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Pacific Carbon Trust to call for more BC offsets

Submitted by Grant Boyle, Articled Student, Vancouver

On August 31 the Pacific Carbon Trust announced it will issue a general Request for Qualifications (RFQ) for carbon offsets in September 2009. The Pacific Carbon Trust is a Crown corporation established in 2008 to deliver BC-based greenhouse gas offsets to the BC public sector.

The Pacific Carbon Trust, as of July 2009, has signed agreements to purchase offsets in 15 projects ( mainly fuel switching and energy efficiency projects) that are expected to generate over 300,000 tonnes of offsets over a five-year period starting in June 2009.

By June 30, 2011, Pacific Carbon Trust plans to acquire between 700,000 and one million tonnes of carbon offsets as part of the BC government's commitment under the Greenhouse Gas Reduction Targets Act (GGRTA), which was passed in November 2007 and came into force on January 1, 2008. The GGRTA established targets for reducing GHG emissions in BC 33% -below 2007 levels by 2020 and 80% below 2007 levels by 2050.

The legislation requires that all public sector organizations in BC be carbon neutral from 2010 onward. All emission offsets used in order to comply with this regulation must be acquired from the Pacific Carbon Trust. BC's Ministry of Environment has established an emission offsets regulation that sets out requirements for greenhouse gas reductions and removals from projects or actions to be recognized as GGRTA Offsets (Greenhouse Gas Reduction Targets Act, Emission Offsets Regulation.

The upcoming RFQ represents the next stage in the competitive selection process to assess and qualify vendors to supply BC-based carbon offsets
To be considered, carbon offsets must:
• be generated in BC;
• have begun operation after November 29, 2007; and
• meet the BC Emission Offsets Regulation

A notice of the RFQ will be posted on the Pacific Carbon Trust and BC Bid (www.bcbid.ca) websites. This solicitation will be open to proposals for different types of offsets from multiple sectors such as energy, transportation, buildings, agriculture and waste management. A separate, targeted forestry offset procurement call is under development.

U.S. DOE to fund 19 Geologic CO2 Storage Projects

On Monday, August 24 2009, the U.S. Department of Energy announced the selection of 19 projects to enhance the capability to simulate, track, and evaluate the potential risks of carbon dioxide (CO2) storage in geologic formations.

Valued at approximately $35.8 million USD over 4 years, the results of the selected projects will be vital to the fossil energy industry and most notably to the coal industry, which is the United States' most abundant domestic energy resource, supplying nearly 50 percent of the country's electricity requirements. In order to ensure that low-cost electricity from coal-fired power plants remains available, it is necessary to develop economical methods for capturing and storing the greenhouse gas emissions which such plants emit. It is thought that CO2 storage in deep geologic formations is one of the most economical ways to achieve this goal.

The outcome of these projects will serve to further develop technologies and protocols intended to monitor the movement of CO2 in geologic storage areas, verify its location, account for the amount sequestered and assess the risks associated with the placement of the CO2 in geologic formations and its potential release following sequestration.

The projects will be carried out by leading U.S. universities and industrial and technology groups, with overall work to be managed by the Office of Fossil Energy's National Energy Technology Laboratory.

India announces energy efficiency "cap-and-trade" initiative

India's Prime Minister, Dr. Manmohan Singh, announced an ambitious new energy efficiency initiative for his country. The "National Mission on Enhanced Energy Efficiency" is intended to cut energy consumption by 5% and greenhouse gas emissions by 100 megatonnes by 2015.

The Mission comprises several complementary initiatives:

• a cap-and-trade system for energy efficiency allowances;
• expanded use of the global carbon markets, particularly the Kyoto Clean Development Mechanism, to fund energy efficiency projects;
• the creation of two new funds, one to provide guarantees to banks for loans to energy-efficiency projects and the other to support investment in the manufacturing of energy-efficient products and provision of energy-efficiency services; and
• the promotion of Energy Service Company ("ESCO") based upgrades to energy systems in buildings, municipalities and agricultural operations.

Of these initiatives, the proposed cap-and-trade system has attracted the most media attention (see Environmental Finance and Reuters). The Prime Minister's announcement describes it as a "Perform, Achieve and Trade" scheme whereby the government will assign energy efficiency improvement targets to businesses in energy-intensive sectors (the cap). Businesses that beat their targets will generate Energy Savings Certificates that can be sold to businesses that miss their targets (the trade).

The Prime Minister anticipates that the Mission will result in $15 billion of energy efficiency transactions, although it is unclear if these comprise only trades of Energy Savings Certificates or also other economic activity under the Mission.

The proposed system is squarely aimed at energy efficiency and does not provide for any direct regulation of greenhouse gas emissions. Nevertheless, it is suspected that the announcement was purposefully made in the run-up to the Copenhagen negotiations. India has steadfastly refused to agree to binding emissions reduction targets under the successor to Kyoto. The proposed energy efficiency scheme, which has the potential to reduce the country's emissions, will likely be held up at Copenhagen as evidence that India is willing to address climate change - but on its own terms.

US Chamber of Commerce demands EPA hearing on climate change

As reported previously, the U.S. Environmental Protection Agency ("EPA") is set to conclude that "greenhouse gases in the atmosphere endanger the public health and welfare of current and future generations." Not so fast, says the U.S. Chamber of Commerce. "We can't just take their word for it," said Bill Kovacs VP of environmental, regulatory and government affairs for the Chamber. The world's largest business federation is instead calling on the EPA to hold a full public hearing on the science of climate change.

In comments filed in June, the U.S. Chamber of Commerce petitioned the EPA to abandon its finding, stating that the "EPA has not adequately demonstrated from a legal or scientific perspective the necessary components of an endangerment finding." This week, the Chamber followed up with a Supplemental Statement in Support of Petition for EPA to Conduct Its Endangerment Finding Proceeding on the Record, demanding that the EPA hold a public hearing on the validity of its findings about climate change.

Several commentators, including the New York Times, are already likening such a hearing to the "Scopes monkey trial", a reference to the 1925 trial of John Scopes for violating a Tennessee law by teaching evolution instead of creationism.

Many will likely shake their head in disbelief at the position taken by the U.S. Chamber of Commerce, whose members include many high-emitting sectors with a vested interest in preventing climate change regulations from being enacted. Particularly in light of the Nobel-prize winning work of Al Gore and the scientists of the Intergovernmental Panel on Climate Change, a concensus is finally emerging that humans are causing climate change.

However, some proponets of climate change regulation have nevertheless argued that there may be merit in holding a public hearing, even if the outcome will almost certainly be to validate the EPA's proposed endangerment finding. In particular, a public hearing could help put to rest the issue of whether climate change is real and could allow the Obama administration and the EPA to make good on promises of improved transparency.

The EPA may also agree to a public hearing for tactical reasons. The U.S. Chamber of Commerce has made it abundantly clear that it intends to fight the EPA's findings in court. The EPA may seek to control the agenda by holding its own proceeding.

The EPA almost certainly wants to avoid a trial in the courts, which have rejected the scientific basis for EPA regulations in the past. Of particular concern would be a "Request for Correction" application under the obscure
Information Quality Act. The Act, which is little more than a footnote to the Treasury and General Government Appropriations Act for Fiscal Year 2001 (Public Law 106-554), was passed by the Bush Administration, which was notorious for its skepticism of science. Pursuant to the Act, an applicant may challenge any assertion of a federal agency as not meeting the criteria of "quality, objectivity, utility, and integrity." The Act has been successfully used beat back EPA regulations of the pesticide atrazine, despite a decade of scientific research and the decision of the EU to ban its use. Once before the courts, the Chamber would likely rely on the U.S. Supreme Court decision in Daubert v. Merrell Dow Pharmaceuticals. The principles in the Daubert decision, which include the malleable test of whether a conclusion is "generally accepted in the scientific community", has also been used to undermine regulations that are rooted in scientific study.

(Daubert found its way into Canadian jurisprudence through the Supreme Court of Canada's decision in R. v. J.-L.J., but has yet been used to attack environmental regulations.)

For now, the EPA has rejected the chamber's claims, calling a hearing a "waste of time" and saying that a threatened lawsuit by the chamber would be "frivolous." The EPA is confident that the proposed endangerment finding on "the soundest peer-reviewed science available, which overwhelmingly indicates that climate change presents a threat to human health and welfare."

