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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.

First Power Solar Project: Clean Energy for First Nations Communities

Today at the 2009 Solar Conference, the Government of Canada announced an investment of up to $1 million in the First Power solar project through its ecoENERGY for Renewable Heat program. In addition to the federal government's commitment, First Power is also being supported by Solar BC and several financial institutions, including the All Nations Trust Company.

The First Power project will support the installation of domestic solar water heating systems in up to 900 homes, with a focus on remote First Nations communities.

First Power, which will leverage millions of dollars in additional funding to complete its projects, is a partnership between Taylor Munro Energy Systems and the Centre for Integral Economics. This unique hybrid business is designed to support First Nations communities to gain access to and ownership of renewable energy and clean technologies. The project intends to replace diesel power generation by energy systems that deliver all the heat, light and power a community requires through renewables.

Making the announcement on behalf of Minister Lisa Raitt was Senator Linda Frum, who declared: "This investment will generate new economic activity in First Nations communities, while reducing energy costs and greenhouse gas emissions [...] Investing in projects like this will stimulate the growth of a domestic clean energy industry, create high-quality jobs for Canadians and help protect our environment."

Donna Morton, President of the Centre for Integral Economics added: "We believe that First Nations can take ownership of renewable energy and clean technology systems through orally taught training [...] Autonomous energy can give First Nations in Canada both a leading role in building green collar jobs and economic development that respects ancestors, elders and the future."

BC Hydro Releases Q&A on First Nations Consulation with Respect to Power Calls

On November 18, 2009 BC Hydro released Questions and Answers (Q&A) on its website regarding BC Hydro's role with respect to First Nations consultation. The Q&A stems from uncertainty in the nature and scope of consultation required as a result of BC Court of Appeal decisions in Carrier Sekani Tribal Council v. British Columbia Utilities Commission, (2009 BCCA 67) and Kwikwetlem First Nation v. British Columbia Utilities Commission (2009 BCCA 68).

The Q&A is directed to Independent Power Producers (IPPs) to "help in understanding BC Hydro's role regarding First Nations consultation for current and future power acquisition activities."

In the Q&A, BC Hydro describes a shift in assessing IPPs consultations with First Nations, from a risk assessment standpoint in evaluating IPPs proposals (ie. will consultations affect securing of land tenure), to adequacy of consultations prior to submissions of Electricity Purchase Agreements (EPA) to the BCUC under section 71 of the Utilities Commission Act.

One question begging to be answered from this is: how will this affect IPPs in the Clean Power Call, the Bioenergy Call, or future power calls? For the current Clean Power Call, BC Hydro's response is that "further information or action may be required from or by those proponents to enable BC Hydro to complete that assessment."

For the Bioenergy Call Phase II, since the call is in its early stages, BC Hydro intends to incorporate new requirements with respect to First Nations consultation into call documents and timelines, and will update the website accordingly.

For the Standing Offer Program (ongoing acquisition process for projects up to 10 megawatts), this program requires proponents to apply with permits already in place, but BC Hydro notes that it will still assess the adequacy of consultation before offering an EPA to an applicant.

For future power calls, it appears as though BC Hydro will build in this new assessment approach into each call. When assessing the adequacy of consultation, BC Hydro will "seek to identify what, if any, other agencies have already assessed the adequacy of consultation", and this evidence may satisfy their requirements, or they may require "additional evidence to support an IPP proposal".

The factors BC Hydro will consider when assessing First Nations consultation may include:

• Information on how the IPP determined which First Nations to consult.
• Information on the potential degree of impact from a project on aboriginal rights and title, and information on how this assessment was reached.
• Information on the level of consultation and potential avoidance, mitigation or accommodation required for each impact and how this was, or will, be undertaken by the IPP as evidenced by consultation reports, logs, impact benefit agreements, letters of support, correspondence and any other material submitted demonstrating consultation.

What is clear from this Q&A is that the BC Hydro has recognized that the ground rules with respect to First Nations consultation have changed as a result of the Carrier Sekani and Kwikwetlem cases and they are attempting to respond to this in a way that addresses this issue with respect to current power calls and future power calls, to provide some level of clarity for IPP proponents, First Nations and other interested stakeholders.

Minister Prentice Talks Climate Change; PM Says He'll Go to Denmark

Minister Prentice believes that in order for the international community to reach a new framework to deal with climate change, the U.S. must "get on board".

