Lawyers in Canada: Davis LLP - Legal Advisors Since 1892

Wave Power Industry Buoyed by the Push for Renewable Energy - but Hurdles Remain

Submitted by Daniel Jarvis.

Wave power has been wanting for attention and capital, with most green and green eyes focused on biofuels, biomass bioenergy, solar and wind. Will wave power ever get its due? In the United States, the fact that the US Federal Energy Regulatory Commission (FERC) is proposing to shorten the permitting process for pilot ocean projects to as little as six months is a hopeful sign.

Harnessing the continual and limitless energy of ocean waves and currents into 100% renewable energy seems like an opportunity to good too be true. In Canada, while remaining a very promising prospect, wave energy projects face a daunting federal, provincial and even municipal regulatory and licensing burden, which has a significant commercial impact. There has also been relatively little federal or provincial support in the past for wave energy, compared to other renewable energy areas.

However, the tide seems to be slowly changing, with federal budget commitments in 2007 to renewable energy and changes to the Capital Cost Allowance (CCA) for businesses to allow a 50% accelerated CCA for eligible equipment (including some equipment that generates electricity using wave or tidal energy) on a straight line basis if purchased within the specified time period.

In BC, an Innovative Clean Energy Fund of $25 million was announced under the BC Energy Plan to help promising clean power technology projects succeed. Ocean (wave and tidal) energy projects are potential candidates of the Fund, but at this point are considered more of a future supply option with great potential, rather than an immediate commercially viable option.

The BC government estimates the cost of ocean energy production at $100 - $360 / megawatt hour, compared to $75 - $91 for Biomass and $700 - $1700 for solar. To test the waters, Canada’s first free-stream tidal power project has been installed at Race Rocks, located ten nautical miles southwest of Victoria, through a partnership between the Lester B. Pearson College of the Pacific, the provincial and federal government, EnCana Corporation and Clean Current Power Systems Incorporated. In addition, BC Hydro is developing a Standing Offer Program to acquire clean electricity from projects up to 10 MW, but it is believed that ocean energy projects will not be eligible at this point under the program which requires proven, commercial technology.

Industry is also moving forward on its own, despite the current regulatory hurdles. Finavera Renewables Inc. is proposing to operate a 5 megawatt wave power plant project off on the west cost of Vancouver Island in the District of Ucluelet. Finavera’s AquaBuOys would be moored several kilometres offshore and convert the vertical component of wave kinetic energy into pressurized seawater by means of two-stroke hose pumps. The pressurized seawater would be directed into a conversion system consisting of a turbine driving an electrical generator, and the power generated transmitted to shore by means of a secure, undersea transmission line. When operational, the 5 megawatt generator would produce enough electricity to power up to 1500 homes.

Australia Gears Up for Carbon Trading

Posted by Daniel Jarvis.

As John Howard’s re-election campaign in Australia warms up, so too has his stance on climate change. Howard signalled yesterday that Australia will develop a carbon trading scheme and invest AU$627 million in new measures (CAD$571 million) to help tackle emissions of greenhouse gases and global warming. Missing from Howard’s speech, were any hard targets for the reduction of GHG emissions, but he has signalled that these would be coming after 2008, so that modeling of impacts could be carried out.

Details of the emissions trading scheme and new measures that have emerged include:

• credits will be issued and auctioned under a “cap and trade” scheme allowing firms to emit a certain level of greenhouse gases. Firms emitting more than their allotted amount will be required to purchase additional credits;
• the deadline for setting up the emissions trading scheme is 2011;
• the scheme will include a “safety valve” emissions fee limit, to ensure that businesses do not suffer unfairly in the transition process;
• firms that cut emissions in the lead-up to the scheme will be rewarded for these cuts;
• research into the potential of nuclear energy in Australia will be funded;
• AU$336 million (CAD$306 million) will be invested in green vouchers for schools to improve energy and water efficiency, with every school eligible for up to AU$50,000 (CAD$ 45,585) to install solar hot water systems and rain water tanks;

Critics are panning Howard’s plan as too little, and too late. They point to Australia’s track record as one of the world’s worst polluters per capita, and one of only two fully industrialized countries (the other being the U.S.) that refused to sign on to the Kyoto Protocol. Howard, however, states that action by his government since 1990, will prevent about 87 million tonnes of GHG’s a year from entering the atmosphere by 2010. In his speech, he also commented that, “Australia will more than play its part to address climate change, but we’ll do it in a practical and balanced way, in full knowledge of the economic consequences of our nation.”

Pine Beetle Projects Get a Boost

Submitted by Daniel Jarvis.

As part of the Canadian federal government’s commitment to invest $100 million over three years in BC to reduce the consequences of the mountain pine beetle (MPB) infestation, the government has announced funding of over $2 million for projects through Natural Resources Canada (NRCan) and is seeking requests for proposals. The federal funding is part of a cost-sharing Canada-BC Implementation Strategy between the federal government and British Columbia, based on the objectives of BC’s Mountain Pine Beetle Action Plan.

The three categories that will receive funding include projects that: 1) address the impacts of MPB infestation on non-timber resources ($1.007 million), 2) examine long-term forest management and timber harvesting ($140,000), and 3) explore alternate uses for the trees killed ($900,000). The deadline for letters of interest is July 31, 2007 and inquiries can be directed to Bill Wilson (bwilson@pfc.cfs.nrcan.gc.ca), Director, Industry, Trade & Economics, NRCan, Canadian Forest Services.

