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Who is the New US Envoy?

Todd Stern, the newly anointed Special Envoy for Climate Change, was former President Bill Clinton's senior representative at the U.N. climate change negotiations in Kyoto. He is, like President Obama, a graduate of Harvard Law who has also authored a number of articles relating to climate change. He argues that climate change needs to be addressed, not only as an environmental issue, but as one that is inextricably linked to U.S. economic and national security interests. He is an advocate of a cap and trade system and contends that containing climate change will require nothing less than transforming the global economy from a high-carbon to a low-carbon energy base.

In his remarks following the announcement, Todd Stern referred to John Podesta as his mentor and expressed his gratitude. John Podesta, also a lawyer, is from Chicago and knows President Obama from his time there. He served as Bill Clinton's chief of staff in the second Clinton administration. He is one of three co-chairs on the Obama transition team and appears to play a very influential role in the administration as an advocate of cap and trade.

It is not likely a coincidence that Mr. Stern was named as special envoy on the same day that the new President directed the Department of Transportation to issue guidelines to require new cars and trucks to meet a standard of 6.7L/100km (35 miles per gallon) by 2020. In one of Mr. Stern's articles he stresses the importance of fighting climate change by requiring that vehicles be more fuel efficient. He wrote in 2007:

"Ours is a vision of an economy in which highly efficient vehicles dominate the roadways, service stations pump large quantities of low-carbon alter- native fuels, incandescent light bulbs are entirely replaced by compact fluorescents, and all buildings employ day lighting, solar heating and cooling, as well as highly efficient appliances and air conditioning."

(See the Centre for American Progress for the entire article).

As Secretary Clinton confirms, the appointment "sends an unequivocal message that the United States will be energetic, focused, strategic and serious about addressing global climate change and the corollary issue of clean energy”. What are the implications for Canada? Stay tuned.

OPA awards 492.1 MW of contracts under RES III

On January 23, 2009, the Ministry of Energy and Infrastructure announced the results of the RES III call for power. OPA awarded six 20-year power purchase agreements to five different proponents. The projects, which are expected to be in service by 2012, will increase Ontario's installed capacity of renewable generation by 492.1 MW.
The following projects will be built:

• Kruger Energy Chatham Wind Project (101.2 MW) in the Municipality of Chatham-Kent (Romney, Raleigh and Tilbury East) by Kruger Energy;
• Greenwich Windfarm (99 MW) in the District of Thunder Bay near township of Dorion by Renewable Energy Systems Canada;
• Talbot Windfarm (99 MW) in the Municipality of Chatham-Kent (Orford and Howard) also by Renewable Energy Systems Canada
• Raleigh Wind Energy Centre (78 MW) in the Municipality of Chatham-Kent (Raleigh and Tilbury East) by Raleigh Wind Power Partnership (Invenergy)
• Byran Wind Project (64.5 MW) in Prince Edward County by SkyPower Corp.
• Gosfield Wind Project (50.4 MW) in Township of Kingsville, Essex County by Gosfield Wind Limited Partnership (Brookfield)

The Ministry's press release emphasize that the projects will directly create 1,132 green collar jobs to and will be indircetly reposnisble for creating an additional 1,090 indirect jobs. "The strength of the chosen projects shows that Ontario is an attractive place to invest and the province is well on its way to maximizing its potential for green, renewable power," said JoAnne Butler, OPA's Vice President of Electricity Resources.

U.S. Announcements

President Obama made the first green moves of his new administration on Monday by directing the Environmental Protection Agency ("EPA”) to reconsider California's request to set its own emissions standards. California and 13 other states whose emissions standards are tougher than those of the US federal government, required a waiver from the EPA in order for those standards to take effect. The Bush administration, citing concerns from the automobile industry, had denied the waiver. President Obama also asked the Department of Transportation to issue guidelines to require new cars and trucks to meet a standard of 6.7L/100km (35 miles per gallon) by 2020. The announcements have repercussions not only for the US-auto industry, but for automakers on both sides of the border, who will have to shift more quickly to building fuel efficient models.