Speaking to a packed room on November 13 in Edmonton, the Minister spoke about climate change on the global stage and about the road to the UNFCCC Climate Change Conference in Copenhagen, which begins in less than a month. The Minister's key message during the speech was that in order for Copenhagen, the "mother of all negotiations" to result in a meaningful frameworks to address the stabilizing of greenhouse gases in the atmosphere, the United States has to "make a substantial effort going forward".

The Minister's other key message hit a bit closer to home:

"If the US does not make a substantial effort going forward, there is nothing Canada can do. Our own mitigation efforts will be futile - as a practical matter, we should probably focus on adaptation.

If we do more than the US, we will suffer economic pain for no real environmental gain - economic pain that could impede our ability to invest in new clean technologies.

But if we do less, we will risk facing new border barriers into the American market.

In short, we need a substantial effort from the United States; and a comparable effort from Canada, so we can create an effective North American climate change regime with national policies that are harmonized, consistent and free from conflict. A continental system composed of national policies and regulations that are equal in value and of similar effect, so we foster fair competition and maintain free trade in the integrated North American market".

The crux of his comments? That a harmonized (although not identical) climate change framework is absolutely crucial for Canada and for the U.S.

Why?

1. We share a common environment;

2. Our economies are integrated. The Minister remarked, "many firms in such key sectors as aerospace and automotive do not so much compete with each other as cooperate, being suppliers to, and customers of each other, somewhere on complex supply chains"

3. Canada's energy supply = security of energy for the United States - "[w]e are not just the single largest supplier to the American market of oil, natural gas, hydroelectricity and uranium - we are an indispensable supplier to the land-locked northern tier states"

4. Our pipelines and power grids transcend the border.

The Minister also pointed to a number of cross border harmonization initiatives, such as identical tail pipe emissions standards, the fact that both countries are busy preparing national cap and trade systems, and commitments on both sides of the border to clean energy technology.

But ultimately, his remarks confirmed that both Canada and the United States, while committed to addressing the effects of climate change, will not do so at the expense of the economy. The Minister's philosophy and one that is shared by his U.S. counterparts is to "do no harm - to avoid measures, no matter how well-intentioned, that would cause Canadian firms to be not just down in 2009, but out by 2010". What does this mean in terms of reductions? The American Clean Energy and Security Act has passed the House, and the Kerry/Boxer legislation has now commenced its journey through the Senate. The former sets the target of 17% less than 2005 levels by 2020; the latter currently talks of 20%. The Minister confirmed "[t]hat Both are similar to our own 2020 target of 20% less than 2006 levels".

Those dectractors who assert that Canada should be reducing its emissions by 25-40% less than 1990 levels are not focused on the economic consequences to our country. Minister Prentice addressed these critics and said "to say the least, reducing 2020 emissions in Canada by 25-40% from 1990 levels is easier said than done. The impact on the overall economy would be dire. In economic context, reductions of that magnitude equal an amount far in excess of all the emissions generated from all transportation sources in Canada".

Are the critics prepared to put away not only their own cars, but the cars of their relatives and everyone else they know, for good? To stop flying anywhere? Stop taking the bus? Probably not. And if the solution is to purchase international offsets to meet our emissions targets, are they comfortable with billions and billions leaving the country every year? We have to have a reasonable response to climate change in Canada - and it is reasonable that our system be consistent with that of our largest trading partner and not cause economic hardship to a nation of 35 million people.

So what will happen in Copenhagen? Canada's position is pretty clear. The United States' position is also increasingly clear - everyone, not just the developed nations, has to be a party to an international convention. That includes China and India, whose positions have really not shifted in the months leading up to the conference. Small concessions have been made, but really, the message is still "we're going to do what we want".

But, as Copenhagen draws ever closer, it appears that the international community is taking it more and more seriously. This morning the Edmonton Journal reported that there is increasing pressure on world leaders, including the U.S. President, to attend the conference. Prime Minister Stephen Harper's aides confirmed that if others are there, he'll likely attend as well.

With all these variables, the conference is December is shaping up to be very interesting. Stay tuned for on the ground coverage from Denmark.

Vancouver - The Greenest City of them All?

The City of Vancouver is on a quest to become the "greenest" city of them all. Not without "fierce competition" though, from the likes of London, Sydney, Copenhagen, New York, Portland, Seattle, San Francisco, Chicago, Toronto, Berlin, Paris, Stockholm and others. Copenhagen is the self-described "Global Climate Capital", Stockholm aims to be fossil fuel free by 2050 and London's mayor has pledged to make London the "cleanest and greenest city in the world."

