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Governments of Canada and of Québec announce major Green Infrastructure Investment in Québec City

Today the Honourable Josée Verner, Minister of Intergovernmental Affairs, President of the Queen's Privy Council for Canada and Minister for La Francophonie and Minister responsible for the Québec City Region, Ms. Line Beauchamp, Minister of Sustainable Development, Environment and Parks, and Mr. Sam Hamad, Minister of Employment and Social Solidarity and Minister responsible for the Capitale-Nationale region of Québec, announced support for a major Green Infrastructure Project in Québec City (the "Project"). The Project represents a global investment of $57 million and will create more than 450 direct and indirect jobs in the region.

The Project involves the construction of an organic waste treatment facility, including biomethanization and composting equipment. In its first five years of operation, it is expected the facility will be capable of treating up to 70% of the organic waste produced by the entire population of Québec City. Once at full capacity, it will treat up to 85,000 tonnes of organic waste previously destined to incineration. Biomethanization is the process of decomposing biomass with anaerobic bacteria to produce biogas, a Green Fuel that can displace fossil fuels in automotive or home heating applications.

Of the overall investment, the Government of Canada has committed to contribute close to $17 million, or up to one third of eligible costs. The federal contribution to the Project will be provided through the new, $1-billion, five-year, nation-wide Green Infrastructure Fund, which is part of Canada's Economic Action Plan announced in the January 2009 Budget. The Green Infrastructure Fund supports sustainable energy generation and transmission, as well as wastewater treatment and solid waste management at the municipal level.

As for the Government of Québec, it is to fund approximately $17.7 million of the Project. The provincial contribution is being granted under the province's Program for the Treatment of Organic Matter through Biomethanization and Composting (French-only) (the "Program") which benefits from a total investment of about $650 million, of which at least $187 million is to come from the Government of Québec. Projects funded under the Program are to create approximately 5,200 direct and indirect jobs. The Program aims to implement one of the major components of Québec's new Management of Residual Materials Policy (French-only) by progressively banning the landfilling of organic matter by 2020, while contributing to the achievement of the province's GHG emissions reduction target.

Québec City Mayor Régis Labeaume announced that the remainder of the Project's cost will be borne by the City.

The federal government is also evaluating other biomethanization projects to be undertaken in the province of Québec under the Green Infrastructure Fund. The total federal investment in these biomethanization projects could reach more than $170 million.

Canada, BC and the Fraser Basin Council Initiate a BC Regional Adaptation Collaborative

The Government of Canada announced a $6.9 million Regional Adaptation Collaborative program for BC ("BC RAC") this week, aimed at addressing the adverse impacts of climate change on water in BC. The project entitled Preparing for Climate Change: Securing BC's Water Future builds on key risks and adaptation opportunities identified in the BC chapter of Natural Resources Canada's report: From Impacts to Adaptation: Canada in a Changing Climate 2007.

The purpose of the BC RAC program is to assist government, First Nations, the private sector, communities and resource managers prepare for climate change through four initiatives: water allocation and use, forest and watershed management, flood protection and flood plain management and community planning. Over the next 3 years, the program will develop adaptation tools and support focused collaboration at the regional level, to facilitate regional adaptation planning and decision making. According to David Marshall, Executive Director of the Fraser Basin Council:

"We are all now faced with a dual challenge: first, to tackle climate change by moving to low-carbon economy and second, to minimize impacts that climate change is already having on watersheds. A collaborative approach is key to success, along with a frank acknowledgement that water is precious and can't be take for granted."

The program is one of several new actions undertaken by the Province to overhaul its water management laws and fulfill its committments for managing water resources and riparian areas under its Living Water Smart plan. See our previous blog on BC's Water Act modernization process.

BC RAC projects will be co-lead by the Fraser Basin Council and the BC Ministry of Environment with funding from NRCan and 18 regional partners.

SEC issues climate change disclosure guidance

As anticipated, the U.S. Securities and Exchange Commission ("SEC") voted 3-2 yesterday to release interpretive guidance regarding climate change disclosure by public companies. The guidance clearly signals the SEC's heightened expectation regarding climate change disclosure. However, issuers may find that the guidance raises more questions than it answers.

SEC Chairman Mary Shapiro was careful to emphasize that yesterday's release constitutes guidance, not an amendment to existing disclosure rules. She also noted that the SEC was expressing no view regarding the existence, pace or causes of climate change. This caveat reflects the highly politicized nature of the climate change issue in the U.S. Despite the "political sensitivity" of the issue, the SEC's guidance is intended to ensure that "disclosure rules are consistently applied...so that investors get reliable information."

The guidance, which is not yet available on the SEC website but is summarized in a press release, highlights that the following four issues may require disclosure:

• "Impact of Legislation and Regulation: When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material. In certain circumstances, a company should also evaluate the potential impact of pending legislation and regulation related to this topic.
• Impact of International Accords: A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change.
• Indirect Consequences of Regulation or Business Trends: Legal, technological, political and scientific developments regarding climate change may create new opportunities or risks for companies. For instance, a company may face decreased demand for goods that produce significant greenhouse gas emissions or increased demand for goods that result in lower emissions than competing products. As such, a company should consider, for disclosure purposes, the actual or potential indirect consequences it may face due to climate change related regulatory or business trends.
• Physical Impacts of Climate Change: Companies should also evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business."