As further evidence of President Obama's commitment to climate change, Hillary Clinton, the new U.S. Secretary of State, named Todd Stern to the newly created post of special climate change envoy on Monday. Mr. Stern, a senior White House Kyoto protocol negotiator under former President Clinton's administration, is appointed to the position to bring the US into a leadership position on the issue of climate change. Secretary Clinton indicated that Stern will represent the US at the UN climate change summit in Copenhagen this December.

What does this mean? What are the connections amongst the issues and the people? It is telling that the first two directives issued by the new President are centered on climate change. With the addition of Mr. Stern as a special climate change envoy, the US is announcing its intention to equate the environment and climate change to economic stimulus and to lead the world from economic crisis.

Canada's Commitment to Climate Change

On January 20, 2009 the Honourable Jim Prentice, Minister of the Environment for Canada, gave a speech in Toronto to the Canadian Council of Chief Executives. The speech focussed on Canada's climate change objectives and policy in 2009 and beyond. The Minister confirmed what many climate change insiders already suspected - that Canada would be evolving from an intensity based performance standard to a cap and trade regulatory regime.

The speech was timely. As Minister Prentice stood before his audience, President Obama's inauguration was taking place in Washington. Cap and Trade, the favoured method for regulating emissions by the new American President, places hard caps on emitters to keep their emissions below specified levels. Minister Prentice clearly recognizes that under the Obama administration, the US is "re-engaging on multilateral climate change negotiations, creating the opportunity for…a North American regulatory regime and a level playing field that will alleviate past concerns about Canadian competiveness”.

How will the Canadian government proceed? Minister Prentice outlined 3 ideas which are at the forefront of the Government's strategy to deal with climate change: (1) endeavour to "do no harm” and avoid measures which would cause Canadian firms to be "not just down by also out”; (2) seek to ensure that federal policies are co-ordinated - climate change regulation would work in tandem with, for example tax policy, tariff policy and technology policy; (3) seek coordination and harmonization between federal and provincial governments and policies.

Minister Prentice also stressed that it is developed nations, like Canada and the United States working together with other developed nations, who will lead the world to cut emissions, with developing nations following suit. Without securing meaningful participation from the Big Five of China, India, Brazil, South Africa and Mexico, efforts of the developed world will be "well-intentioned folly” in the realm of climate change.

To achieve leadership in this area and central to Minister Prentice's speech was his desire to see one shared target between Canada and the United States akin to the collective commitment of the European Union. When President Obama makes his first official state visit to Canada in the upcoming weeks, Minister Prentice hopes that "one of the many points of agreement for action will be commencing a co-operative, bilateral approach to the environment and to energy in ways that spur economic recovery and renewal”.

All roads will lead to the Copenhagen Climate Conference in December, 2009. It's an exciting time. With its natural resources and new technology initiatives in the realm of carbon capture and storage, energy conservation and efficiency and greening energy production, and with Minister Prentice's bright and forward thinking leadership, Canada is poised to be a force to be reckoned with on the world stage.

The full text of the speech is available here: Environment Canada - Media Room

OPG seeks expressions of interest to supply biomass to coal plants

Will the mountains of coal at Nanticoke Generating Station one day be replaced by mountains of switchgrass pellets? Ontario Power Generation is taking further steps to answer that question. OPG had already run some pilot projects in which it co-fired biomass with coal in several of its generating stations. It now wants to assess the commercial feasibility of a large scale switch to biomass.

To that end, OPG has issued a request for expressions of interest (RFEI) for the supply of biomass to Ontario's coal-fired generating facilities. OPG is seeking pricing information regarding the entire solid biomass fuel supply chain, including fuel production, loading/storage, quality control, road/rail/ship transportation, rail equipment, and lakeport terminal services. Interested parties must confirm their participation by February 3, 2009. Responses are due at 3:00 pm on February 26, 2009.

For more background on the announcement, see Tyler Hamilton's article in the Toronto Star.

Ontario shifts cap-and-trade program development into gear

Ontario plans to implement a cap-and-trade program as early as January 1, 2010. That is the somewhat noncommittal position taken by Ministry of the Environment as it begins a year-long public consultation process regarding the design of the program. With little fanfare, the Ministry released a discussion paper last December.

As a partner of the Western Climate Initiative, Ontario will likely use the WCI as the basis for its cap-and-trade program. However, the discussion paper also indicates that the system will be designed in light of federal and North American initiatives.