BC's Speech from the Throne shows government plans to stay the course on clean power

Submitted by Grant Boyle, Articled Student

The Lieutenant-Governor's Speech from the Throne to open BC's 2009 Legislative Session ( 1st Session, 39th Parliament ) made clear the government's intention to promote green energy in the province. The speech took direct aim at the BC Utilities Commission's recent rejection of BC Hydro's Long Term Acquisition Plan, indicating the government's intention to give the Commission a "specific direction", to phase out the Burrard Thermal power station, and to set up a new Green Energy Advisory Task Force "to complement the work of the BCUC's long-term transmission requirement review".

Here are some excerpts from the speech:

Green energy will be a cornerstone of British Columbia's climate action plan.

Electricity self-sufficiency and clean, renewable power generation will be integral to our effort to fight global warming.

The BC Utilities Commission will receive specific direction.

Phasing out Burrard Thermal is a critical component of B.C.'s greenhouse gas reduction strategy.

Further, this government will capitalize on the world's desire and need for clean energy, for the benefit of all British Columbians.

Whether it is the development of Site C, run-of-river hydro power, wind, tidal, solar, geothermal, or bioenergy and biomass - British Columbia will take every step necessary to become a clean energy powerhouse, as indicated in the BC Energy Plan.

Government will use the means at its disposal to maximize our province's potential for the good of our workers, our communities, our province and the planet.
While these forms of power require greater investment, in the long run, they will produce exponentially higher economic returns to our province, environmental benefits to our planet and jobs throughout British Columbia.

High-quality, reliable, clean power is an enormous economic advantage that will benefit every British Columbian in every part of this province for generations to come.
Ready access to clean, affordable power has been a huge strategic incentive to industrial development in British Columbia.

We will build on past successes with new strategies aimed at developing new clean, renewable power as a competitive advantage to stimulate new investment, industry and employment.

Growing knowledge industries like database management and telecommunications will increasingly look for new places to invest and create jobs that have clean, reliable, low-carbon, low-cost power.

New energy producers will be looking for long-term investments leveraged through long-term power contracts that give them a competitive edge in our province.

B.C.'s multiple sources of clean, renewable energy are far preferable to reliance on other dirtier forms of power.

We will open up that power potential with new vigour, new prescribed clean power calls and new investments in transmission. New approaches to power generation, transmission and taxation policies will create new high-paying jobs for British Columbia's families.

A new Green Energy Advisory Task Force will shortly be appointed to complement the work of the BCUC's long-term transmission requirement review.

That task force will be asked to recommend a blueprint for maximizing British Columbia's clean power potential, including a principled, economically-viable and environmentally-sustainable export development policy.

It will review the policies, incentives and impediments currently affecting B.C.'s green power potential, and it will identify best practices employed in other leading jurisdictions.

We will promote biomass power solutions and convert landfill waste into clean energy that reduces harmful methane gas emissions.

The government has mandated methane capture from landfills to ensure we deal responsibly with our own waste and convert it to clean energy where practicable.

We can be leaders in the commercialization of cellulosic ethanol and other biofuels, as we are in hydrogen and fuel cell technology.

Diverging GHG emissions reporting requirements in North America

Submitted by Grant Boyle, Articling Student

Recently, American and Canadian leaders have expressed their intention to cooperate on climate policy. In terms of regulations that are actually coming into play, however, it looks like the patchwork approach to greenhouse gas (GHG ) emissions control in North America continues to be the norm. In both countries, regulators are beginning to give official notice for GHG reporting requirements. On one score, the required reporting threshold ( i.e. the facilities that must report emissions - whether this includes office buildings as well as power plants, for instance ), there are already significant differences between the jurisdictions that apparently have not been resolved since Obama came to power and both countries committed to greater cooperation.

The U.S. Environmental Protection Agency is in the process of obtaining final approval from the White House for a reporting rule that would require power plants, industrial facilities and other sources to begin reporting emissions in 2011. The reporting threshold is for sources that emit 25,000 tonnes of CO2 equivalent per year.

In July the Canadian government gave notice that it will require reporting from sources that emit 50,000 tonnes per year. Facilities in Canada that emit this amount must report emissions to the Ministry of Environment by June 1, 2010.

Meanwhile, the Western Climate Initiative has recommended the low threshold of 10,000 tonnes for reporting under its regional emissions trading program.

The province of British Columbia, which is a member of the Western Climate Initiative plans to introduce a mandatory reporting regulation pursuant to its Greenhouse Gas Reduction Act. The British Columbia Ministry of Environment says first emissions reports for the 2010 calendar year (including retrospective reports for the 2006 to 2009 calendar years for facilities with emissions greater than 20,000 tonnes per calendar year) would be required by April 1, 2011, while upstream oil and gas operations would be aggregated and use the lower 10,000 tonne reporting threshold.

BC Hydro delays its decision in Clean Power Call

BC Hydro will not award electricity purchase agreements ("EPAs") under the Clean Power Call until later this fall or early this winter, the utility announced yesterday. BC Hydro has asked the B.C. utilities Commissions ("BCUC") for permission to extend its Competitive Electricity Acquisition Process deadline to December 31, 2009.

BC Hydro said that it needed more time to satisfy itself that proponents had conducted adequate consultations with First Nations that could be affected by the proposed projects. Proponents may be asked to meet "evolved" requirements and to provide additional information before BC Hydro awards the EPAs.

The Globe and Mail reports that Hydro spokesman Dag Sharman said that the delays are in no way linked to the recent rejection of BC Hydro's Long Term Acquisition Plan by the BCUC. However, Tom Hakney, vice-president for policy at the BC Sustainable Energy Association, was not so sure: "It's hard to say what BC Hydro will do. I think the commission's ruling has created, certainly, some uncertainty around the clean call and we will just have to wait and see if BC Hydro chooses to go ahead or not."

BC Hydro is delving deeper into First Nations issues in the wake of the B.C. Court of Appeal's decisions in Carrier Sekani Tribal Council v. British Columbia (Utilities Commission) and Kwikwetlem First Nation, et al v. British Columbia (Utilities Commission). The court clarified that the BCUC has both the jurisdiction and the obligation to determine the constitutional question of whether project proponents have adequately consulted with and accommodated First Nations. BC Hydro and the applicants to the Clean Power Call therefore risk having projects disallowed by the BCUC if consultations are deemed to be inadequate.

In its announcement, BC Hydro advised that it may require additional information from some applicants. It will also be posting additional information about its "evolved requirements" for First Nations consultations on the Clean Power Call website.

Proponents may therefore find themselves in a position of having conducted what are now deemed to be inadequate consultations. It is uncertain whether the extended deadline will leave sufficient time for proponents to go back to the relevant First Nations for additional consultations.

UK Charges Group for Carbon Credit Fraud

In the wake of recent Interpol warnings that organized crime syndicates were taking notice of the potential lucrative fraud opportunities posed by carbon credit offset systems, nine people were arrested in the UK in a suspected $62.8 million carbon credit fraud as of August 20, 2009.

Officers believe that an alleged network of organized crime had been trading large volumes of high-value carbon credits from overseas sources free of value-added tax.

In May, Peter Younger, an Interpol Environmental Crimes Official, stated that "in the future, if you are running a factory and you desperately need credits to offset your emissions, there will be someone who can make that happen for you. Absolutely organized crime will be involved." The nine arrests, are a sure sign that Younger's predictions may be correct.

US Senator John Barrasso recently compelled Congress to take heed of Younger's warnings and realize that with the incorporation of a carbon credit industry, national security issues are certain to arise. "Organized crime will be the place to go to get carbon credits," warned Barasso.

The US, through its Environmental Protection Agency has joined forces with Interpol's Climate Change Crime and Corruption Working Group to explore legislative restraints and potential loopholes that may lead to the development of new crime with respect to climate change.

What does this mean for Canada? Canada is not immune from organized crime, and if Canada does not give serious consideration to the events which occurred in the UK, similar situations are likely to arise in our own nation. The final draft of Canada's voluntary carbon offset system is expected this fall and with such a heavy reliance on self-reporting, the above incidents in the UK are evidence that these systems are left vulnerable to tax fraud schemes.

The Minister of Environment Jim Prentice, has stated that "as Canada's economy is deeply integrated with that of the U.S., with which we share the same environmental space, the two countries must work toward the same climate change objectives." Canada will likely be keeping a close eye on U.S. policy relating to carbon offset systems going forward.