Interestingly, the guidance does not provide any guidance as to when companies should disclose actual emissions data. Presumably, it will be left to the issuers to determine when this level of detail is material.

Particularly challenging will be the call to disclose the impact of "pending legislation and regulation", the "potential indirect consequences it may due to climate change related regulatory or business trends", and " potential material impacts of environmental matters on their business". This type of speculative disclosure begs several questions: To be material, do pending legislation or potential consequences have to be possible, probable or certain? How are companies expected to assess the probability and likely magnitude of the impact of future contingent events? On whose assessment may they rely? What happens if an issuer provides disclosure based on speculation today that proves to be wrong tomorrow?

Given that these questions remain unanswered, we expect that any disclosure provided in response to the new SEC guidance will be heavily qualified. We also expect that many companies will rely heavily on professional advisors to assist with this speculation. Issuers will no doubt proceed cautiously when preparing climate change disclosure this year. They will have to balance the need to say something that takes the new guidance into account with the risk of saying something that harms share prices and is later found to have been unfounded or unnecessary to disclose.

As discussed in a previous posting, the SEC's guidance will certainly be taken into consideration by the Ontario Securities Commission as it develops its own climate change disclosure guidance in time for the 2010 annual report season.

Canada qualifies its stated emissions reduction goals

In remarks that are consistent with Canada's declared position over the past several months, federal Environment Minister Jim Prentice emphasized to the Globe and Mail that Canada's top priority is harmonizing its approach to regulating greenhouse gasses with that of the U.S. Minister Prentice clarified that such harmonization extends to the setting of reduction targets: "By definition, that means we will want to see our targets and the American targets equated, we want to see our base years equated, and we condition our position [on targets] as requiring commensurate U.S. effort."

In Copenhagen in December, Canada declared its target to be a reduction of 20% from 2006 levels by 2020, which it believed to be equivalent to the U.S.'s declared goal of a reduction of 17% from 2005 levels by 2020.

However, some expect that the U.S. may soften its target to help pass the draft climate change bill (which is currently languishing in the Senate). Minister Prentice's comments suggest that Canada would follow suit.

Minister Prentice also said that Canada will likely follow the overall approach to regulation adopted in the U.S. If the Waxman-Markey bill dies in the Senate, the Obama administration may turn to the Environmental Protection Agency to act on its endangerment finding by regulating emissions under the Clean Air Act.

Critics lament the Minister's comments, fearing that the federal government's strategy of following the U.S. is as much a tactic for further delaying the regulation of large emitters in Canada.

BC Renewable and Low Carbon Fuels Act provides opportunity to sell 'over-compliance' rights

The BC Greenhouse Gas Reduction (Renewable And Low Carbon Fuel Requirements) Act came in to force at the beginning of January. See news release.

Ethanol and Biodiesel Standards

Under the Act, a supplier who sells gasoline (for the first time after the fuel is manufactured or imported) in BC, must ensure that renewable fuel (ethanol produced from biomass) comprises 5% of supplies for each calendar year starting in 2010.

A supplier who sells diesel (for the first time after it is manufactured or imported) in BC, must ensure that renewable fuel (biodiesel) comprises 3% of supplies for the calendar year 2010; 4% for 2011 and 5% for 2012.

A handful of companies in BC import or manufacture transport fuels, but there are also numerous smaller companies that will be affected by the new requirements.

Notional Transfers

A supplier may "notionally transfer" all or part of the renewable fuel that it supplies in a compliance period to another supplier. In other words, if one fuel supplier in the province supplies more renewable fuel than is required under the Act that supplier will effectively be able to sell its "over-compliance" as a credit to another supplier who cannot (or who decides not) to meet the compliance obligation.

These trades take place under private contract.

Compliance reports must set out the volume of fuel notionally transferred as measured in litres, and be evidenced by "dated contracts, records of transfer, invoices, sales receipts, and records of payments". Compliance reports must be submitted in March 2011 for the 2010 reporting year.

Carbon Intensity Standards - Emissions Trading

Also, suppliers who sell gasoline, diesel, natural gas, propane, hydrogen or electricity (for the first time after it is manufactured or imported) in BC for use as a transport fuel must ensure that the weighted average of "carbon intensities" for all such fuels is no greater that a prescribed level for a compliance period. However, there are no penalty provisions yet in force for this part of the Act.

"Carbon intensity" means the GHG emissions proportionate to the energy provided by the fuel (measured in grams of carbon dioxide equivalent per megajoule)

As with the renewable fuels standard, suppliers will also be able to "notionally transfer" to other fuel suppliers carbon dioxide equivalent emissions if they exceed requirements.

"BASIC Bloc" fast out of the gates on international climate talks (as well as economic recovery) in 2010

Submitted by Grant Boyle

On January 24, 2010 the so-called BASIC Bloc - (Brazil, South Africa, India and China) held its second meeting since the Copenhagen Summit last December. The BASIC Bloc, along with the United States, were among the key players involved in last minute efforts to put together the Copenhagen Accord at the end of December's meeting.

In a joint statement the Ministers expressed their intention to communicate information on their voluntary mitigation actions to the UNFCCC by 31 January 2010 and called for the early flow of the pledged US$10 billion in 2010.