To fulfill this "green" quest, the City of Vancouver has released a long-term action plan dubbed Vancouver 2020: A Bright Green Future - An Action Plan for Becoming the World�s Greenest City by 2020. The plan sets out measurable and ambitious targets in three broad areas: 1) Green Economy, Green Jobs; 2) Greener Communities; and 3) Human Health.

1) Green Economy/Green Jobs
Targets set in this area include:

• Green Jobs - generating 20,000 new green jobs. Two signature ideas related to this are: i) creation of "Low Carbon Economic Development Zones"; and ii) a green entrepreneur kick-start program. The proposed Zones would be areas such as False Creek Flats which would be designated for the development of low-carbon businesses, technologies, products and services. The Kick-Start program would offer expert guidance and seed capital to aspiring "green' entrepreneurs.
• Reducing Emissions (Climate Change Leadership) - reducing GHG emissions 33% from 2007 levels (as set out in the province's Energy Plan). This involves developing an integrated energy strategy, and changing land-use patterns to increase density and permit mixed-uses.
• Green Building - developing a strategy to enable all new construction to be carbon neutral by 2020, and improved efficiency of existing buildings by 20%. The report notes that "tens of thousands of buildings will require energy efficient retrofits." The report also notes that "On-Bill Financing" could be very beneficial to encourage energy-efficiency upgrades.

2) Greener Communities
Targets set in this area include:

• "Green mobility" - making at least 25% of trips on foot or bicycle and 25% on public transit. Recent data indicates that walking and transit account for 17% while cycling sits at 3%.
• Zero Waste - reducing solid waste per capita by 40% going to landfill or incinerator. Currently metro Vancouver produces 1.5 tonnes of solid waste per capita annually.
• Easy Access to Nature - every person living within a 5 minutes walk of a park, beach or greenway or other natural space (today the figure is 71%), and planting an additional 150,000 trees.
• Lighter footprint - reducing per capita ecological footprint by 33%. Ecological footprint measures how much of the regenerative capacity of the earth is used by human activities.

3) Human Health
Targets set in this area include:

• Clean Water and Water Conservation and Stewardship- reducing per capita consumption by 33 % and meeting or beating the strongest drinking water standards set by B.C., Canada, and World Health Organization (WHO). Reducing consumption could be done through increased metering (currently only 14% are metered) and volume-based pricing.
• Clean Air - meeting or beating WHO air quality guidelines.
• Local Food - reducing the carbon footprint of our food by 33 % per capita, by adopting "Buy Local" campaigns, and building sustainable urban food systems.

The City of Vancouver has also announced its new branding of the city as "Vancouver Green Capital", which will be featured at the Vancouver House during the 2010 Games.

Canadian Ambassador to US: Oilsands Get Disproportionate Amount of Criticism

Canada's Ambassador to the United States, Gary Doer, who is a former NDP Premier of Manitoba, stated yesterday that the oilsands are facing a disproportionate amount of criticism in the climate change debate. Mr. Doer argues that North America is missing the big picture on global warming if Canada is singled out as the chief emissions culprit, the Montreal Gazette reported this morning.

"One of the concerns that I have is that it represents so little of the emissions in North America. It's getting a disproportionate amount of chatter," Gary Doer said in an interview yesterday with Canwest News Service. "The question is: How much do the oilsands represent as a percentage of emissions in North America? It's a very small amount. If we don't deal with all sources of emissions, we are not going to have a solution that's comprehensive."

Exactly.

The oilsands are much maligned. Greenpeace is up there trying to block production (and recently got sued by Suncor for its efforts), activists are tying themselves to machines, and natural gas lobbyist groups in the US are pointing their fingers at the oilsands. But do you know what the chief source of carbon emissions in North America is? It's not oilsands. It's not SUVs and trucks, tailpipes or dryer vents.

It's coal.

What are we doing about it? If you've been following our blogs, you'll see that Alberta and Canada have just made a $769 million pledge to a carbon capture and storage project for a coal thermal plant - the technology used at the plant will be the first of its kind in the world. The US is presently conducting a $14 million study to see if they should spend $1 billion on CCS for coal thermal plants in the US. It's a step in the right direction. Emissions from coal thermal plants in North America are about sixty times higher than the emisisons from the oilsands and coal is the fastest growing fossil fuel being produced (World Watch Institute, October 15, 2009). According to the Canadian Association of Petroleum Producers, the oilsands only account for about five per cent of Canada's overall greenhouse gas emissions - a much smaller number when all of North America is taken into account.