Nova Scotia Power to cut emissions by 10% by 2020

Nova Scotia has committed to trimming emissions from its electricity sector by 10% by 2020. Recently passed regulations impose a declining cap on facilities that emit more than 10,000 tonnes of carbon dioxide equivalent per year.

Only Nova Scotia Power will be caught by the regulations. Its generating stations currently emit about 10 million tCO2e per year, the bulk of which are from its four coal-fired plants.

Nova Scotia Power is already looking for ways to cut its emissions. Like OPG in Ontario, it is test-firing coal plants with blends of coal and biomass. It recently issued a Request for Expressions of Interest to supply biomass to those plants in the future. The deadline for responding is August 28.

Self-Sustaining, Zero CO2 Emissions EcoPlus Home Project Breaks Ground in New Brunswick

Can a family of six live their everyday life without using fossil fuels for a whole year? That is the question that the Eco Plus Home project in Bathurst, New Brunswick, Canada, seeks to answer. The project intendeds to demonstrate how a family can live self sustained in a fully fitted showcase house for one year starting this September. The energy balances of the household consumptions will regularly be published on the EcoPlusHome website, which will also allow the family to share their experience with the public.

Commercially available building technology and household appliances for the showcase house are provided by the Bosch Group. These consist of an electric heat pump, a solar thermal system, a photovoltaic system as well as energy-efficient home appliances including an oven, a refrigerator, a dishwasher, a coffee maker, a washing machine and a dryer. The solar thermal system will generate heat and hot water from free solar radiation, while the heat pump uses geothermal energy. Although the heat pump needs electricity to run, the photovoltaic system will generate much more CO2-free electricity in the course of the year than the heat pump will consume. It is even planned to operate an electric car. Excess electricity will be fed into the public grid and withdrawn when needed. According to the project sponsors, it will be possible for the family to live comfortably in the house even through the harsh Canadian winter, when temperatures drop to minus 30 degrees, all the while still achieving a positive energy balance. CO2 emissions from the Eco Plus Home will be close to zero, whereas a conventional home produces an average of 8 tons of CO2 per year.

The home itself is being provided by Maple Leaf Homes, a Canadian manufacturer of prefabricated homes. When planning the showcase house, emphasis was placed on sustainability without loss of comfort and on the price-performance ratio. Once the experiment is over, similar houses will be offered in the U.S. and Canadian markets.

A Changing Climate Position in China?

A couple of weeks ago, we reported that a number of US Senators had written a letter to President Obama urging (insisting?) that U.S. climate legislation include a "border adjustment mechanism". In an article for Point Carbon , we also noted that China and India, both of which are classified by the UN as developing nations, were not going to be especially pleased with what really amounts to a US tariff on imports. We also predicted that if one country was to eventually capitulate to international pressure on its climate change policy, it would be China.

Are we going to start to see signs of that?

Back on August 5, China's Climate Change Ambassador (seems like everyone has one of these positions now), Yu Qingtai, said that China is looking to halt its emissions as soon as possible, although not at the expense of pulling its tens of millions of people out of poverty. If this seems like a similar tune the Indian government has been singing, that's because it is. You'll recall that the Indian Environment Minister said basically the same thing on July 31.

However, the Chinese position may be slightly softer. According to Reuters, Yu Qingtai also said that "China was willing to thrash out emissions-cutting targets for rich nations at U.N.-led talks later this year, dropping an earlier demand for a reduction of at least 40 percent". Although China is one of the nations advocating for climate funds from developed nations, according to Yu Qingtai, "there is no one in the world who is more keen than us to see China reach its emissions peak as early as possible".

Last week, a study published by some of China's top climate policy advisors concluded that it was feasible for China to peak its emissions by 2030. Although the report does not represent official Chinese policy, it is among several reports out of China which estimate emissions reductions in China in the next 20 years. An article from the Centre for American Progress, the D.C. based think tank headed by John Podesta is optimistic that China's position on climate change is moving in the general direction of the developed world.

Julian Wong from the CAP, reports:

China may announce its next five-year plan as early as this year, and many expect that it will contain even stronger commitments and perhaps incorporate some measure of carbon reductions in the form of benchmarks for reducing carbon intensity. China's State Council, led by Premier Wen Jiabao, last week laid down the objective of incorporating climate change considerations into "the medium and long-term development strategies and plans of government at every level." Also, Sun Qin, the vice chief of the National Energy Administration said he expects the government to complete a comprehensive plan for new and low-carbon energy development by the end of the year. A low-carbon strategy will be a central thread in China's ongoing economic development strategy.

China is also hinting at increased flexibility in the negotiation process. Su Wei, director-general of the climate change office within the National Development and Reform Commission, China's main economic planning agency, has signaled a change in tone, saying, "China will not continue growing emissions without limit or insist that all nations must have the same per-capita emissions. If we did that, this earth would be ruined." China maintains its hard line that developed countries are historically responsible for climate change, but climate envoy Yu has also backed off somewhat from China's previous demands that all developed countries commit to 40 percent reductions in carbon emissions by 2020, saying that, "[a] concrete figure has to be decided by the negotiations; we will get a result in Copenhagen."

This doesn't mean that China is all of a sudden going to abandon its domestic policy and international position on emissions reductions, but it does seem to signal that China may be more flexible than other developing nations. With the world's second highest greenhouse gas emissions, it should be.

U.S. Secretary of State approves Enbridge's Alberta Clipper pipeline

We recently blogged about the pending approval of Enbridge's Alberta Clipper pipeline. Yesterday, the U.S. Secretary of State, exercising powers delegated to that office by the President, approved the project.

The Secretary of State's decision

As discussed previously, the project represents a stark example of the difficulties of balancing environmental, energy and economic policy. It appears in this instance that energy security and job creation prevailed, as reflected in a statement released by the Secretary of State yesterday:

"The Department found that the addition of crude oil pipeline capacity between Canada and the United States will advance a number of strategic interests of the United States. These included increasing the diversity of available supplies among the United States' worldwide crude oil sources in a time of considerable political tension in other major oil producing countries and regions; shortening the transportation pathway for crude oil supplies; and increasing crude oil supplies from a major non-Organization of Petroleum Exporting Countries producer. Canada is a stable and reliable ally and trading partner of the United States, with which we have free trade agreements which augment the security of this energy supply."

However, environmental policy was considered in the decision making process:

"The National Interest Determination took many factors into account, including greenhouse gas emissions. The administration believes the reduction of greenhouse gas emissions are best addressed through each country's robust domestic policies and a strong international agreement. The United States is taking unprecedented steps at home to transform how we produce and consume energy. The president is committed to reducing overall emissions and leading the global transition to a low-carbon economy."

Implications

Critics of the approval point out that the pipeline will make the U.S. even more dependent on oil from the tar sands, which produce higher-than-average lifecycle (i.e., wellhead to tailpipe) emissions. "At a time when concern is growing about the national security threat posed by global warming, it doesn't make sense to open our gates to one of the dirtiest fuels on earth," Sierra Club executive director Carl Pope said in a statement reported in the Financial Post, "this pipeline will lock America into a dirty-energy infrastructure for years to come." The Sierra Club and several other environmental and aboriginal NGOs are planning to file for an injunction to block the construction of the pipeline.

In the meantime, Enbridge is expected to begin work immediately on the $1.2 billion U.S. leg of the 1,600 km pipeline.

The decision is certainly a disappointment for those opposed to the tar sands. However, U.S. environmental policy may yet return to haunt the Alberta Clipper pipeline and other oil sands projects. The statement above from the Secretary of State makes it clear that the U.S. will develop its own domestic policies for addressing climate change. Current legislative proposals, particularly the Waxman-Markey bill (discussed extensively here) provides for "border adjustments", or carbon tariffs, that could be used to price upgraded bitumen out of the U.S. market. Such carbon tariffs would compound the price increases imposed by a Canadian cap-and-trade policy that applied to operations in the tar sands.

As Enbridge prepares to plow several more billion dollars into securing an American market for oil from the tar sands, expect Enbridge to join other oil and gas companies in trying to steer the direction of regulations in Ottawa, Washington, and Copenhagen.

International Climate Funds Disburse Billions?

With Copenhagen just around the corner, developing governments are expressing an urgent need for greater financial contributions from industrialised nations. And how are industrialised nations going to help? One way is climate change funds. Most developing nations, (see our article on India and US protectionism) believe that the industrialised world should pay for their efforts to cope with and adapt to climate change.

It's an expensive proposition.