The paper describes and proposes approaches for the following aspects of a cap-and-trade system:

• Emissions caps: These would be set based on past emissions and would decline over time.
• Scope and points of regulation: Facilities emitting more than 100,000 tCO2e would be subject to regulation in 2010, with the threshold potentially dropping to 25,000 tCO2e in 2012 to harmonize with other trading systems (most notably the WCI). The electricity sector, large stationary combustion sources, fossil fuel production, and industrial processes with significant emissions would all be regulated. With respect to electricity, domestic generation would be regulated at the generators; imported generation at the first point of sale (perhaps by deeming default emissions to imported power).
• Allocation of allowances: Allowances would likely be doled through a mix of auctions and free allocations. To be compliant with the WCI, a minumum of 10% of allowances would have to be auctioned as of 2012.
• Offsets: Offsets that are real, surplus, verifiable, permanent and enforceable would be a recognized compliance tool. To be compliant with the WCI, no more than 49% of compliance obligations could be met through the use of offsets. Agriculture, forestry and waste management offsets have been given highest priority under the WCI. It is likely that protocols would be adapted from a variety of sources, including the Alberta offset system.
• Credit for Early Action: Like the federal Turning the Corner plan, the discussion paper contemplates giving credit for early action (but may eschew the cap of 15 Mt found in Turning the Corner).
• Banking and borrowing: Ontario plans to allow the former and forbid the latter.
• Compliance and reporting: Ontario may have a 1-year reporting period from 2010-2011. The threshold for reporting may be as low as 10,000 tCO2e to allow the government to collect data to set subsequent caps. Beginning in 2012, Ontario will likely move to 3-year compliance periods with a reporting threshold of 25,000 tCO2e to harmonize with the WCI. Ontario wants to avoid imposing multiple reporting requirements on industry. It is already a part of The Climate Registry, a regsitry that has been widely endorsed by provinces and states.

Interested parties are invited to submit comments to:
Heather Pearson
Air Policy Instruments and Program Design Branch
Ministry of the Environment
135 St. Clair Avenue West, 4th Floor
Toronto, Ontario
M4V 1P5
heather.e.pearson@ontario.ca

What Obama's cap and trade plans mean for Canada

The January 2009 issue of the Climate Change Law bulletin predicts the trajectory of U.S. federal cap and trade legislation under the Obama administration.

On January 20, 2009, the United States will have, for the first time, a President who has committed to enacting a national cap and trade program and other mandatory measures to reduce greenhouse gases in the U.S. The Obama administration could table a framework for a climate change plan, along with further legislative proposals from the U.S. Congress in the first months of the 2009. This bulletin identifies some key initiatives and drivers to watch in the U.S. as the new administration takes over.

U.S. federal energy and climate policy under the new Obama administration is of interest to Canadian business for several reasons. [read more...]

PM appoints new ADM to tackle North American carbon trading scheme

The federal government continues to ramp up its efforts to negotiate a North American emissions trading scheme. Effective January 5, Prime Minister Stephen Harper has appointed Bob Hamilton as a new Associate Deputy Minister of the Environment. While details of the appointment have not been publicized, Point Carbon reports that Mr. Hamilton's responsibilities will be to develop a North American carbon emissions trading scheme with the new US administration.

Minister of the Environment Jim Prentice has previously emphasized that climate change represents the intersection of environmental, energy and economic policy (see previous posting). Mr. Hamilton will help bring the economic perspective to the Ministry of Environment. He was associate secretary of the Treasury Board since August 2008 and had previously worked as a senior assistant deputy minister in the tax policy branch of the Department of Finance between 2003 and 2005.

BC Hydro "clarifies" the Clean Power Call target

Clean Power Call bidders and clean power supporters in BC will be relieved to learn that BC Hydro appears to have softened its position with respect to the lower acquisition target of 3,000 GWh per year it announced at the end of last year. In a letter to the BC Utilities Commission dated January 12, 2009, BC Hydro suggested that it may be willing to award EPAs "up to or greater than the original target of 5,000 GWh per year if the EPAs are cost-effective."

Recall that in late December, BC Hydro asked the BCUC for permission to claw back its Clean Power Call target from 5,000 GWh to 3,000 GWh (see this related posting). No doubt this request was received poorly by the independent power producers who had submitted bids based on the original target.