David Jacobsen, the new US Ambassador to Canada, met with Ambassador Doer in Winnipeg on Monday, after a trip through the oilsands last week. Ambassador Jacobsen, who called Canada "a pillar in the energy security of the United States" , acknowledges that the oilsands must be part of the equation. Canada's new US Ambassador seems to agree, stating "[y]ou've got to look at everything. How do you reduce emissions from coal? How do you increase the use of renewables? How do you have the increase in energy efficiency?" All of these items have to be on the agenda. The fact that one project (oilsands) is discussed means that we've missed the big picture".

Big picture indeed. The big picture actually includes China and India, particularly if Copenhagen is really going to amount to a meaningful climate change treaty. China is constructing coal plants at a frentic pace and has the world's third largest coal reserves, after the US and Russia. Because China now uses more coal than the United States, Europe and Japan combined, it the world's largest emitter of gases that are warming the planet. Why is everyone so concerned with the oilsands, when the real question is - what is China going to do about climate change?

China has a script they stick to which basically goes something like this - the rest of you got to do it, now it's our turn - too bad if you don't like it. China is setting its self up as the advocate of the developing world (intensity targets tied to GNP), but meanwhile as China points fingers and constructs power plants, the Maldives, the lowest country in the world, could wind up entirely underwater.

Shouldn't Greenpeace be more worried about that?

BC's Northwest Transmission Line Project to receive up to $130 million under the Green Infrastructure Fund

Almost one year ago, British Columbia Premier Gordon Campbell announced that the Province would start the environmental assessment process and First Nations consultation on the Northwest Transmission Line, which consists of a 287 kV line which would extend 335 kilometres into the Northwest portion of the province from Terrace to Meziadin Junction and north to Bob Quinn Lake.

The estimated $404 million project which is expected to be ready for construction in early 2010 has been given a serious boost as a result of yesterday's announcement by the federal government that it has been selected as a priority for funding of up to $130 million under the Green Infrastructure Fund, conditional upon the signing of a contribution agreement with the British Columbia government under the fund.

The Northwest Transmission Line will provide multiple benefits:

As the area surrounding the project has a significant potential to generate green power, local communities will be able to access clean electricity in the future, reducing their reliance on diesel generation and resulting greenhouse gas emissions. There is currently an estimated 2,000 MW of renewable energy in the area from small hydro, geothermal, wind and biomass sources and the project could immediately serve a number of potential generation projects representing approximately 500 MW being considered under British Columbia's current Clean Power Call.

The project also provides access to the electricity grid for potential customers, which in turn will support and promote economic diversification in the area. According to the Mining Association of BC, the project has the potential to attract $15 billion in new capital investments and create almost 11,000 jobs.

Lastly, construction of the transmission line will be a key step in a potential interconnection between southeast Alaska and the North American transmission grid via British Columbia.

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.

BC Green Agenda Hits Big Bump

British Columbia's Energy Plan: A Vision for Clean Energy Leadership hit a bit of a wall yesterday when it was rejected by the BC Utilities Commission as being "not in the public interest" - in other words, it's going to cost a lot of money and we're not interested. British Columbia, which is a member of the U.S. based Western Climate Initiative, had set aggressive GHG emissions reductions targets of 33% below 2007 levels by 2020. The Globe and Mail reported that "[s]ome analysts say the ruling - which shocked the government and the stock market - indicates B.C. has been over-estimating the amount of power the province needs in order to justify the development of independent power projects". A spokeswoman for the Canadian Office of Provincial Employees Union, COPE, stated "[w]e have a very flawed energy plan in this province ... the government cannot continue to exaggerate the need for power".