The world will need a "phenomenal amount of money" to change its energy supply from fossil fuels to cleaner sources and to adapt to climate change, states Yvo de Boer, head of the UN Climate Change Secretariat. Mr. de Boer estimates that beginning in 2020, the cost of reducing greenhouse gas emissions will be $200 billion a year with an additional $100 billion required for adaptation measures. (Adapation refers to people and business adapting to the effects of climate change in order to deliver a sustainable economy vs. mitigation, which is the reaction to rising emissions in order to limit future climate change - most regulatory frameworks address mitigation).

Hundreds of Billions? That's big money.

One of the topics of discussion at Copenhagen in December, will be which countries are going to contribute to climate funds to help developing countries address climate change and to what extent (ie.: how much) are they going to do that.
According to Point Carbon Data collected by the UK's Overseas Development Institute (ODI), has showed that six international multilateral and bilateral funds are responsible for approximately $3 billion in disbursements to more than 830 projects in the developing world which are aimed at reducing greenhouse gas emissions.

The largest contributor is the Global Environment Facility's (GEF) Trust Fund as it relates to Climate Change. The GEF is responsible for nearly $2.4 billion in disbursements to 591 programs. From its inception in 1994, the GEF has supported programs that minimize climate change damage by reducing the risk, or the adverse effects of climate change. On average 32 to 36 countries have contributed, and in its last replenishment in 2006, Canada contributed $131 million, making it the 6th largest contributing nation.

The German Government administered International Climate Change Initiative has disbursed $347 million to 128 international projects supporting climate change mitigation, adaptation and biodiversity projects with climate relevance. The fund intends to focus on countries with a high potential for emissions reduction in view of their significant and rising greenhouse gas emissions.

The Least Developed Countries Fund is managed by the GEF with an aim to address the special needs of the Least Developed Countries. From its inception in 2002, the Fund has aided the 48 Least Developed Countries through disbursements totalled at $47.5 million to over 60 programs. As of May 2009, 19 contributing nations have contributed to the Fund, with Canada being the 10th largest contributor.

The MDG Achievment Fund was established by the Government of Spain and the United Nations Development Programme and made operational in 2007. It has since disbursed $85.5 million to 16 programs aimed at reducing poverty and vulnerability in eligible countries by supporting improvements to environmental management and enhanced climate change adaptation. As of now, Spain and the US are the only two contributing nations to the Fund.

Mexico, Canada's partner in NAFTA, has proposed an "imaginative" climate fund, which aims to bridge the gap between developing and wealthier nations. We previously reported that the Mexican model proposes that countries pay into and are able to receive monies from a fund that may amount to $10 billion a year to help everyone, not just the developing world, adapt to the effects of global warming. Mexico, classified as a developing country by the UN, has suggested that all countries pay into the fund based on that country's economic output, population and fossil-fuel output. Not a bad idea. But still one which is probably subject to governmental budgetary restrictions.

Maybe a better way is the Alberta model. We've told you before about Alberta's climate fund initiative, the Climate Change and Emissions Management Fund (the "Alberta Fund"). The Alberta Fund is a different sort of animal from the aforementioned funds. Why? The Alberta fund, as we've mentioned before, is very unique. The funds mentioned above are funded by government. Because of a link with the compliance mechanism, the Alberta solution is an industry based and funded model. Once the money is paid into the Alberta Fund, the money is segregated and not subject to government allocation processes, unlike the international funds.

The Alberta Fund may only be used for purposes related to reducing emissions of greenhouse gases or improving Alberta's ability to adapt to climate change. Mr. de Boer says that the world is going to need a "phenomenal amount of money" to address climate change globally. The Alberta Fund will, over time, amount to a phenomenal amount - just think - in only one and a half years of compliance, contributions to the Alberta Fund are $122.4 million, with future yearly contributions anticipated to be as high as $100 million. If every jurisdiction had fund like that, imagine the dollars flowing into combating climate change!

And while the objects of the Alberta Fund are different than those international funds listed above, everyone's ultimate goal is the same. Implement effective solutions, bend the emissions curve and ultimately find an answer.

New study calls on mining sector to adapt to climate change

A new study released by the David Suzuki Foundation confirms that the mining sector is particularly vulnerable to the effects of climate change. The study found that variability in climate has already had a material adverse impact on certain mining operations over the past 20 years. On the assumption that such variability will increase in the future, the study recommends that mining companies and government take a more pro-active approach to understanding climate change risk and implementing appropriate adaptation strategies today.

"Because of its dependency on the natural environment, the Canadian mining sector is particularly vulnerable to the consequences of climate change," said Jason Prno, a mining researcher who co-authored the report. "We spoke with mining stakeholders from across Canada and found a significant number believe that climate change is already having a negative impact on their operations."

Specifically, the study found that mines across Canada have been adversely effected over the past 20 years by climate events including:

• droughts decreasing water availability and forcing gravel quarries to curtail production;
• warm temperatures leading to ice road closures; and
• heavy rains shutting down access roads.

The study calls on the mining industry to understand and communicate climate related risks more effectively, to identify adaptation measures that will deliver benefits regardless of the severity of climate change, and look for solutions that combine adaptation and climate change mitigation measures. With an ever-increasing focus by investors (and securities regulators) on the disclosure and management of climate change risk, forward-thinking mining companies should begin taking action now.

The study also calls on the government to assist the mining sector by doing the following:

• mandate that mines plan for climate change (perhaps as part of decommissioning regulations);
• provide regulatory certainty regarding climate change mitigation by quickly enacting emissions management regulations (e.g., a cap-and-trade system); and
• restore funding for research into climate change forecasting and adaptation.

A full copy of the report is available here. Key findings and a summary for decision makers are also available for download.

US "big labor" and green groups launch campaign in support of climate change legislation

As the American Petroleum Institute moves into damage control mode over its alleged support of the "grass roots" Energy Citizens group, US labor unions and environmental groups prepare to launch the "Made in America Jobs Tour" to encourage Congress to pass legislation to create green jobs and mitigate climate change.

The tour is part of Alliance for Climate Protection's Repower America campaign. Leaders of the United Steelworkers, Service Employees International Union, Utility Workers Union of America, Natural Resources Defense Council and the Sierra Club will kick off the tour this week in Ohio. The tour will stop in 22 states and will stress the job-creation benefits of clean energy policies.

Canadian proponents of greenhouse gas regulations will no doubt welcome the campaign. Canadian businesses, however, may have mixed feeling about the initiative. As the name suggests, it has a very strong protectionist agenda that could hinder Canadians from participating in the emerging green economy south of the border.

U.S. public debate surrounding Climate Change heats up a notch

Public debate in the United Sates surrounding proposed Climate Change legislation just heated up a notch (pun intended) as a result of rallies planned by a "Grass Roots" group in about 20 states to express concerns about proposed federal clean air legislation before the U.S. Congress. The rallies are planned prior to Congress' return from its August recess.

The group, called Energy Citizens, is a coalition of more than 100 organizations, including some 15 oil and gas groups. Energy Citizens' plans have gained significant notoriety of late as a result of showing up in an e-mail message from the American Petroleum Institute (API)'s President Jack N. Gerard to chief executives of API's member companies.

As for Gerard's e-mail, it provoked a strong response from Greenpeace USA's Executive Director Phil Radford, who pointed out in a written response that the API's endorsement of Energy Citizen's objective to defeat Climate Change legislation would be contrary to several prominent API members public support for climate action and the Waxman-Markey bill. Such prominent API members notably include Royal Dutch Shell PLC, BP PLC and ConocoPhillips, which are also members of the U.S. Climate Action Partnership (USCAP).

In reaction to the controversy, API claims that the organization is not sponsoring Energy Citizens, which would however appear to contradict the e-mail itself, where the API states that the objective of the rallies is to "put a human face on the impacts of unsound energy policy [...]" and that the API will "call on the Senate to oppose unsound energy policy [...]"

In the closing paragraphs of his e-mail, Gerard asks the API members to "please treat this information as sensitive [...] we don't want critics to know our game plan." To this, Radford simply responds "Game plan known."

As is to be expected, the debate surrounding the proposed legislation will only continue to increase, with groups on each side ramping up their efforts to vilify the other. It will certainly be interesting to see how key players such as the Oil & Gas industry will position themselves, as the more polarized viewpoint holders will most likely not allow them to stay on middle ground.

IESO to launch wind forecasting service

Ontario's Independent Electricity System Operator announced on August 18 that it will launch a centralized wind forecasting service on behalf of wind generators. The service, which is set to launch in 2010, will enhance system reliability and help developers identify windy areas for future wind projects within existing distribution service territories.