BC Hydro offered the following explanation for its latest change of position:

""The Evidentiary Update includes a load forecast which projects future electricity needs in British Columbia within a large range of outcomes. Even this large range may not necessarily capture all of the uncertainties inherent in possible future demand for electricity. These uncertainties include those associated with the recovery of the economy which is related to world economic events, as well as opportunities created by British Columbia initiatives. Further uncertainties and opportunities result from the potential future demand created by the transformation to a low carbon economy, a British Columbia initiative as well as a world-wide trend. These further uncertainties and opportunities include the switching from other fuels to electricity for personal transportation, mass transit, heating and other applications. As a result of all of these uncertainties and opportunities, and the 2007 Energy Plan's goal to achieve electricity self-sufficiency by 2016, BC Hydro does not want to limit its opportunities to acquire cost-effective renewable power through competitive processes with independent power producers.""

Ontario electricity consumption down 2.3% in 2008

Ontario's used 148 terawatt hours (TWh) of electricity in 2008, 2.3% less than in 2007, reports Ontario's Independent Electricity System Operator (IESO). The IESO attributes the drop to changing economic conditions, increased conservation efforts, and milder weather. Paul Murphy, IESO President and CEO, emphasized the relevance of weather: "While the mild and wet summer of 2008 won't be remembered fondly by vacationers, the increased precipitation led to record levels of hydro output and a low peak demand for electricity due to a reduction in the use of air conditioning.”

Ontario produced a total of 159.3 TWh in 2008 (net exports were 10.9 TWh) from the following sources:

• Nuclear: 53% (84.4 TWh)
• Hydroelectric: 24.1 % (38.3 TWh)
• Coal: 14.5 % (23.2 TWh)
• Gas/Oil: 6.9% (11 TWh)
• Wind: 0.9% (1.4 TWh)
• Other Sources: 0.6 % (1 TWh)

IESO highlighted that coal-fired generation was down 18% from 2007 while wind power was up 35% from 2007. This is consistent with the province's desire to phase out coal while increasing renewable generation capacity. The IESO expects wind production to top 2 TWh in 2009.

Peak demand was also down in 2008. Demand surged above 24,000 MW for only 4 hours in 2008, as compared to 62 hours in 2007.

Despite the softening demand, the average weighted spot market price for energy was $51.67 per megawatt hour (MWh) or 5.2 cents per kilowatt hour (kWh), up slightly from $50.51 per MWh in 2007.

Regrettably, Canada defied 2008 cleantech investment trends

2008 was a record year for global cleantech venture investment. According to Cleantech Group, LLC, venture investment in clean technology in North America, Europe, China and India totalled $8.4 billion, up 38% from $6.1 billion in 2007. Nicholas Parker, Executive Chairman of Cleantech Group, described 2008 as "a quantum leap in talent, resources and institutional appetite for clean technologies", and concluded that "now, more than ever, clean technologies represent the biggest opportunities for job and wealth creation.”

However, Canada appears to have defied the trend in 2008. Despite the global growth, cleantech investment in Canada plummeted by 58% from 2007 to a mere $159 million in 14 disclosed rounds. This retreat by venture investors occurred despite ongoing support from the government, for example through Sustainable Development Technology Canada whose latest round of funding pumped $57 million into 19 cleantech projects.

Many commentators are offering their predictions for the coming year: for example, see Cleantech Group and Toronto Star columnist Tyler Hamilton. Both share a cautious optimism about the level of venture investment in 2009, but concede that even the cleantech sector, which has boomed for years, may contract slightly in the wake of the financial crisis.

IESO: Ontario still on track to phase out coal

"Ontario is well positioned for the phase-out of coal-fired generation by the end of 2014," concluded the Independent Electricity System Operator (IESO) as part of its most recent Ontario Reliability Outlook, released December 22, 2008. OPG is obliged to wean itself off coal by 2014 by Regulation 496/07, which will prohibit the use of coal to fire the Atikokan, Lambton, Nanticoke, and Thunder Bay Generating Stations after December 31, 2008.