The BC Energy Plan claimed to put British Columbia at the forefront of environmental and economic leadership, by looking to all forms of clean, alternative energy in meeting British Columbians' needs in the provincial economy. The Plan called for a number of green initiatives, including:

• Zero greenhouse gas emissions from coal fired electricity generation
• All new electricity generation projects will have zero net greenhouse gas emissions
• Ensure clean or renewable electricity generation continues to account for at least 90 per cent of total generation
• Achieve electricity self-sufficiency by 2016
• Generate electricity from mountain pine beetle wood by turning wood waste into energy
• Invest $89 million for fuelling stations and the world's first fleet of 20 fuel cell buses through a federal-provincial partnership

What the report doesn't say is that a massive capital (read: expensive) outlay is going to have to be made in order to implement the plan. But before the plan could be truly put into action, the BC Utilities Commission had to essentially approve it. The Utilities Commission Decision includes a refusal "to allow BC Hydro to downgrade the Burrard Generating Station. Burrard is a conventional thermal plant fuelled by natural gas that supplements hydroelectric generation in years of low water flows". As part of its Energy Plan, BC Hydro wanted to rate that station as capable of producing a maximum of 3,000 gigawatt hours annually. The Utilities Commission disagreed, concluding said the figure should be 5,000 GWh. If the Burrard potential is rated 2,000 GWh higher, then the need for private power would have to drop by the same amount.

It wasn't all bad news for the BC Government. The Commission approved all but $2 million of the $630 million spend requested by BC Hydro, including $418-million on demand side management. The Energy Minister downplayed the significance of the decision and confirmed that the province is committed to producing clean, renewable energy through independent power producers.

However, the decision raises a couple of issues:

1. BC is going to have to take a long look at its targets, whether they are reasonable and whether the need for power is as stated.

2. What does the Utilities Commission's rejection of the clean energy call mean for the future of green energy in BC? What is the tolerance level of British Columbians in terms of the spend? The Utilities Commission doesn't think it's as high as the government does.

3. What's more important - reducing emissions and using "clean" energy or ensuing the economy is stable and humming (no pun intended) along? Not to mention that sustainable/renewable/clean energy projects don't come without their own high environmental cost.

We'll keep you posted on how this is all playing out.

BC Hydro Stakeholder Session - Bioenergy Call for Power Phase II - Community Based Biomass Projects RFQ (CBB)

On Tuesday July 14, 2009 BC Hydro held an introductory stakeholder session pertaining to the Bioenergy Call for Power Phase II - Community Based Biomass Projects (CBB) Request for Qualifications (RFQ). More information on this CBB RFQ can be found on the BC Hydro website.

Through this RFQ, BC Hydro is looking to source power from community-based biomass projects no larger than 5 Mw. The biomass can be any form of biomass that meets BC Clean or Renewable Electricity definitions.

Regarding Timing for the RFQ, the deadline for submissions of proposals is currently set for November 2009, with the RFQ process complete in early 2010. BC Hydro seeks to qualify at least two projects to engage in negotiations after this RFQ process is complete, which may result in Electricity Purchase Agreements being awarded with respect to the qualified proposals.

Feedback on this RFQ can be submitted through the BC Hydro website by filling out and submitting the Draft RFQ Comment Form, and this opportunity is open until July 31, 2009.

Evaluation Criteria is based on: 1) economic viability; 2) development risk; 3) Distribution-system benefits (addressing reliability issues); 4) community benefits; 5) First Nations involvement; and 6) innovation (unproven or near-commercial technology is not excluded). James Grant, the project manager for the CBB commented that these carried equal weight, and that not all were needed but having them all would make a proposal submission stronger.

For development risk, BC Hydro would consider fuel availability for the length of the contract, adverse impacts and community and First Nations engagement and support. Mr. Grant stressed the importance of having the community "onside", and having a First Nations consultation plan. However, some IPP and First Nations attendees questioned the fast approaching time deadlines of the RFQ, the vagueness of it as it is currently drafted (including what constitutes First Nations consultation, and on price signals), and whether it met today's competitive procurement environment.

Other attendees questioned why this was not an ongoing process, while many questioned BC Hydro on "environmental attributes'. Mr. Grant commented that there is some flexibility there in terms of ownership of environmental attributes, but stated that "we want those", and proposed that attendees should submit feedback on this point, and all other points raised through the comment form.

Overall it appeared that many in attendance were not satisfied that this RFQ would lead to competitive opportunities, particularly in light of the upper project size limit of 5 Mw and the fact that BC Hydro foresees only selecting a small number of proposals for bi-lateral negotiations.

The Harmonization of Climate Change

Since you've been waiting with bated breath to find out what we had to say next about the federal and provincial climate change policies, we didn't want to keep you in suspense. We blogged on Monday that the provinces are throwing together climate change legislation faster than you can say "greenhouse gases".