The Ministers spoke of the importance of the Copenhagen Accord as "representing a high level political understanding among the participants on some of the contentious issues of the climate change negotiations" but emphasized a negotiating agenda very much in keeping with the approach leading up to Copenhagen that started in Bali two years ago. The statement says:

"The Ministers underscored the centrality of the UNFCCC process and the decision of the Parties to carry forward the negotiations on the two tracks of Ad hoc Working Group on Long-term Cooperative Action (AWG-LCA) under the Convention and the Ad hoc Working Group on further emission reduction commitments for Annex I Parties under the Kyoto Protocol (AWG-KP) in 2010 leading up to COP-16 and COP/MOP6 at Mexico. The Ministers reiterated that all negotiations must be conducted in an inclusive and transparent manner."

The Ministers also called on the COP 15 President (Denmark) to convene meetings of the Ad hoc Working Group on Long-term Cooperative Action under the UNFCCC (AWG-LCA) and the Ad hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG-KP) in March 2010, and to ensure that the those groups meet at least five times before the Mexico Conference. (See previous post for a brief summary of the outcomes of the AWG-LCA at Copenhagen.)

It appears, then, that it's back to the "Bali drawing-board' as far as the BASIC Bloc is concerned.

This message is at odds with the flurry of sentiment following Copenhagen that the UNFCCC will likely (or should ) disintegrate into more manageable negotiating frameworks such as the G-20 or Major Economies Forum. See for example, remarks by US policy analyst, Robert Stavins.

It is difficult to imagine, however, that the G20 or something like it could establish an agreement framework that would go beyond the type of high-level political agreement exemplified by the Copenhagen Accord.

As reported in the Canadian Press, Canadian Environment Minister Prentice appears to agree that any international agreement would require consensus beyond the G20 to be legally binding.

We are therefore left with the question: is the Copenhagen Accord a turning point in international climate talks or does it simply amount to a high level announcement amidst what is shaping up to be a long-term, incremental, negotiating process under the UNFCCC?

SEC climate change disclosure requirements imminent; OSC to follow by end of 2010

We have blogged on several occasions about growing support in the investment community for greater disclosure by public companies of the financial risks posed by climate change (for all relevant posting, see here; for our most recent posting regarding shareholder activism in respect of Shell, see here). Investors and other stakeholders have called upon securities regulators to update their requirements in respect of such disclosure. U.S. investors may get their wish tomorrow. Canadian investors do not have long to wait.

SEC proposal

The U.S. Securities and Exchange Commission will be holding a meeting on Wednesday, January 27 at 10:00 a.m. to consider and vote on two proposals, the second of which is the following:

The Commission will consider a recommendation to publish an interpretive release to provide guidance to public companies regarding the Commission's current disclosure requirements concerning matters relating to climate change.

The recommendation, if endorsed, will have the SEC publish much more detailed guidance on how and what companies are to report with respect to climate change. Ideally, the SEC will require that companies disclose their emissions levels, discuss and quantify both regulatory risks (e.g., costs of complying with cap-and-trade or other emissions reduction obligations) and operational risks (e.g., impact of extreme weather events, changes in demand as a result of legislation), and discuss corporate strategies for addressing such risks and capitalizing on any opportunities created by climate change.

General implications

The guidance is a long time coming. Some groups, like the Investor Network on Climate Risk, have been petitioning the SEC since 2003 to improve its climate change guidance. Forward thinking investors have increasingly recognizing that the legal and physical changes brought about by climate change are financially material. Increasingly, the costs associated with climate change will have to be internalized by companies and will be reflected in the market's valuation of the securities of those companies.

Many large scale emitters will likely be happy to have the SEC tell them what to do about climate change disclosure. Several such companies have been forced by state-led lawsuits, environmental class actions, and shareholder activism to acknowledge that climate change is financially material to their business. SEC guidance would provide a level of clarity and certainty that civil litigation and proxy wars cannot offer.

Ultimately, clearer disclosure requirements should give the market access to the information they need to understand the impact of climate change on the long term value of companies. This improved understanding could drive a significant reallocation of capital that would have the potential to accelerate the transition towards a more sustainable economy.

Canada next

On December 18, 2009, the Ontario Securities Commission ("OSC") issued Staff Notice 51-717 to notify stakeholders of its plans regarding disclosure of corporate governance and environmental matters during 2010. With respect to environmental disclosure guidance, the notice says the following:

"During 2010, we intend to issue a staff notice providing guidance on compliance with existing environmental disclosure requirements under National Instrument 51-102 Continuous Disclosure Obligations. In developing the notice, we plan to consult with our advisory committees and other experts in this area. We intend to publish the notice by December 2010 so that reporting issuers will have sufficient time to consider the guidance when preparing their 2010 annual continuous disclosure documents."

It therefore appears that the OSC intends to prepare environmental disclosure guidance that it will expect reporting issuers to follow when preparing their 2010 annual report.

While the notice only discusses environmental disclosure generally, we expect that the OSC's guidance will deal with climate change issues specifically. In a December 18, 2009 report to the Minister of Finance on the OSC's corporate sustainability reporting initiative, the OSC referred to climate change risk in several places. It also took specific notice of a submission from the British Columbia Investment Management Corporation, Ceres, Climate Action Network Canada and the Climate Change Lawyers Network which included a survey of the annual reports of 35 reporting issuers in Ontario in nine industry sectors with market capitalization of at least CDN $1 billion. The survey found that the disclosure contained poor or limited descriptions of climate change risks, if the issue was discussed at all. The OSC's guidance will likely address this gap in disclosure by providing suggestions as to what should be disclosed where climate change is material for a reporting issuer.