"Ontario has been making great strides to install wind power in Ontario,
increasing capacity this year by more than 50 per cent," says Paul Murphy,
President and Chief Executive Officer of the IESO. "Due to the variable nature
of wind generation, accurate wind forecasting is essential to the operation of
an efficient and reliable power system."

Predicting when and where the wind will blow will not only assist the IESO in managing the grid, but will also assist the OPA, the OEB, distributors and project developers to ensure that wind is developed and integrated into Ontario's supply mix in a cost effective manner.

SDTC announces opening of new round of funding

Sustainable Technology Development Canada ("SDTC") will be accepting Statements of Interest ("SOIs") from September 2 to October 21, 2009.

SDTC was created to fund development and demonstration projects, which SDTC also describes as prokecst that take technologies out of the laboratory and prove them in real-world test situations. SDTC funding is not available for primary research and development or for initial proof of concept projects. Applicants must therefore demonstrate that:

• the proposed project is technically sound and undertaken by an applicant with the necessary technical, financial and management capacity;
• the proposed project will be undertaken in a collaborative and innovative manner;
• the new technology and related intellectual property will be diffused in a timely manner in the relevant market sectors; and
• the funding is necessary to ensure that the project proceeds in a manner to ensure broad benefits to Canadians nationally or regionally

Projects must pertain to one of the following primary sectors of Canada's economy:

• Energy Exploration, Production, Transmission and Distribution
• Power Generation
• Energy utilization
• Transportation
• Agriculture, Forestry and Mining
• Waste Management
• Cross-sectoral

To date, SDTC has provided over $376 million in funding to 154 projects. A breakdown by sector is posted here.

Note that SDTC is also running an open call for projects for its $500 million NextGen BioFuels Fund. To be eligible, projects must:

• be a First-of-Kind facility that primarily produces a next-generation renewable fuel at large demonstration-scale;
• be located in Canada;
• use feedstocks that are or could be representative of Canadian biomass; and
• have demonstrated its technology at pre-commercial scale.

UN Talks at Bonn Show CDM Reform Agenda Wide Open

Submitted by: Grant Boyle, Articled Student

Canada and the United States are currently developing carbon offset systems as components of emerging regulatory compliance regimes for controlling greenhouse gas emissions. But what role will international offset systems play, including the Clean Development Mechanism (CDM), in helping North American emitters reach future emissions reduction targets?

Canada and the United States will likely use and may rely heavily on international offsets to meet mid-term targets that are under negotiation leading up to the 15th Conference of the Parties (COP 15)in December in Copenhagen. Canada's April 2007 Regulatory Framework stated that "certain credits" from the CDM could be used for compliance with domestic regulations, limited to 10% of each firm's regulatory obligation. The leading, draft, legislation in the United States, the Waxman-Markey Bill, allows up to one billion tons of offsets from international projects that meet certain requirements.

As of July, the CDM had issued 317 million certified emission reduction credits, and there were over 4500 projects at some stage of development. The CDM is widely expected to continue at the end of the first commitment period of the Kyoto Protocol in 2012, but it will likely undergo reform at Copenhagen and be augmented by new systems or funds.

From August 4 to 10, intersessional, informal consultations were held under the United Nations Framework Convention in Bonn, which forms part of the ongoing discussions leading to COP 15. One of the topics under discussion was the role of the CDM. Some of the ideas on the table include:

Standardized baselines: currently under the CDM there is no formally, centralized system of project protocol development, unlike emerging North American plans or Alberta's or RGGI's ( Regional Greenhouse Gas Initiative) existing offset systems.

Multiplication and Discount Factors: some Parties, for example, are recommending that a post-Copenhagen CDM apply discount factors to certain projects to account for the risk of excess crediting.

Co-benefits: some Parties want CDM projects to produce benefits such as reducing local air pollution or increasing employment in addition to reducing greenhouse gases.

Improving Access to CDM: some Parties want to ensure the CDM is used in a wider range of countries, especially African countries. Most projects to date have taken place in China, India, and Brazil.

Inclusion of Carbon Capture and Storage: currently the CDM does not include carbon capture and storage projects. Is the CDM the right mechanism for such projects?

Sectoral CDM: this approach, which appears to be favoured by the EU, would credit entire sectors (eg. electricity or transport) in developing countries rather than individual projects. Who would sell credits under such an approach, if not an individual project developer?

Funding-based approaches: these include the World Bank's Clean Technology Fund, which receives major funding from the United States as well as the recent Mexican proposal for a Green Fund, that would be financed by both developed and developing countries - a proposal that was officially endorsed by Canadian and American leaders last week in Mexico.

"REDD-plus" ( Reduced Emissions from Deforestation and Forest Degradation Plus Conservation): There is ongoing discussion over how to credit activities to prevent tropical deforestation in developing countries, especially in Brazil, the Congo Basin and Southeast Asia. Deforestation accounts globally for more greenhouse gas emissions than the transport sector.

Crediting Nationally Appropriate Mitigation Actions (NAMAs):
There was discussion at Bonn over NAMAs. By way of background, generally most developing countries will not be expected to take binding emissions reduction targets at Copenhagen, but have agreed to negotiate so-called NAMA's to reduce emissions. Should these actions receive fungible credits?

These proposals will characterize a refined CDM or perhaps a new suite of options through which North American emitters can purchase international offset credits for domestic compliance.

The next intersessional meeting leading up to Copenhagen is scheduled for the end of September in Bangkok.

NAFTA partners commit to integrating continental emissions trading market

On August 10 in Guadalajara, Mexico, Prime Minister Harper, President Obama, and President Calderón signed a joint North American Leaders' Declaration on Climate Change and Clean Energy. The declaration contains the seeds of a continental market for carbon credits, but falls short of promising a truly integrated cap-and-trade scheme. It also includes some other items that are receiving mixed reviews from stakeholders. Undoubtedly, the declaration fits into each country's plans for the negotiations in Copenhagen this fall.

A (somewhat) integrated scheme

Although soft pedaled somewhat by Prime Minister Harper in a subsequent statement, the announcement nevertheless represents a significant victory for Canada. Since the early days of the Obama presidency, Ottawa has been pursuing Washington to commit to a North American scheme. The much touted Clean Energy Dialogue fell short of such a commitment. The Guadalajara declaration represents something much closer to a commitment to work together in managing greenhouse gas emissions.

However, the declaration is clearly not a promise to implement an EU ETS-style integrated emissions management regime. Rather, the countries will remain responsible for establishing domestic emissions management rules, as evidence in the following two points of the declaration:

• We will work together as we set and implement our own ambitious mid-term and long-term goals to reduce national and North American emissions;
• We will work together to develop our respective low-carbon growth plans;

Reference to "our own" goals and "our respective" plans suggest that the countries will retain control over their domestic regulatory regimes, particularly the setting of a cap on emissions (but may share ideas for the same with their NAFTA partners). There may therefore be no legal integration of the North American emissions cap.

However, the declaration appears to contemplate legal integration of the "trade" component of the three countries domestic cap-and-trade systems. The following two points contemplate the development of a cross border market for carbon credits.

• We will develop comparable approaches to measuring, reporting, and verifying emissions reductions, including cooperating in implementing facility-level greenhouse gas reporting throughout the region;
• We will build capacity and infrastructure with a view to facilitate future cooperation in emissions trading systems.

The first of these points appears intended to provide for a level of fungibility of credits, where credits generated in one jurisdiction could be recognized as being equivalent for compliance purposes in another jurisdiction. The second point directly addresses the potential to enable cross border trading of emissions credits.

Interestingly, the declaration draws no distinction between emissions allowances (i.e., the emissions permits that would be distributed by regulators and would be used to implement an emissions cap) and carbon offsets (i.e., credits that are generated as a result of emissions reductions undertaken by entities not subject to the cap and that may be sold to regulated entities for compliance purposes). However, federal Environment Minister Jim Prentice was reported by the Globe and Mail as predicting that the countries would focus initially on the cross border trade of offsets.

A focus on offsets would not be surprising. Carbon offsets are viewed as a policy tool for reducing the overall cost of complying with a cap on emissions. Rather than undertake expensive capital improvements to reduce emissions, regulated players have the option of purchasing offsets from entities that can voluntarily reduce emissions at lower costs. By creating a continental wide market for offsets, the three countries may be able to lower the overall cost of a cap-and-trade system by increasing the supply of offsets.