In related news, yesterday the Globe and Mail reported that the Alberta Conservatives are taking their federal counterparts to task over energy and environment, treatment of the oil sands and other federal government policies. The controversy arises after speaking notes prepared for Conservative MLAs to raise with federal MPs in their home ridings found their way into media hands.

A significant bone of contention for Alberta's governing party appears to be with respect to the federal government's climate change policies as they relate to coal-fired electricity. In a meeting with media on April 29, Minister Prentice was asked about what types of regulations Canada would be rolling out with respect to climate change, and specifically what its policy around thermal-coal would be. The Minister replied that any new coal-fired plants will have to be neutral in terms of emissions, (which means they must have the ability to inject the carbon dioxide at the source underground). He also indicated that once coal-fired electricity plants that have come to the end of their useful lives, and have been fully depreciated, they will be decommissioned and replaced with more environmentally friendly options.

Unfortunately, the announcement appears to have been the first time the information was relayed to Alberta. Why is this so significant for Alberta in particular? Alberta relies on coal for electricity. Virtually all of the country's 27 coal plants are here. We do not have hydro in Alberta and we rely only minimally on renewables, so thermal coal is rather important for keeping the lights on. A policy such as the one outlined by the Minister means that Alberta may "shoulder the biggest burden in complying with these regulations - and depending on how they are formulated, they could have a significant impact on the health of the provincial economy". Premier Stelmach may agree. He was quoted in the Globe article as saying "You cannot ask Albertans to carry the burden of equalization, and then also penalize them for producing the wealth that allows us to make such a massive contribution to the programs that Canadians enjoy".

While the Globe story points to the issue as being one of a frayed relationship between Alberta and Ottawa, really the problem is one of harmony of regulation, not relationship.

As Canadians, we are seeking solutions to climate change at the provincial level - this is good. But it's also challenging. Each province's emissions profile is different from the next and given its industry, Alberta's situation is particularly hard to address. Intraprovincial carbon trading, for example, is a desirable mechanism, but regulations in BC are so vastly different from those in Alberta or Ontario that they will be difficult to align. You could be trading apples for oranges. The longer the provinces have to grow and develop their own programs, the harder it's going to be to allow the various systems to operate in concert.

What will drive harmonization? Probably not climate change, but rather industry (national corporations are the same whether they are operating in PEI or Saskatchewan after all) and intra-provincial trade. Degrees of harmony have to be created.

We're just beginning to explore this topic here on the blog. Stay tuned to see our thoughts on how harmony will be achieved and how the constitutional issue will be addressed.

Dandelions are Springing Up Everywhere

We blogged the other day that Canada is pushing back its target start date for the regulation of emissions at the federal level to align more closely with the American schedule. In a discussion with media from London on May 28, Minister Prentice indicated that the GHG reduction targets would be in effect as late as 2012 in order to ensure they were aligned with the system south of the border. The Turning the Corner Plan called for targets to be developed in 2008 and come into force in 2010.

In a speech to the CD Howe Institute on June 4, the Minister remarked "[w]e will outline the full suite of policies that relate to all major sources of emissions this year, in 2009. I have said this, this will happen time and time again and it will happen by the time we reach the international table at Copenhagen. The process then of drafting the detailed regulations under CEPA will consume much of 2010, the following year. In some cases - the tailpipe emission standards being the obvious illustration - we have already started that process, but 2010 will be the year in which the regulations are drawn together. The regulations will be drafted with a view to an application date of January 1, 2011 and they will be brought into force thereafter on a sector by sector basis. We will make individual decisions on a sector by sector basis in terms of the application date for those".

The critics used to complain that Canada was moving forward without a plan and now they critics bitterly declare that Canada is lagging behind. Isn't that ironic given a year ago we were busily lambasting the U.S. for their lack of climate change initiatives. Canada lagging behind? I don't think so - we're moving forward, just not cohesively.

What is the consequence of Canada pulling back at the federal level (and what, exactly, is the meaning of the blog title), you ask? While the federal government waits for its biggest trading partner to define its domestic targets, regulatory frameworks addressing climate change are springing up all over the place like dandelions on a prairie field.

Alberta's emissions reduction targets were introduced in 2007. BC brought in a carbon tax last year. Ontario passed the Green Energy Act this year and has recently introduced a cap and trade bill (although the implementation date has been pushed back to 2012). So has Quebec. Saskatchewan introduced comprehensive climate change legislation in May. We're expecting that the Maritime provinces and Manitoba, which have established action plans already, will follow suit with regulatory frameworks soon.

