Intensity of greenhouse gas debate continues to increase
Submitted by Andrew Lord
The federal government released the details of its plan to reduce industrial greenhouse gases last week. The plan has already drawn a lot of fire from various groups. Much of the criticism focuses on the fact that the Conservative government does not plan to regulate aggregate emissions, but has instead chosen to regulate emissions intensity.
Aggregate emissions are the total emissions of greenhouse gases for a particular industry, sector or country over a given period. Aggregate emissions drive climate change and are the subject of instruments like the Kyoto Protocol. Emissions intensity, by contrast, refers to the quantity of greenhouse gases that may be emitted for a given unit of industrial production. The problem with an emissions intensity based regulation is that aggregate emissions can rise if industrial production rises. Intensity-based targets may therefore not actually mitigate climate change.
The government's focus on emissions intensity is being attacked on at least three fronts: policy, economics and law. First, policy-focused NGOs have been quick to highlight the inherent flaw in the emissions intensity-based approach, pointing out that the plan will not achieve its stated objective of mitigating climate change. For example, Claire Demerse of the Pembina Institute noted that the plan is misleading where it states that the targets will "effectively require oil sands starting operations in 2012 to implement carbon capture and sequestration (CCS)" (as reported by Point Carbon) She notes that the plan actually requires no such thing, but only provides financial incentives for using the technology. Depending on the overall economics of the project, such incentives may be insufficient to prompt the desired mitigating action.
Economists have also criticized the approach as being out of step with the emerging global carbon market. Rik Parkhill, interim co-chief executive officer of the TSX Group said that an "intensity-based system in Canada, apart from being potentially incompatible with other, larger and more liquid markets, could be smaller and less efficient for intensity-based trading that for a system based on trading under a strict cap" (as reported by Reuters). A strict cap on aggregate emissions, such as that imposed under the EU Emissions Trading System, would create the scarcity that is required to establish a reliable and compelling price for carbon. A reliable and compelling price is necessary to create sufficient liquidity in the proposed carbon market. To ensure that Canada is included in a liquid international market, Parkhill anticipates that exchanges and other financial regulators will continue to "lobby hard to make sure that carbon trading systems are wrestled into some form of compatible form on both sides of the pond."
Finally, a decision released by the Federal Court last week turned on the efficacy of emissions intensity based targets. The case concerned a challenge by several NGOs of a joint Alberta-Federal panel's environmental assessment of the proposed Kearl oil sands project. The panel concluded that intensity-based mitigation measures and regulations would be sufficient to ensure that greenhouse gas emissions from the project would not result in significant adverse environmental impacts. The Federal Court took issue with the fact that the panel had not provided cogent reasons in support of that conclusion. The court held that "given the amount of greenhouse gases that will be emitted to the atmosphere and given the evidence presented that the intensity based targets will not address the problem of greenhouse gas emissions, it was incumbent upon the Panel to provide a justification for its recommendation on this particular issue." The court therefore ordered that the matter be remitted to the same panel with the direction to provide a rationale for its conclusion.
In light of all of the above criticism, perhaps the federal government will feel compelled to do the same.