Given the strong linkages between the capital markets of Canada and the U.S., we expect that the OSC (and other Canadian securities regulators) will follow the SEC's lead with respect to climate change disclosure guidance. The outcome of the SEC's meeting tomorrow, and the guidance that it subsequently issues, may therefore help companies anticipate what type of climate change disclosure the OSC will require by the end of 2010.

Important note regarding Davis LLP's Climate Change Law blog

As you hopefully already know, Davis LLP maintains a number of blogs of interest to the Canadian legal and business communities. This blog, which focuses on Climate Change Law, has included many postings over the past year regarding the evolving renewable power market in Ontario. In the future, renewable power developments in Ontario (and across Canada) will be covered on our Environmental, Energy and Resources Law blog, starting with today's posting: "Ontario to announce $7 billion renewable power deal with Samsung tomorrow."

Climate change issues, including those regarding greenhouse gas regulation in Canada and the U.S., emissions trading, climate change disclosure, and post-Copenhagen developments abroad, will continue to be covered here in the Climate Change Law blog.

We hope this change will help make each of our blogs more specific and relevant to you.

Investors' petition to Shell to improve oil sands disclosure is a sign of a broader trend

A coalition of over 140 investors wants the opportunity to scrutinize Royal Dutch Shell plc's decision to invest in Alberta's oil sands. The investors succeeded in having a motion added to the agenda for Shell's 2010 annual general meeting that, if passed, will require the company's Audit Committee or Risk Committee to report on the relevant investment analysis in time for the 2011 AGM. While this initiative is uniquely focused on Shell, it is part of a larger trend whereby progressive investors are calling upon large emitters to improve their climate change disclosure. Canadian reporting issuers should consider preparing today for the disclosure requirements of the future.

The Shell motion

The initiative is being co-ordinated by FairPensions, campaigning organisation founded in 2005 to promote responsible investment in the pensions and investment industry. The coaltions 142 supporters include fund managers, pension funds, foundations and faith groups. Major financial players in the coalition include The Co-operative Asset Management (which is also funding legal action by the Creen Nation alleging that Shell's oil sands development infringes their Constitutionally protected rights), the UNISON Staff Pension Scheme and a significant contribution from Rathbone Greenbank Investments clients.

The following is the full text of the proposed resolution:

That in order to address our concerns for the long term success of the Company arising from the risks associated with oil sands, we as shareholders of the Company direct that the Audit Committee or a Risk Committee of the Board commissions and reviews a report setting out the assumptions made by the Company in deciding to proceed with oil sands projects regarding future carbon prices, oil price volatility, demand for oil, anticipated regulation of greenhouse gas emissions and legal and reputational risks arising from local environmental damage and impairment of traditional livelihoods. The findings of the report and review should be reported to investors in the Business Review section of the Company's Annual Report presented to the Annual General Meeting in 2011.

The motion was informed by a general concern about the environmental impacts of the development of the oil sands and specifically by concerns regarding:

• the carbon intensity of the oil sands projects at a time of anticipated regulation and pricing of greenhouse gas emissions;
• forecasted carbon prices;
• the limitations and cost of emissions mitigation; and
• local environmental and livelihoods issues.

In its response, Shell noted that the oil sands account for only 2.5% of its production. "The resolution is basically a request for further information around the economics and other aspects of our oil sands operations. The resolution is submitted by shareholders representing some 0.15% of our total outstanding shares," said the company.

The investor's acknowledged that Shell has provided some disclosure, but believe that more is required. The Co-operative Asset Management's Niall O'Shea said, "given Shell's level of commitment to oil sands there is a greater obligation to shareholders to reassure how it would cope under a number of scenarios. We acknowledge Shell has already done some work in this area but it does not go anywhere near far enough to allay our concerns."

Shell's AGM will be held in the Hague on May 18, 2010.

Broader trend

Shell is not the only entity under pressure to improve environmental disclosure in the public markets. A variety of investor-backed initiatives are calling for more thorough financial reporting and discussion of climate change issues by public companies. Some recent examples include the following:

• The Climate Disclosure Project, which calls upon companies to disclose climate change risk voluntarily, entered its 9th year last year. CDP's 2009 request for information was sent on behalf of 475 global investors with assets under management of US$55-trillion, including 47 of Canada's largest investment organizations.
• In October 2009, the Ontario Securities Commission received a submission from a coalition of investors and environmentalists calling on it to address the poor rates of climate change disclosure in the annual reports of Canadian reporting issuers. The submission was prepared by the Climate Change Lawyers Network and endorsed by British Columbia Investment Management Corporation (bcIMC), Ceres and Climate Action Network Canada. It was based on a review of 35 reporting issuers with market capitalizations of more than $1 billion who operate in sectors that are particularly exposed to climate change risk. Finding disclosure to be wanting, the submission calls upon the OSC to issue guidance that could be informed in part by the Global Framework for Climate Risk Disclosure.
• Last November, a coalition of investors submitted a supplemental petition to the U.S. Securities and Exchange Commission asking for improved disclosure guidance. The 20 signatories to the petition include leading U.S. and Canadian institutional investors managing more than $1 trillion in assets, including the California Public Employees' Retirement System (CalPERS), British Columbia Investment Management Corporation of Canada, Pax World Management Corporation, state treasurers from Oregon, North Carolina, Connecticut, Maryland and Vermont and Florida's Chief Financial Officer. In an accompanying press release, Ceres notes that the "simple truth" behind the petition is that "it's impossible for investors to adequately assess the risk to their investment money if companies don't tell them how much climate change and its impacts might affect their financial performance."
• As we reported previously, New York's Attorney General Andrew Cuomo dusted off an obscure piece of legislation called the Martin Act and relied upon it to subpoena five large energy companies in 2007 to demand information about the companies' analysis of the risk posed by climate change and the disclosure of that risk to investors. The Financial Post reported on December 5, 2009 that three of the companies, AES Corp., Xcel Energy Inc. and Dynergy Inc., had all agreed to provide disclosure as part of settlements with the Attorney General.