The IESO is confident that 10,000 MW of new or planned generation and demand management will be sufficient to support the elimination of coal-fired generation in Ontario. However, the IESO also concludes that Ontario must transform the way it operates its electricity grid and must make significant improvements to transmission infrastructure if the phasing out of coal (and phasing in of renewables) is to be a success.

Before the 2014 deadline, OPG must mitigate the greenhouse gas emissions of its coal-fired generating stations. Last May, the Ministry of Energy imposed greenhouse gas emission targets on OPG (through a Ministerial Directive that was approved by the Ontario Energy Board and two shareholder resolutions passed by the Minister). Emissions from coal-fired generation may not exceed 19.6 Mt CO2e in the 2009 calendar year and 15.6 Mt in 2010.

On November 28, 2008, OPG delivered to the Ministry a strategy for meeting the targets. The strategy has four prongs:

• OPG will designate certain planned outages as CO2 outages. If the IESO needs to dispatch the units during designated CO2 outages, the emissions released as a result will not count towards the targets;
• OPG will manage the operation of the units to minimize wasteful emissions. OPG will designate certain units as Not Offered But Available ("NOBA") for parts of the year. NOBA units will not be started unless a coal-fired unit is forced out of service or the IESO directs the NOBA unit to operate;
• OPG will apply an "emission adder" to the price of coal-fired power. The emission adder is an additional premium per tonne of emissions that is intended to price the unit out of the market at all but peak demand periods. OPG estimates that an emission adder of $7.50 per tonne wil suffice;
• OPG will match its coal purchases to the target emissions.

Interestingly, OPG's strategy does not mention co-firing coal with biomass. OPG is already piloting the use of biomass in each of its four coal-fired generating stations (see the media backgrounder issued in June 2008). Biomass is considered by many to be "carbon neutral", meaning the amount of carbon released when burned is equal to the amount removed from the atmosphere when being grown. Biomass could therefore be used to reduce the reportable emissions of the coal-fired facilities. That biomass co-firing was not included in OPG's strategy likely reflects OPG's reservations about the large-scale implementation of this emissions reduction option.

BC Hydro claws back Clean Power Call target

BC Hydro has asked the BC Utilities Commission ("BCUC") for an amended order slashing the target for the Clean Power Call from 5,000 gigawatt hours (GWh) per year to 3,000 GWh per year. The request was included in an Evidentiary Update to the 2008 Long-term Acquisition Plan ("LTAP"), filed with BCUC by BC Hydro on December 22, 2008.

The request for a 40% cut comes just weeks after the November 25 deadline for Clean Power Call proposals. The request will no doubt come as a shock to the 43 registered proponents who submitted a total of 68 proposals for BC Hydro's consideration. Collectively, these proposals represent about 17,000 GWh per year of production. With a reduced target, competition amongst the proposals will now be even more intense.

BC Hydro's request comes as a result of adjustments to its load forecast and Demand Side Management Plan based on what it refers to as "recent economic events" as well as the expected results of the Bioenergy Call Phase I RFP (BC Hydro announced the successful proposals on December 8). While the new forecasts may reflect BC's needs, some question whether the reduced target overlooks the opportunity to export power to other markets.

Public hearings before the BCUC will commence February 19, 2009. The status of the application can be found on the BCUC website.

Federal offset system on the not-so-Fast Track

The federal offset program does not appear to be materializing as quickly as once anticipated. Protocol developers and policy analysts alike are still waiting for a key announcement, expected last November, regarding the so-called Fast Track Protocol Development program.

Recall from a previous Climate Change Law bulletin that the federal government published a draft guide for offset protocol developers in August 2009. The draft guide included a preliminary list of "fast track" offset protocols. The government intended to consider protocols on the fast track list first based on feedback from industry. The draft guide included a series of deadlines for parties wishing to have specific protocols approved. These deadlines were all to be measured from the date of publication of the final version of the guide.

Environment Canada expected to publish the final version in November 2008. However, a review of the Canada Gazette revealed that, as of today, the final guide has yet to be published. It therefore appears that the starter's pistol for the fast track process has yet to be fired.

The delay in the fast track process suggests that the development of the federal offset program as a whole may also be delayed. Most likely, Environment Canada is reevaluating its priorities in light of intensifying talks with President-elect Obama's team about a harmonized North American approach to climate change mitigation.