The possibility of an integrated offset market brings with it the promises and risks inherent in international trade. On the one hand, the U.S. could be a huge market for offsets created by Canadian offset project developers. On the other hand, the opportunity could quickly shrink if the U.S. imposed import restrictions on the number of offsets that could be sourced from Canada (the Waxman-Markey bill already contemplates such a limit) or if Mexico grabs a disproportionate share of the market by supplying offsets at prices that Canadians cannot beat.

Other aspects of the declaration

Proponents of large infrastructure investment will be pleased to see that the declaration also includes commitments to develop a North American smart grid and to cooperate on regional carbon capture and storage initiatives.

Environmentalists are already bristling at absence of firm reduction targets and the inclusion of "wiggle room" in the declaration. For example, the preamble includes the statement that "we support a global goal of reducing global emissions by at least 50% compared to 1990 or more recent years by 2050, with developed countries reducing emissions by at least 80% compared to 1990 or more recent years by 2050" [emphasis added]. The year 1990 is internationally recognized base year for measuring emissions reductions under the Kyoto Protocol. Reference to "more recent years" leaves open the possibility that the NAFTA countries will set less demanding 2050 targets based on later reference years (that have higher baseline emissions).

On the road to Copenhagen

The Guadalajara declaration is almost certainly a component of each of the NAFTA country's negotiating strategy in the run up to Copenhagen. For the U.S., it is evidence that Washington is open to international cooperation on the climate change issue. For Canada, it is likely an attempt to align the country with one of the biggest players at the Copenhagen negotiating table. To get full value of that strategic alignment, however, Canada will have to make good on its promise to table a meaningful domestic emissions regulation proposal before November.

Hillary Clinton faces dilemma about Enbridge's Alberta Clipper pipeline project

Earlier this year, federal Environment Minister Jim Prentice described environmental, energy and economic policy as "parallel roads to the same destination." For Enbridge, which is seeking approval for the U.S. leg of its 1,600 km Alberta Clipper pipeline, that destination may soon be the desk of Hillary Clinton. The Financial Times reported this week that the U.S. Secretary of State is expected to decide as early as this month whether or not to approve the proposal.

The proposal is a stark example of the difficulties of balancing environmental, energy and economic policy.

On the one hand, getting access several hundred thousand extra barrels a day of fuel from its friendly neighbour to the north would certain help the U.S. improve its energy security. Laying several hundred kilometers of pipe would also create a lot of jobs for Minnesotans.

On the other hand, the tar sands have been roundly criticised for the above-average greenhouse gas emissions associated with extracting and upgrading bitumen (as well as for other environmental impacts). Particularly given President Obama's focus on addressing climate change, the U.S. is under significant pressure to avoid increasing its reliance on the tar sands, which could be characterized as "inconsistent with limiting climate change." As discussed in our analysis of the Waxman-Markey bill, there is a fear that even if the pipeline is built, the "border adjustment" mechanism in the bill could later be used to impose carbon tariffs that would kill the value of the investment. Concern over the lifecycle carbon content of the oil sands output is not new: even President Bush, who was much less concerned about the climate change issue, wanted to fetter U.S. federal agencies from buying vehicle fuel derived from non-conventional sources like the tar sands (see our posting here).

What will Mrs. Clinton do? Perhaps delay the decision and allow the parallel roads to converge in Copenhagen. Stay tuned.

The microFIT has arrived (finally)

Having spent the last 5 months refining the Feed-in Tariff ("FIT") for larger generators, the Ontario Power Authority has now released details of the program for generators with a capacity less than 10 kW (the "microFIT"). The OPA invites comments on the draft rules and draft contract until Friday, August 28, 2009. Comments must be submitted through the OPA's online tool.

Based on a preliminary review of the microFIT documents, we suspect that the issues with which the OPA will wrestle include:

• Settlement pricing and mechanism: As discussed in a previous posting, the Ontario Energy Board ("OEB") is exploring settlement options under the FIT and microFIT that may be different from the options that have been considered by the OPA in its development of the FIT. The microFIT documents contain notes to draft indicating that their final form will depend on the approach adopted by the OEB.
• Allowable connection configurations: The draft rules contemplate three types of connection: (i) direct connections exclusively to the distribution system, (ii) direct connections in parallel with metered loads, and (iii) embedded connections in series with metered loads (i.e., "behing-the-meter" connections). Notes in the draft rules suggest that generators may not always have the flexibility to choose any of these three options.
• Inclusion of battery systems: Small-scale renewable systems such a PV panels often integrate battery storage so that surplus energy generated when the sun is shining can be saved for use when the clouds roll in. However, battery storage could conceivably be abused under the microFIT if energy was drawn from the grid through a load meter at relatively low market prices, stored temporarily, and then injected back into the grid through the generator meter at much higher FIT prices. The OPA acknowledges that it must determine "acceptable battery back-up system configurations").

It also remains to be seen if the OPA, the Ministry of the Environment, and the OEB will move to harmonize their definition of a "small scale" project. Currently, any project under 10 kW qualifies for the OPA's FIT. However, the Ministry of the Environment may still require proponents of some projects under that threshold to obtain renewable energy approvals (e.g., the MoE's draft documents require renewable energy approvals for wind projects over 3 kW). Meanwhile, the OEB recently amended the Distribution Code queue exemption provisions to apply not only micro-embedded generation projects under 10 kW, but also to small embedded generation facilities (name-plate rated capacity of 250 kW or less in the case of a facility connected to a less than 15 kV line and 500 kW or less in the case of a facility connected to a 15 kV or greater line). For small scale distributed generation to take off, consumers will need to know that they can participate in the microFIT, avoid the hassle of a renewable energy approval, and jump to the front of the connection queue.

Stay tuned for new developments.

Haida Signs MOU for an Option to Invest in Naikun Offshore Wind Energy Project

Haida Enterprise Corporation ("HEC"), the business arm of the Haida Nation, has signed a Memorandum of Understanding with the NaiKun Wind Energy Group Inc. ("Naikun") for an option to purchase an up to 40% stake in the Naikun Wind energy project off BC's north coast. HEC and the Haida Nation plan to seek federal support for their participation, and consider the initiative to fit with the new Federal Framework for Aboriginal Economic Development.

The $2-billion project will be financed with 70 per cent debt and 30 per cent equity. The Haida equity share is $240 million. NaiKun and Enmax Green Power Inc. currently each own 50 per cent of the project company.

The Naikun project is a proposed 396 MW Phase 1 offshore wind energy project located in the traditional territory of the Haida Nation, in the Hecate Strait (the "Project"). Naikun submitted a proposal for the Project on November 24, 2008 into BC Hydro's Clean Power Call ("Clean Power Call"), and its Environmental Assessment application for Phase 1 to British Columbia's Environmental Assessment Office (EAO) was accepted on May 20, 2009.

Final evaluation of proposals and Electricity Purchase Agreements (EPAs) with BC Hydro were scheduled for Mid-April through June 2009 for the Clean Power Call. Evaluation and execution of EPAs has been delayed, due in part to the British Columbia Utilities Commission's (BCUC) decision on BC Hydro's long-term acquisition plan (LTAP), which we have blogged on a previous post. BCUC's decision has created some uncertainty with respect to the Clean Power Call and how much power will ultimately be purchased by BC Hydro, and when. Despite BCUC's decision, the Government of BC has stated that they remain committed to moving forward with the Clean Power Call, and firmly committed to the BC Energy Plan and that development of clean energy resources in the province remains a priority.

Whether the Clean Power Call proceeds as designed or not, HEC and the Haida Nations involvement with the Project has provided optimism for the Haida Nation and Naikun for a successful wind-energy future off the coast of BC, and ultimately for a signed EPA with BC Hydro.

Major Investments in Biofuels Development

On August 11, 2009 one of the world's largest energy companies, BP PLC, announced that it had entered into a partnership with Martek Biosciences Corp. to advance the development of a technology to convert sugars into biodiesel.

Under the terms of the joint development agreement (the "JDA"), BP agreed to contribute up to $10 million to a research program aimed at enable large-scale, cost-effective microbial biodiesel production. The sugar to diesel technology would use advanced biological science to convert sugars derived from biomass into lipids with the assistance of fermentation micro-organisms; chemical or thermocatalytic processes are then applied to convert the lipids into fuel molecules.