A Carbon Exchange - Coming to an Emissions Trading Scheme Near You

Submitted by Daniel Jarvis

Where an emissions trading scheme is born, so an exchange follows. Carbon exchanges arise in response to mandatory or voluntary emissions trading schemes, platforms where unused greenhouse gas (GHG) emissions credits allocated or auctioned can be traded between participants, and investors can speculate for profitable returns. A comparison of sorts can be drawn to the Toronto Stock Exchange (TSX) which operates along with a framework of Securities rules and regulations for the trading of stocks and other securities.

The Chicago Climate Exchange (CCX) launched in 2003 as the world’s first and North America’s only legally binding GHG emissions trading system, along with an exchange trading platform. Fourteen founding organizations, including Manitoba Hydro, the City of Chicago and Ford Motor Company, voluntarily agreed to participate in the scheme and cut their GHG emissions by 4% within four years.

While the CCX led the way, it wasn’t long before the European Union’s Emissions Trading scheme (EU-ETS) joined the picture in 2005 as the world’s largest and only mandatory multi-country, multi-sector emissions trading scheme. To provide a platform for carbon credits generated through the EU-ETS (also called allowances, or EUAs), the CCX launched the European Climate Exchange (ECX), now the leading carbon exchange operating in Europe handling more than 82% of exchange-cleared trading under the EU-ETS. Other notable European exchanges include Scandinavian-based Nord Pool (11%), Powernext (6%) and the European Energy Exchange (1%).

Since 2006, both the CCX and the ECX have been owned by Climate Exchange Plc (Climate Exchange), a UK publicly listed company on the AIM of the London Stock Exchange. Now the Climate Exchange is seeking to expand its reach and is in talks with Chinese and Indian commodities exchanges to setup carbon exchanges in those countries. These exchanges would presumably be modeled on the CCX since they would operate in conjunction with voluntary emissions trading schemes, as neither country has an emissions trading scheme in place. The idea behind this, being pushed in part by interested corporations, is to get companies and organizations on board now voluntarily, making it easier to transition to a mandatory system down the road. Would Chinese or Indian companies voluntarily join? That remains to be seen, but in China it is thought that with the Olympics coming to Beijing in 2008, corporations will face increasing pressure to act in some way to curb their GHG emissions.

A similar development is also taking place in Dubai, where State-run Dubai Multi Commodities Centre (DMCC) said it plans to setup an exchange for trading credits with fellow AIM listed firm EcoSecurities servicing a middle east carbon trading market.

In Canada, where no voluntary or mandatory emissions trading scheme is (yet) in place, the Montreal Climate Exchange (MCeX) is thought to be the leading contender to become the main platform for trading, when such a scheme, or schemes are operational. The MCeX is owned by the Montreal Exchange (MX), and is a joint venture with the CCX.

Much of the trade worldwide in emissions credits is still carried out via brokers in ‘over the counter’ markets (particularly in London), but with new exchanges being introduced or developed and the volume and type of trade growing and maturing, carbon exchanges will play an increasingly important role. It is estimated that the global carbon market tripled in size to $30 billion in 2006, from $10 billion in 2005, according to a report from the World Bank (although some market participants believe it was 25% higher). The carbon market is dominated by the trading of EUAs through the EU-ETS, with more than 1.1 billion EUAs traded in 2006, worth almost $25 billion, compared with 321 million tonnes traded in 2005, worth just under $8 billion. One EUA is equivalent of one tonne of carbon dioxide.

The main questions looking forward, are: “Who’s Next?”, and “What’s Next?”. Although the who is uncertain, it is likely that as trade continues to grow, more and more exchanges will spring up to facilitate this trade. As for what’s next, as more voluntary schemes are developed, it is likely that an increasing number of companies and organizations will join these schemes over public and corporate pressure. Another likely development is a movement eventually away from voluntary schemes operated by exchanges, towards mandatory schemes setup by countries, regions, or blocs of countries or regions, such as proposed under the Western Regional Climate Action Initiative (WRCAI), which British Columbia has joined. These mandatory schemes, much like the EU-ETS, would lay down the framework for trading through legislation and regulation, and let the market and exchange platforms take over from there.

Tracking Renewable Energy Production

With the establishment of Renewable Energy Portfolios in most Western states, BC’s commitment to produce 90% of its energy from Clean Sources and a growing demand for renewable energy certificates as carbon offsets, it will be important to ensure that each Megawatt of renewable energy produced is only claimed once. This will ensure that projects are not double or triple counted. The California Energy Commission has recently launched a renewable energy tracking system. This system will issue a certificate and a unique serial number for each MW of renewable energy produced and deposited on the grid. The jurisdictions covered include: Washington, Oregon, California, Nevada, Idaho, Utah, New Mexico, Arizona, Colorado, Wyoming, Montana, Texas, South Dakota, Nebraska, British Columbia, Alberta and the northern portion of Baja California.

Real estate lawyers find it isn't easy being green

Jason Hicks quoted in current issue of Canadian Lawyer re: green buildings.

Congratulations Jason!