Despite the lacklustre outcome of Copenhagen, the glacial progress of the Waxman-Markey bill through the U.S. Senate, and Canada's lack of emissions policy at the federal level, we expect that the investment community will continue to call for improved climate change disclosure through 2010. This trend will be facilitated by the introduction of mandatory emissions reporting requirements in many jurisdictions and by the credible threat that the U.S. EPA will regulate greenhouse gases if Congress fails to do so.

Companies may be wary of being the first to provide comprehensive climate change disclosure, as doing so may (fairly or unfairly) cause the market to devalue the stocks of such companies relative to their more tight-lipped peers. However, companies should nevertheless expect that more disclosure will be required in the foreseeable future. Such companies will not be able to understand their climate change risk exposure overnight. They should therefore consider developing systems today to enable them to meet the disclosure requirements of tomorrow.

Hydro-Québec and Mitsubishi Motor Sales of Canada to launch Canada's largest all-electric vehicle pilot project in the fall of 2010

Today, Hydro-Québec and Mitsubishi Motor Sales of Canada Inc. (MMSCAN) announced the signature of a memorandum of understanding that will lead to the launch of Canada's largest all-electric vehicle pilot project this coming fall. In collaboration with the City of Boucherville, Hydro-Québec will test the performance of up to 50 Mitsubishi i-MiEVs, the vehicle which recently won the Japanese Car of the Year award for "Most Advanced Technology" at the Tokyo International Motor Show.

The project, which is evaluated at $4.5 million, aims to test the cars under a variety of road conditions, including those due to Québec's harsh winters and is designed to study the vehicles' charging behaviour, the driving experience and overall driver satisfaction. The project is the first of its kind to include the participation of a car manufacturer, a public utility, a municipality and local businesses that will integrate the vehicles into their existing fleets.

Thierry Vandal, Hydro-Québec's President and CEO declared "This new pilot project is part of our action plan for the electrification of vehicles [...] it will allow us to advance our knowledge of the technology and its integration into our grid, which in turn, will help us plan the necessary charging infrastructure for homes, offices and public places."

The City of Boucherville was selected as the project's host municipality given its proximity to Hydro-Québec's research institute (IREQ), its role in Hydro-Québec's upcoming interactive smart zone trial and the diversity of its local businesses. The availability of a local Mitsubishi dealership to oversee the i-MiEVs' maintenance was also part of the selection criteria.

i-MiEV, which stands for Mitsubishi Innovative Electric Vehicle, is an all-electric, highway-capable, charge-at-home commuter car. Because the battery, the motor and other items are mounted out of the way beneath the floor, the i-MiEV seats four adults and offers surprising interior room and cargo space. Other i-MiEV features include excellent low-speed acceleration and a very low centre of gravity, which contributes to superior handling and stability. Moreover, the i-MiEV is extremely quiet.

"We are very proud to be leading the way to a greener, more sustainable future by developing environment-friendly vehicles fuelled by clean, renewable energy," said Koji Soga, President and CEO of MMSCAN. "Mitsubishi is a leader in electric car development and the i-MiEV represents the pinnacle of our green technologies. In the same sense, Hydro-Québec and the City of Boucherville are demonstrating their environmental leadership by participating in this unique initiative."

The electric vehicle pilot project comes ahead of the government of Québec's soon to be released 2010-2015 Electric Vehicle Action Plan, announced in June 2009 and which is expected to include incentives to get electric vehicles on Québec's roadways, as well as for car and component manufacturers to establish themselves further in the province.

Climate change to continue to be a challenging issue for Canada

Three recent reports begin to illustrate the difficulties that Canada will have in addressing the climate change issue in coming months. The first encourages Canada to take a comprehensive approach to the regulation of greenhouse gas emissions. The other two highlight divergent regional views that will make negotiating a comprehensive approach extremely difficult. The climate change debate in Canada is therefore expected to intensify this year. Hopefully, the country will find a solution that works across the confederation, and that could serve as a model abroad.

Call for a comprehensive approach

The first report, entitled Getting the Balance Right: The Oil Sands, Exporting and Sustainability, was prepared by the Conference Board of Canada. As stated in the accompanying press release, one of the report's conclusions is that "Alberta's oil sands should not be singled out as the source of Canada's poor record on greenhouse gas emissions." Instead, the report calls for improved regulation of "every link in the energy value chain."

The environmental community did not object to the notion of a comprehensive approach to GHG regulation. As reported by the Canadian Press, Simon Dyer, oilsands program director for the environmental think-tank Pembina Institute, agreed that "We need meaningful greenhouse gas reduction policies that apply to all polluters" provided that there is "no special deal for the oilsands." As reported last fall, the federal government views the oil sands as a trade exposed" industry that may warrant special treatment under cap-and-trade, although Ottawa has not yet finalized its policy.

