation cover.

Vatican Power

Here is a small news item from the Infrastructure Journal that we just couldn’t resist posting:

The power of prayer apparently doesn't get the papal kettle boiling; for that the Vatican is seeking a higher power - solar power.

Pope Benedict XVI has requested that deteriorating cement roof tiles of the Paul VI auditorium will be replaced next year with photovoltaic cells - generating enough power to light, heat or cool the 6,300-seat auditorium Vatican officials said.

The Pope has criticised 'the unbalanced use of energy' around the world citing environmental concerns and the safe guarding of natural resources - something he shares with his predecessor, the late John Paul II.

The Paul VI auditorium was designed by architect Pier Luigi Nervi and built in 1969.
The Vatican is considering placing solar panels on other buildings although St Peter's Basilica and other historical landmarks will not be touched.

IJ News wonders if the Vatican is considering other renewable projects.

Editor Angus Leslie Melville ponders:

• Ocean power from the Holy See
• Wave power from papal visits
• Geothermal - hell fire and brimstone
• Biomass - harnessing the heat from incense and the burning bush
• Run of river hydro - for the Holy water power

Merkel sticks to her 2 Degree Guns - But Gets Outgunned

Submitted by Daniel Jarvis

At the 33rd Annual Summit of the Group of 8 in Heiligendamm, Germany (G-8, includes: Canada, France, Germany, Italy, Japan, Russia, the United Kingdom and the United States), German Chancellor Angela Merkel, currently president both of the European Union and of the G-8 summit declared that she would not negotiate on two degrees.

The meaning behind this statement was her attempt to get G-8 countries, including Canada, to agree to deep enough emission cuts to limit global heating to two degrees (3.6 degrees F) by the end of this century. This two degree figure was not Merkel’s creation, but rather borrowed from a 2007 Communication by the European Commission, “Limiting Global Climate Change to 2 degrees Celsius - The way ahead for 2020 and beyond”, and Working Group reports from the International Panel on Climate Change (IPCC) 4th Assessment Report (View Summary for Policymakers - Working Group II: Climate Change 2007: Impacts, Adaptation and Vulnerability).

For Merkel, getting countries to commit to a 50 per cent reduction in greenhouse gas emissions by 2050 compared to the baseline figure for 1990 was the key to keeping temperatures to a two degree rise. This reduction percentage was not agreed upon by all G-8 leaders, but instead they are hailing a political declaration that sets out “substantial” but unspecified cuts in greenhouse gases and a plan to draw up a post-Kyoto deal by 2009. The Chair’s summary provides:

Combating climate change is one of the major challenges for mankind and it has the potential to seriously damage our natural environment and the global economy. We noted with concern the recent IPCC report and its findings. We are convinced that urgent and concerted action is needed and accept our responsibility to show leadership in tackling climate change. In setting a global goal for emissions reductions in the process we have agreed in Heiligendamm involving all major emitters, we will consider seriously the decisions made by the European Union, Canada and Japan which include at least a halving of global emissions by 2050.

We have agreed that the UN climate process is the appropriate forum for negotiating future global action on climate change. We are committed to moving forward in that forum and call on all parties to actively and constructively participate in the UN Climate Change Conference in Indonesia in December 2007 with a view to achieving a comprehensive post 2012-agreement (post Kyoto-agreement) that should include all major emitters. To address the urgent challenge of climate change, it is vital that the major emitting countries agree on a detailed contribution for a new global framework by the end of 2008 which would contribute to a global agreement under the UNFCCC by 2009.

We reiterate the need to engage major emitting economies on how best to address the challenge of climate change. We stress that further action should be based on the UNFCCC principle of common but differentiated responsibilities and capabilities.

Technology, energy efficiency and market mechanisms, including emission trading systems or tax incentives, are key to mastering climate change as well as enhancing energy security. We reaffirmed the energy security principles we agreed at St. Petersburg. In our discussion with the emerging economies we agreed that energy efficiency and technology cooperation will be crucial elements of our follow-up dialogue.

Does this agreement go too far, or hardly far enough? The answer it seems, depends largely on who is doing the answering. One item many hoped would be on the agenda would be an affirmation by the G-8 of raising the share of renewable energy to 20% by 2020, a target set by the European Union in their 2007 Energy and Climate Change ‘Package’. The promotion of renewable energy is clearly on the agenda of many industrialized and developing countries, but the 20% by 2020 target was not seriously considered at this years’ G-8. Perhaps next year at the 34th Summit in Toyako, Hokkaido, Japan.

Airlines Embrace Emission Trading

Greenhouse gas emissions from international air travel were not covered by the Kyoto protocol because of the difficulty in assigning the emissions to a responsible country. Does a Canadian flying from New York to Paris on a Lufthansa flight create GHG emissions that are the responsibility of Canada, the US, France or Germany? Given the small percentage of global emissions that international travel represents, this issue was left to be dealt with at a later date.

It is now a later date. International air travel is growing at a high rate. This in turn means that international air travel (and international air shipping) are increasing as a proportion of total global GHG emissions. Air Canada recently announced it will offer customers a chance to offset emissions, and Expedia offers the same option to its clients. With the writing clearly on the wall, the International Air Transport Association has come forth and stated its support for an international cap and trade system for GHG. IATA has pledged its support for a system that would allot airlines an ultimate cap on the GHG emissions they could emit. Where these emissions were exceeded, the airlines would then have to purchase emissions credits from companies that exceeded their own emissions targets. The IATA briefing notes from the 2007 annual meeting stated that “airlines will likely be net buyers of allowances.”

Utah joins climate change pact

The Western Regional Climate Action Initiative gained a new member on May 21, 2007, when Utah joined the pact. This membership to six States and one province. Utah is a welcome addition as they are a heavily coal-reliant economy whose inclusion demonstrates wide support for this initiative.

Air Canada Offering Carbon Offsets

Air Canada has recently announced that along with the option for meals, blankets and assigned seating, passengers will soon be able to offset the greenhouse gas emissions associated with their flight. The price of the offsets will be a couple of dollars for short hall flights to nearly forty dollars for trans-Pacific flights. For more information click here.

Offsets will be offered by Zerofootprint. This, of course, raises the question of whether or not other airlines in Canada will follow suit. In particular given West Jet’s motto “Because owners care!” will it be following up with an off-set program of its own?