All of these provincial frameworks have an opportunity to emerge because the federal framework is being delayed. But are the provinces going to bump into one another? What if you're a corporation operating in B.C., Quebec, Alberta and Ontario - what do you do? Are the provinces on a collision course with the federal government? Where's it all going?

We have some thoughts about that. Stay tuned the next couple of days and we'll explore it.

BC tops ranking of climate change policies by Sustainable Prosperity

BC's carbon tax scored highest on a ranking of 5 climate change policies by Ottawa-based think tank Sustainable Prosperity. Policies were ranked based on eight principles that Sustainable Propserity believes are necessary for an effective climate change policy. Not even BC achieved a perfect score, suggesting that all Canadian jurisdictions have room for improvement.

The complete ranking, with scores based on the above, is as follows:

• BC: 87% compatible with the Sustainable Prosperity principles;
• Quebec: 65%;
• Western Climate Initiative: 48%;
• Federal Turning the Corner: 48%; and
• Alberta: 30%.

Many Canadian provinces have yet to implement or even propose any meaningful climate change plan and were thus not ranked.

Policies were ranked based on eight principles that Sustainable Prosperity believes are necessary for an effective climate change policy:
1. Comprehensive: across all sources and sizes of emissions with no exemptions;
2. Nation-wide: a federal framework is needed to establish a minimum carbon price across the country;
3. Simple and readily implemented: avoiding complex rules and exemptions, and with a short lead time to come into effect;
4. Transparent and accountable: to ensure its integrity, any new policy must be accompanied by a clear analysis of its expected economic and environmental effects, including a clear accounting of amount and use of any revenues raised;
5. Complemented by other measures such as improving the efficiency of vehicles, homes and appliances, and promoting technology research and development where a price signal alone is insufficient;
6. Environmentally effective in meeting the jurisdiction's medium and long-term emissions reduction targets;
7. Ultimately comparable to carbon prices in other countries; and
8. Predictable but adaptable to provide investment certainty but respond to changing scientific knowledge, international agreements, or unanticipated emissions reduction responses.

There were some common themes in the analysis of the 5 climate change policies:

• Systems with widely-scoped offset programs, like those included in Alberta's plan, Turning the Corner, and the WCI, were penalized. Sustainable Prosperity believes that offsets are prone to manipulation and may thus undermine the environmental effectiveness of a policy;
• Intensity-based targets, such as those that are (or were) part of Turning the Corner and Alberta's system, were viewed as a dubious approach to achieving absolute emissions reductions;
• Carbon taxes had an edge over cap-and-trade and baseline-and-credit systems in that they can be implemented through existing administrative bodies; and
• Sustainable Prosperity prefers a coordinated national approach to the issue of climate change, a preference that benefited only the Turning the Corner plan.

Additional reporting is available from the Globe and Mail.

IBM and Acclimatise identify 10 strategic questions that directors should ask about climate change

IBM and Acclimatise (a UK climate adaptation risk management consultancy) recently release a list of 10 strategic questions that directors must ask about climate change. The list is included in a report that focuses on the actions being taken by the UK FTSE 350 companies to "adapt to a changing climate and build business resilience" (the "Report"). The report was prepared as part of the Carbon Disclosure Project.

The questions are grouped to help companies assess their climate change risks, opportunities, and responses. In the preface to the report, IBM says that it believes "anticipation and competent management of [climate change] risks - and the opportunities they present - will be a source of competitive advantage and be crucial to business success."

As shareholders and securities regulators become increasingly focused on climate change issues, the anticipation and competent management of these risks will also be crucial to discharge the fiduciary duties of directors to the corporation and to comply with environmental disclosure requirements.

The following excerpt begins at page 16 of the Report (© Copyright Acclimatise (Climate Risk Management Ltd) and International Business Machines Corporation, 2009, reproduced with permission):

"YOUR RISKS

1) What are the operational impacts of climate change on your company?

• How are your supply chains and suppliers' operations affected?
• What are the implications for the price, supply and demand for commodities (e.g. agriculture, fisheries, minerals), and services (e.g. water, energy, telecommunications and IT)?
• How will international and internal security threats due to climate change affect your local labour supplies and supply chains?

2) Which of your company's key operating assets are located in areas vulnerable to climate change impacts and what are the implications?