Most noteworthy is the fact that such biodiesel produced from sustainable feedstocks offers the potential to deliver greenhouse gas emission reductions of up to 80-90% when compared to traditional fossil fuel. Other advantages of the proposed sugar to biodiesel pathway over conventional biodiesel made from vegetable oils noted by BP include:

• Acess to a wide variety of biomass feedstocks such as sugar cane, sugar cane waste (bagasse), energy grass and woodchips, which can be produced at scale and in high yield.
• Use of sustainable, non-food, plant biomass as its feedstock.
• Ability to tailor the product for a variety of diesel and jet-fuel needs.
• Reduced exposure to vegetable oil price.

Under the terms of the partnership, all intellectual property developed during the JDA will be owned by BP, with an exclusive license to Martek for application and commercialization in nutrition, cosmetic, and pharmaceutical applications.

The parties will combine Martek's unique algae-based technologies and intellectual property for the creation of sustainable and affordable technology for microbial biofuel production with BP's expertise in fuels markets and applications, and their more recent experience in biofuels production and commercialization.

The BP-Martek partnership announcement comes on the heels of Exxon Mobil Corp.'s July 14, 2009 announcement of a $600 million investment in next-generation algae-based biofuels in partnership with privately held Synthetic Genomics Inc., with the possibility of significantly more investment to follow in order to scale up the technology and bring it to commercial production.

Announcements such as the ones above from industry heavyweights BP and Exxon Mobil - and their underlying funding of the renewable energy sector - clearly demonstrate that the Oil & Gas industry understands that the world faces a significant challenge to supply the energy required for economic development and improved standards of living while managing greenhouse gas emissions and are now decisively positioning themselves to be part of the climate change solution.

Hydro-Québec's Strategic Plan for 2009-2013

On July 30, 2009, Hydro-Québec submitted its Strategic Plan for 2009-2013 (the "Strategic Plan") with the Minister of Natural Resources and Wildlife. The Strategic Plan comprises measures that will support energy efficiency, development of renewable energies and technological innovation.
A few goals of Hydro-Québec's Strategic Plan include:
1. Achieving a 8 billion kWh in energy savings in Québec by 2013;
2. Integrating new wind power capacity by bringing nearly 4,000 MW of wind power onto to the grid by 2015; and
3. Implementing a plan to support transportation electrification. This plan foresees, inter alia, financial support for the development of public transit infrastructure; test driving electric vehicles and experimenting with their integration into the power grid; and planning infrastructure for vehicle charging.

The Strategic Plan will be tabled in a parliamentary commission in the fall of 2009.

U.S. Senators Pen Letter of Warning on American Climate Bill

Ten Democratic Senators sent a letter to President Barack Obama on Thursday last week (August 6) advising that they would not support a climate bill which did not contain provisions to maintain a level playing field for American manufacturing.

Does the letter call the potential success of the U.S. climate bill into question?

The Senators represent midwestern coal producing states. According to the New York Times, without the support of these Democratic Senators, "it is unlikely that the Senate can pass a major climate change bill". As we've reported to you before, the American climate change bill narrowly passed through the U.S. House of Representatives at the end of June. The bill is now moving slowly through the Senate, which is also preoccupied with debates about health reform.

The Senators, Evan Bayh of Indiana; Sherrod Brown of Ohio; Robert C. Byrd and John D. Rockefeller IV of West Virginia; Bob Casey and Arlen Specter of Pennsylvania; Russ Feingold of Wisconsin; Al Franken of Minnesota; and Carl Levin and Debbie Stabenow of Michigan, warn:

"It is essential that any clean energy legislation not only address the crisis of climate change, but include strong provisions to ensure the strength and viability of domestic manufacturing. Further, any climate change legislation must prevent the export of jobs and related greenhouse gas emissions to countries that fail to take actions to combat the threat of global warming comparable to those taken by the United States....In addition a longer term border adjustment mechanism is a vital part of this package to prevent the relocation of carbon emissions and industries if other major emitting carbon countries fail to commit to an international agreement requiring commensurate action on climate change. "

The letter continues to focus on the "border adjustment mechanism" (read: tariff) and suggests that the mechanism could spur countries to reach a global accord in Copenhagen in December "by eliminating the competitive benefit of not acting to address this global problem". The letter concludes "[w]e would find it extremely difficult to support a final measure that does not effectively deal with these important measures. We look forward to working with you and your Administration to ensure that climate change legislation does not produce an international race to the bottom".

Does this letter spell p-r-o-t-e-c-t-i-o-n-i-s-m? Certainly sounds like it. In fact, President Obama confirmed that he was concerned about the letter, calling the tariff provision "potentially protectionist".

This is a serious situation for the President, who has pleged to lead the world to a new treaty in Copenhagen. The newly elected President shot out of the proverbial climate change gate early in his term passing energy efficency and conservation reforms and promising aggressive domestic legislation. The problem is "to get the legislation passed will require compromises aimed at protecting the economies of manufacturing and coal states".

Are countries, such as India and China, faced with a "border measurement adjustment" going to be in a negotiating mood in Copenhagen? Can't imagine they will. Will other Senators whose interests differ from those 10 who penned the letter have their own demands? Can't imagine they won't.

How does this affect Canada?

We know that the Canadian federal government is already closely monitoring the progress of the U.S. climate bill for evidence of protectionist policy. Canada has vowed that its climate change policy will align (although not mirror) that of its largest trading partner. If these Senators have their way and protectionism of the nature they are suggesting is introduced into the U.S. climate bill, Canada's response is going to have to be carefully crafted.

Stay tuned. We'll keep you posted.

OEB issues notice of proposal to move to gross load billing under FIT

This week, the Ontario Energy Board ("OEB") released a notice of proposal to amend the Retail Settlement Code ("RSC") and Distribution System Code ("DSC"). The amendments, which apply only in the context of the OPA's Feed-in Tariff ("FIT") program, would impose gross load billing on load customers that draw power both from the grid and from "behind-the-meter" generators (i.e., embedded retail generators that are connected to load customers in series behind the load customers' meters). As discussed below, the proposed amendments would have implications for load customers, embedded FIT generators, the FIT contract, and local distribution companies ("LDCs").

Under the current regime, load customers with behind-the-meter generation pay both for the cost of the electricity and for non-competitive electriticy costs ("NCEC") and other volume-based charges on a "net load billing" basis. The load customer is billed based not on its full consumption, but on its consumption net of the electricity supplied by the "behind-the-meter" generator. Using power from behind-the-meter generation thus allows a load customer to reduce its utility bill.

Under the proposed amendments the load customer would pay on a "gross load billing" basis. The load customer will pay for electricity, NCECs, and other volume-based charges based on its full consumption, regardless of whether the power is supplied from the grid or by the behind-the-meter generator. Using power from behind-the-meter generation will therefore have no effect on a load customer's utility bill.

The proposed amendments have some very significant implications, including the following:

• Load customers will not be able to avoid paying the "socialized" costs of the electricity grid by installing "behind-the-meter" generation, nor will they be able to insulate themselves from the commodity price of electricity (whether under the RPP or in the wholesale market). Load customers will therefore not be able to fund any part of their investments in behind-the-meter generation out of savings on their utility bills.
• Load customers will tend to be indifferent about the source of their electricity. This indifference will matter where the load customer and the behind-the-meter generator are independent entities. In such cases, the behind-the-meter generator will not reasonably be able to expect the load customer to pay for electricity supplied by the generator. In fact, the load customer may demand compensation for giving the generator the privilege of supplying them with electricity.
• The OPA will have to revise the draft FIT contract schedules dealing with settlement of behind-the-meter generators that are not IESO market participants. Those schedules currently provide that payments to such generators would be based on the amount of power delivered by the FIT generator at a price equal to the FIT price minus the applicable commodity price (i.e., rather than allowing LDCs to collect the commodity charges directly from the load customers, the FIT contract currently contemplates that they will collect them indirectly from the FIT generators by way of a FIT price adjustment).
• LDCs will need more working capital. Under a net load billing arrangement, LDCs would have been able to reduce their working capital requirements because they would be billing for less load and would be responsible for FIT payments discounted by the commodity price. Under the proposed gross billing arrangement, LDCs will be billing on based on full consumption (as they do now) and will be responsible for FIT payments based on the full FIT price, which together will tend to require more working capital. The working capital implications of the proposed amendments may be used to justify LDC rate increases.

The OEB's proposal makes it clear that the changes will apply not only to microFIT projects (e.g., a residential rooftop solar system), but to all behind-the-meter projects under the FIT.