Interestingly, having concluded that the oil sands should not be singled out, the report recommended that "emissions from vehicles merit priority treatment." The recommendation was based on the fact that the transportation sector accounts for 27% of Canadian GHG emissions while the oil sands accounts for only 5%. However, the report acknowledges that oil sands production is expected to double in the next decade, meaning that even if emissions intensity can be decreased, the oil sands contribution to national emissions will continue to grow.

Simmering below the surface of the report is a growing debate between the provinces about climate change, generally, and the oil sands, specifically (witness the back and forth between Quebec City and Ottawa this week). The Conference Board report acknowledges that Alberta in particular will "capture a significant share of direct benefits of oil sands development." Other provinces want to guard against oil sands producers socializing the environmental costs of the projects across the entire country, which could occur in part if Alberta does not bear a proportionate burden for reducing Canada's emissions (environmental effects aside, provinces whose economies depend on a cheap Canadian dollar to drive exports are no doubt concerned about expanding the country's sensitivity to the global price of oil, as the price of oil and the strength of the Canadian dollar tend to be positively correlated).

The debate is likely to get even more heated in the coming year.

Divergent views across the country

The debate will intensify in part because Canadians do not agree about the reality of climate change or the risk it poses, as illustrated in two recent polls.

The first poll was conducted by Angus Reid last December. As reported in the Calgary Herald, the poll found that 31% of Albertans believe that global warming is a theory that has not yet been proven while only 41% of them believe that climate change is a fact and that it is mostly caused by emissions from vehicles and industrial facilities.

These views stand in sharp contrast to those held across the country. Nationally, only 17% believe climate change to be a theory, while 56% accept that it is caused by emissions from human activities. The keepers of the oil sands therefore do share the same conviction as their neighbours about the existence of the problem.

Even those Albertans who perceive a problem do not necessarily agree about its severity. The other recent poll was a Canadian Defence & Foreign Affairs Institute survey conducted by the Innovative Research Group (the "CDFAI Poll"). The CDFAI poll concluded that a majority of Canadians view climate change as a critical threat to the vital interests of the country in the next 10 years, making climate change the most important threat in the views of Canadians (other threats in the Top 5 were international terrorism, increasing number of immigrants and refugees, globalization, and potential epidemics). Again, the CDFAI Poll found that the perception of climate change as a threat varied sharply across the country. For example, a full 62% of Quebecers ranked climate change as a critical threat. In contrast, only 28% of Albertans did so.

As Duane Bratt, a political scientist at Mount Royal University, put it, these diverging views bode "very poorly and it's because the issue of climate change cuts into the common narrative of Alberta in the federal system." He explained "When you hear Albertans getting upset about the response of particularly (Quebec Premier) Jean Charest, it gets thrown into equalization payments, it gets into Quebec special status and Confederation. It gets framed as an issue of consumers versus producers, that instead of putting the burden on consumers - which the majority live in Ontario and Quebec - they are putting the onus on carbon producers, which singles out Alberta, Saskatchewan and Newfoundland."

Challenge and opportunity

Responding to climate change therefore simultaneously requires a national consensus and aggravates issues that tug at Canada's constitutional seams. We therefore expect to see intense and at times acrimonious debate about the issue across country this year. However, we remain optimistic that Canada can arrive at a workable solution, particularly given that the confederation has survived more than one constitutional/federalist skirmish in the past.

In many ways, Canada's situation is representative of the global issues that make climate change such a formidable problem. Disparities in historical emissions, resource wealth, consumption, production, and exposure to the effects of climate change were all barriers in the Copenhagen process. Should Canada be able to develop an approach to climate change that reconcile the different interests of its provinces, it may be able to play a constructive role in addressing the problem globally.

Canadian government announces nineteen successful projects in response to a call for proposals under the Renewable and Clean Energy portion of the Clean Energy Fund

The Honourable Lisa Raitt, Canada's Minister of Natural Resources, today announced support for nineteen (19) projects selected in response to a call for proposals under the Renewable and Clean Energy portion of the Clean Energy Fund. Up to $146 million will be invested over five (5) years to support the demonstration of renewable and clean energy across the country, including integrated community energy solutions, smart grid technology, and renewable applications with solar, wind, tidal and geothermal energy.

Under the Clean Energy Fund, part of the Government of Canada's Economic Action Plan (Budget 2009), the government is to invest almost $1 billion over five (5) years in research, development and demonstration projects to advance Canadian leadership in clean energy technologies. This includes large-scale carbon capture and storage demonstration projects, three (3) of which have already been announced totaling $466 million from the fund, as well as smaller-scale demonstration projects of renewable and alternative energy technologies such as those announced today. Total investments under the Clean Energy Fund for large and small demonstration projects are to benefit Canada's economy by leveraging nearly $3.5 billion in further investments by industry and other levels of government.

The Government is now inviting the project proponents to begin negotiations toward formal contribution agreements to set the conditions under which funding will be delivered. The funding amounts are expected to range from $2.5 million to $20 million for each project. However, until a written contribution agreement is signed by both parties, no commitment or obligation exists on the part of the Government of Canada to make a financial contribution to these projects.

Successful Project Descriptions

A) Projects expected to receive $2.5-$5 million

1. Biomass-based Urban Central Heating Demonstration
Lead proponent: SSQ, Société immobilière Inc.
Strategic Area: Buildings/Community Energy Systems
Location: Québec, Québec
Purpose: La Cité Verte is an innovative real estate project, which combines various initiatives related to sustainable development such as renewable energy utilization, energy efficient design, the management of water consumption, energy and waste management. The funding will support the installation of a biomass and wood-based district heating system. This project combines a variety of technologies and partners.

2. Utility-scale Electricity Storage Demonstration using New and Re-purposed Lithium Ion Automotive Batteries
Lead proponent: CEATI International Inc.
Strategic Area: Electricity Storage
Location: Toronto and Cornwall, Ontario, and Manitoba
Purpose: This project will address electricity storage for renewable and high-density urban applications. The project will demonstrate utility-scale electricity storage systems using new and re-purposed automotive batteries. This concept will reduce cost for electric vehicle batteries providing a future market to meet urban electricity demand using automotive batteries.

3. Energy Management Business Intelligence Platform Development and Demonstration
Lead proponent: Power Measurement Ltd.
Strategic Area: Smart Grid
Location: Commercial buildings in Calgary, Alberta, Ontario and BCIT in Burnaby, British Columbia
Purpose: This project will develop and demonstrate smart grid technology, voluntary load curtailment and peak shaving in a commercial building setting. Most projects of this type to date have focused on residences. This technology will also enable tenants to voluntarily reduce their demand based on real-time price signals.

4. Wind and Storage Demonstration in a First Nations Community
Lead proponent: Cowessess First Nation
Strategic Area: Wind/Storage
Location: Cowessess, Saskatchewan
Purpose: This project aims to demonstrate a combined wind and storage energy system in a First Nation community. The successful demonstration would prove this system as a model for other First Nation's communities across Canada.

5. Bioenergy Optimization Program Demonstration
Lead proponent: Manitoba Hydro
Strategic Area: Bioenergy
Location: Five locations in Manitoba
Purpose: This project is comprised of five different bioenergy systems at five different project sites. The project demonstrates collaboration between utility companies and customers. It is anticipated that the project will help to remove the perceived barrier of technical and operational risk and will promote the wide-scale adoption of bioenergy systems in Canada.

6. Offshore Wave Energy Demonstration
Lead proponent: SyncWave Systems Inc.
Strategic Area: Marine/Hydro
Location: Offshore Central Vancouver Island near Tofino, British Columbia
Purpose: This project will demonstrate the performance, operations and life cycle of a pre-commercial 100-kW wave energy device in ocean conditions typical of British Columbia's open coast. Canada has potentially significant wave energy resources, and it is important for Canada to participate in demonstrations to further the technology, understanding of ocean conditions and the regulatory environment.

7. Demonstration of Waste-heat Recovery at Compressor Stations
Lead proponent: Great Northern Power Corp.
Strategic Area: Hybrid Systems/Northern
Location: Compressor Stations in Alberta and British Columbia
Purpose: This project plans to demonstrate waste-heat recovery systems on a variety of stationary, reciprocating engines greater than 1,000 hp. A successful demonstration has the opportunity to lead to commercialization and wide-scale adoption of this technology at compressor stations and other industrial applications across Canada.

8. Residential Implementation of Solar-thermal Heating Systems
Lead proponent: Enbridge Gas Distribution Inc.
Strategic Area: Buildings/Solar
Location: Greater Toronto Area, Ontario
Purpose: The project will use different types of solar collectors and storage technologies to verify and compare their costs, performance and technical qualities. The project has the ability to validate the technology and provide integrated systems at a lower cost to consumers, thereby allowing greater market penetration.

9. Food and Yard Waste Anaerobic Digestion to Electricity Demonstration
Lead proponent: Harvest Power Canada Ltd.
Strategic Area: Bioenergy
Location: Fraser Richmond Soil and Fibre, British Columbia
Purpose: This project would be Canada's first high-efficiency system for producing up to 1 MW of renewable energy from food and yard waste. If successful, this technology has the potential to be rapidly deployed across Canada as a mechanism to divert food wastes from landfills and produce renewable energy.

B) Projects expected to receive $5-$10 million

10. Demonstration of Heat and Power from Biomass Gasification
Lead proponent: Nexterra Systems Corp.
Strategic Area: Bioenergy
Location: UBC Point Grey Campus, Vancouver, British Columbia
Purpose: This project will showcase biomass gasification integrated with an internal combustion engine generator in a novel, small-scale combined heat and power demonstration suited for on-site applications at public institutions, industrial facilities, and northern and remote Canadian communities. The project has the potential to overcome the difficulty of gas clean up and opens up the possibility of significant replication in Canada and overseas.

11. Energy Storage and Demand Response for Near-capacity Substation
Lead proponent: BC Hydro
Strategic Area: Smart Grid/Electricity Storage
Location: Golden and Field, British Columbia
Purpose: This project demonstrates the integration of energy storage as a mechanism for reducing electricity demand at near-peak capacity substations. This type of solution has the ability to be used in other remote communities where the grid reliability is low and the cost of the transmission line upgrade is uneconomical.

12. Interactive Smart Zone Demonstration in Québec
Lead proponent: Hydro-Québec - Institut de recherche
Strategic Area: Smart Grid
Location: Boucherville, Québec
Purpose: This project will ensure the installation of an interactive network area in a neighbourhood of Boucherville. This will demonstrate different technologies and concepts related to modernization of electrical networks, in particular the deployment of infrastructure for charging electric and hybrid rechargeable vehicles.