The OEB invites comments on the proposed amendments until August 26, 2009.

BC's first wind farm starts spinning

The first of 34 turbines at AltaGas Income Trust's Bear Mountain Wind Farm began feeding power into BC's electricity grid this week. According to a press release by AltaGas, the project is ahead of schedule. In addition to the one spinning turbine, 24 other towers have been erected and are awaiting installation of their blades. The project is expected to achieve full commercial operation by November of this year.

David Cornhill, Chairman and CEO of the AltaGas Income Trust describes this week's development as "an important milestone for AltaGas and for renewable power in British Columbia." He added that, "AltaGas is committed to growing its renewable power generation capacity. With 1,500 MW of wind power opportunities and an additional 400 MW of run-of-river power opportunities under study or development, AltaGas is well positioned to be a leader in clean energy generation."

B.C., which enjoys an abundance of hydropower but still relies heavily on fossil fuels to generate electricity, is a latecomer to the wind power game in Canada. Quebec, Ontario, Manitoba, Saskatchewan, and Manitoba have installed capacity ranging from 103 MW in Mantoba to 781 MW in Ontario. The Bear Mountain project is expected to deliver 102 MW to the B.C. grid.

Canadian Hydro directors' circular recommends rejecting TransAlta offer

The board of directors of Canadian Hydro Developers mailed a directors' circular this week recommending that shareholders reject TransAlta's take-over bid. The dircetors identified the following as being the most relevant reasons why the bid should be rejected:

• The TransAlta Offer is inadequate, as it does not reflect Canadian Hydro's current value or the value of its extensive growth prospects;
• The TransAlta Offer of $4.55 per Common Share is below current trading prices and is lower than premiums typically paid in Canadian take-over offers. Research analysts have stated that the TransAlta Offer is inadequate;
• The timing of the TransAlta Offer is opportunistic and is prejudicial to Canadian Hydro and its Shareholders;
• The TransAlta Offer is not a permitted bid under Canadian Hydro's Shareholder Rights Plan;
• Superior proposals delivering greater value for Shareholders may emerge;
• Each of Canadian Hydro's Financial Advisors has delivered a written opinion stating that the TransAlta Offer is inadequate from a financial point of view; and
• The TransAlta Offer is highly conditional and is not a firm offer.

Meanwhile, Canadian Hydro has been actively hunting for a white knight. They have established a dataroom to give prospective bidders an opportunity to conduct due diligence on the corporation. Canadian Hydro CEO Kent Brown claims that there has been a lot of interest in the company, but would not disclose who might be in the hunt.

As reported in the Globe and Mail, industry and financial analysts expect TransAlta to raise their bid from $4.55 per share to about $5.00, and expect that the deal could close as high as $5.50 is others choose to bid.

Davis Helps Bring Bioenergy to BC's Power Grid

Davis client, Canfor Pulp Limited Partnership, was one of four biomass projects chosen by BC Hydro to add electricity to BC's power grid. The four projects will burn wood waste to generate year-round electricity, providing carbon neutral fuel for 52, 000 homes. Canfor is expected to begin contributing power to the province soon. Davis lawyers Brian Hiebert and Will Todd acted for Canfor.

To read the Vancouver Sun article on this subject, please click here.

The CCEMC Issues 2009 Call for Proposals: Initial Expressions of Interest Stage

By Robert A. Seidel, Q. C. and Jennifer Cleall

On August 5, 2009 Alberta's Climate Change Emissions Management (CCEMC) Corporation ("CCEMC") announced the 2009 Call for Proposals: Initial Expressions of Interest Stage (" 2009 Call for Proposals"). The CCEMC is inviting Expressions of Interest from project proponents wishing to obtain funding for developing and demonstrating projects that reduce greenhouse gas emissions.

What Does This Mean

"The time for talking is done, it's time for action" - a typical conclusion when Industry and Policy Makers get together in Alberta. Industry has collaborated with policy makers to establish a sustainable funded model that is calling for real innovative projects and in return the CCEMC is committed to funding the projects that meet or exceed its standards.

The plan, based on real dollars in hand, is; before the end of November to notify the best projects to make their full project proposals. From there the project proponents of the best projects are to have their full project proposals in by January 30th of 2010. Meteoric speed in the talk filled world of Climate Change. The fact that the CCEMC has now begun the process of calling for projects is a first in Canada and is clearly the most significant event in the world of climate change innovation in Canada. The model for climate change funding in Alberta is working to create action. In answer to the critics who would rather wait because ________ (fill in which ever of the many reasons you have heard), these actions taken have very sound underpinnings including the conclusion of the consultations summarized in Alberta's Climate Change Strategy as "Albertans also said: Don't wait.". Industry and policy makers obviously listened. Stay tuned and we'll keep you posted on its progress!

The 2009 Call for Proposals

The CCEMC has up to $120 million for project funding for the 2009 Call for Proposals. Up to 50 percent of monies will be invested in green energy production, 20 percent in energy conservation and efficiency and 30 percent in carbon capture and storage.

According to the 2009 Call for Proposals, applications are open to all organizations, including out-of-province and out-of-country entities. Preference will be given to projects where the lead applicant is from industry and projects must take place in Alberta - although applied research and development and technology development may occur outside Alberta.

The CCEMC's investment will be limited to a maximum of $25 million over the life of the project. Projects will last for a term of up to five years. Project proponents must have a minimum of 1/2 of project funding for cost shared projects with the CCEMC. If government funds are available for the project, the project proponent must provide a minimum of 1/3 of the project funding, such that the total funds from government and the CCEMC are 2/3 or less. It is expected that the recipient's contribution to the project will be cash or cash equivalents.

Organizations can submit their proposals online beginning in mid-August up to September 30, 2009. The CCEMC will invite the proponents of the most promising projects to submit full project proposals following the Expressions of Interest stage.

Details of the funding requirements and for more are outlined in the 2009 Call for Proposals Guide: Initial Expression of Interest Stage available at www.ccemc.ca.

We have outlined the importance of the Fund before, but it bears repeating:

• Because of a link with the compliance mechanism, the Alberta solution is an industry based and funded model. Unlike the talk or promise of technology funds Alberta's action assures there is no question about whether money will actually find its way through governmental and political processes to the Fund.
• Money in the Fund is segregated and not subject to normal government budget allocation processes. Rather, monies are collected by Alberta Environment and segregated separately from general revenue to be used to address climate change. This concept is specifically incorporated in the Act, which requires that monies from the Fund "may be used only for purposes related to reducing emissions of specified gases or improving Alberta's ability to adapt to climate change".
• The Fund helps the government of Alberta achieve its policy objectives. By legislating that the Fund be used to specifically focus on emissions reductions and climate change adaptation, it allows Alberta to integrate greenhouse gas solutions with resource management and energy supply strategy and keeps money where it is most needed - to face the challenge of developing and deploying transformative technology.
• The model of the Fund accomplishes a significant goal - the engagement and commitment of industry. The Fund also acts as a sort of "safety valve" to enable a focus on things like greening energy production and consumption along with emissions reduction. All of these are points of engagement for industry rather than some solutions that have been suggested which result in having industry's attention focused only on the availability of offsets, the quality of those offsets, being out of compliance, the price of carbon and whether a market exists.

About the CCEMC

The CCEMC is a not-for-profit, arm's length organization, independent of government, whose mission is to achieve real reductions in greenhouse gas emissions by stimulating transformative change through investments in climate change knowledge, technology development and operational deployment. The Government of Alberta has granted monies to the CCEMC to be used for the purposes of the Climate Change and Emissions Management Fund, which are specified under Alberta's Climate Change and Emissions Management Act.

As we have previously mentioned, under Alberta's climate change regulatory framework, persons responsible for regulated facilities must comply with the Act and supporting Specified Gas Emitters Regulation ("Regulation"). Persons responsible have three choices for meeting their regulated facility's compliance requirements:

• A reduction in the release of greenhouse gases;
• The application of emissions offsets in the Alberta-based offset system; or
• Obtain credits by contributing $15 per tonne to the Fund

The Fund

The monies paid into the Fund do not go into general revenue and must be allocated toward the purposes set forth in the Act and Regulation. The structure of the Fund is unique in the world as a regulatory compliance and climate change financing mechanism and the 2009 Call for Proposals marks a significant step in driving low-carbon investments in Alberta and Canada.

With assistance from Grant Boyle, Articling Student