13. Biomass and Coal Co-firing Demonstration in Coal Plants
Lead proponent: Nova Scotia Power
Strategic Area: Bioenergy
Location: Coal Plants in Nova Scotia
Purpose: This demonstration project aims to determine optimum fuel blends for the potential co-firing of wood-based biomass with coal as a mechanism to partially replace fossil fuels with sustainable energy sources in coal plants. If successful, there is potential for wide-scale implementation across Canada and the United States.

C) Projects expected to receive $10-$20 million

14. Tidal Energy Project in the Bay of Fundy
Lead proponent: Fundy Ocean Research Centre for Energy (FORCE)
Strategic Area: Marine/Hydro
Location: Minas Passage, Bay of Fundy, Nova Scotia
Purpose: The project plans to validate the performance and resilience of tidal current turbines in the Minas Passage of the Bay of Fundy. This will be the first Canadian deployment of commercial-scale tidal turbines. The project has the potential to advance tidal energy in Canada, provide economic impacts in the Atlantic region and place Canada as a world leader in marine renewable energy.

15. Northern Application of a Geothermal District Heating System
Lead proponent: City of Yellowknife
Strategic Area: Northern/Community Energy System
Location: Yellowknife, Northwest Territories
Purpose: The City of Yellowknife is in advanced stages of project engineering and plans to install a district heating system by extracting heat from the abandoned Con Mine. This project has the potential to provide a cost effective and a more environmentally friendly alternative to fossil fuel based heat. The information that will come out of this project on the effect of extracting ground-source heat from an existing aquifer and its associated long-term heat capacity will help determine if this technology could be replicated in other northern communities.

16. Electricity Load Control Demonstration
Lead proponent: New Brunswick Power Corporation
Strategic Area: Smart Grid
Location: Four maritime communities in New Brunswick, Nova Scotia and Prince Edward Island
Purpose: Traditionally, to accommodate the intermittent nature of wind power, other generation sources are required to follow the net effect of variation in load and wind power production. This project focuses on the integration between smart grid technologies, customer loads and intermittent renewables in a region with potentially significant renewable electricity capacity. It will allow utilities to better understand how customers will react to smart grid and which loads can be controlled by real-time demand balancing in up to 750 buildings, thereby assisting these utilities to capitalize on renewable resources in the region.

17. A 9-MW Wind Technology Research and Development Park
Lead proponent: Wind Energy Institute of Canada
Strategic Area: Wind/Storage
Location: Prince Edward Island
Purpose: The 9-MW wind park proposed will be the first wind/storage combination in Prince Edward Island. The project's research base has a strong focus on information dissemination and would be a good base for supporting additional wind research.

18. Demonstration of Fish-friendly and VLH Turbines in Existing Low-head Water-control Dams
Lead proponent: Eco Joule Inc.
Strategic Area: Marine/Hydro
Location: Mississippi River System, Ontario
Purpose: This project will demonstrate three in-stream hydro technologies including fish-friendly, low-head hydro turbines along an existing water-controlled river system in Ontario. It has the opportunity to prove the technology concept, demonstrate cooperation with a conservation organization, and reduce the barriers to commercialization.

19. Community-based Geothermal Demonstration in a Remote First Nations Community
Lead proponent: Borealis GeoPower Inc./Acho Dene Koe First Nation
Strategic Area: Hybrid Systems/Northern
Location: Fort Liard, Northwest Territories
Purpose: This project will demonstrate how a northern community can use a geothermal resource to generate electricity and heat, thereby reducing the entire community's fossil fuel demand and energy costs. A successful demonstration will provide a model for other northern and First Nations communities with available geothermal resources.

Québec applies California Standards to Light Vehicle GHG Emissions

On December 29, 2009, Ms. Line Beauchamp, Québec's Minister of Sustainable Development, Environment and Parks, announced that the Regulation respecting greenhouse gas emissions from motor vehicles, whose standards are equivalent to those in force in California, was to come into effect in mid-January 2010. Québec thus becomes the first Canadian province to apply North America's strictest automotive emissions standards and joins an ongoing North American movement that has seen some fifteen (15) American states, including a majority of the province's northeast neighbours, follow California's lead. The U.S. federal government has also announced its intention to adopt California-equivalent standards in 2012.

The Regulation applies to all cars and light trucks sold, leased or marketed in Québec from the 2010 model year onward and most notably sets out a table of gradually diminishing maximum GHG emissions standards for large volume manufacturer vehicles for model years 2009-2016. In addition, the Regulation establishes a system of credits and debits whereby beginning with the 2010 model year for large volume manufacturers and the 2016 model year for other manufacturers, a fee of $5,000 per vehicle equivalent is payable for any excess over the maximum emissions standards. All sums thereby obtained are paid into the province's Green Fund, established by section 15.1 of the Act respecting the Ministère du Développement durable, de l'Environnement et des Parcs.

At 40% of the province's total GHG emissions, of which nearly half are due to Light Vehicles, the transportation sector is Québec's most important emitter. The Regulation's coming into effect thus constitutes an important step towards realizing the goals of the province's 2006-2012 Climate Change Action Plan, and is a determinant factor in reaching its 2020 GHG emission reduction target as well.

It is expected that in addition to encouraging the large scale use of more energy efficient technologies in the transportation sector, such as electric or hybrid vehicles, the Regulation will foster a more rational use of non-renewable petroleum resources, thereby decreasing Québec's overall dependence on fossil fuels.