• How long would it take and what costs would be involved to relocate and reconfigure key operating assets?
• What are the implications of depreciating, abandoning or writing-off assets before normal end-of-life?
• How will the value of your asset portfolio change over time?

3) How sensitive is demand for your products and services to climate change impacts?

• How will customer needs, buying behaviour and ability to pay, change and over what timescale?
• What steps have you taken to ensure that your current products and services remain viable?
• What are the implications arising from changes in the demographics of your customer base?

4) How could current and future climate change regulations and industry standards affect your organisation and its reputation?

• What is your level of regulatory and financial exposure to the introduction of prescriptive legislation on adaptation, together with further legislation on urgent mitigation action as the reality of climate change becomes more pressing?
• How effective and auditable is your process for reporting regulatory and policy compliance?
• Which areas of your business are sensitive to media, NGO and local community concerns?

YOUR OPPORTUNITIES

5) What new and enhanced existing products and services can you offer your customers?

• What steps are you taking to develop new or enhanced business opportunities that will provide competitive leadership?
• How will you develop brand stretch to take advantage of changes in customer behaviours and develop climate related markets?
• Can you provide products and services that will help customers predict, monitor, adapt, insure or recover from climate change?

6) What operational benefits could you enjoy from managing your response to climate change?

• How can you improve the attractiveness of your company to investors, banks, credit rating agencies, employees and potential recruits?
• How will you use the current economic crisis as an opportunity and an incentive to revisit your business model and respond to the growing social, environmental and economic challenges?
• What are the cost advantages if you can secure more favourable insurance cover by demonstrating strong operational risk management processes and a responsible climateaware business?

YOUR RESPONSE

7) How clear and effective are your company's internal management responsibilities for climate change and your engagement with stakeholders?

• To what extent are your climate change leadership and management roles clearly defined, supported and empowered?
• How are you sharing knowledge with and informing governments, regulatory bodies, NGOs, and the media to manage and forecast exposure?
• What actions are you taking to ensure that the investment community, your bankers and insurers understand and support the steps you are taking regarding climate risk?

8) How well structured is your company's approach for managing climate change?

• How effective is your process for exploring longer-term scenarios and identifying risks and opportunity signals as they emerge to plan and act accordingly?
• How are you assessing the vulnerability of your suppliers, assets, operations, workforce and markets to changing risks?
• What steps are you taking to ensure that climate-driven business risks and opportunities are embedded into your capital investment and operational expenditure decision-making processes?

9) How can you ensure your company's approach is based on robust information and assumptions?

• How have you integrated the latest available climate science, climate change scenarios to inform your business planning and decisions?
• Are your management information systems for assets, supply chains, operations, markets and customers reporting on and monitoring climate change KPIs using realtime, interconnected and intelligent data?
• Can your information systems provide an early warning of operational risk?

10) How can you demonstrate that your company's climate business resilience plans are realistic and financially viable?

• What actions have you taken to understand and manage future liquidity and ensure sufficient contingency funding?
• How do your business continuity and crisis management plans reflect the changing risk profiles due to climate change and are they well-rehearsed?
• What steps are you taking to involve your employees, implement new technologies, and develop new skills, expertise and cultural change?"

BC releases Energy Plan progress report

On April 9, British Columbia released a progress report on the implementation of the BC Energy Plan.

The province highlighted that it has completed several initiatives, including the following:

• Rolled out the LiveSmart BC: Efficiency Incentive Program, which has provided energy-efficiency labels to over 10,000 houses, giving homeowners access to rebates and incentives to improve the energy efficiency of their homes;
• Enacted the Greenhouse Gas Reduction Targets Act to make the broad public sector carbon neutral by 2010;
• Required utilities to implement demand side management measures, which has prompted BC Hydro to apply to BCUC for approval of a Long-Term Acquisition Plan that includes ambitious demand-side management program.
• Prompted BC Hydro to procure more renewable power by conducting the Clean Power Call and the Bioenergy Call for Power Phase 1, which approved 4 new projects (Phase 2 is underway), and by establishing a Standing Offer Program for projects under 10 MW;
• Issued Special Direction 10 to BCUC to ensure BC Hydro can pursue self-sufficiency goals;
• Provided 34 clean energy projects with $47 million in funding from the Province's Innovative Clean Energy (ICE) Fund

In his preface to the report, Blair Lekstrom, Minister of Energy, Mines and Petroleum Resources, notes that, "while we're proud of the achievements to date, there is still much work to be done." Accordingly, the report also describes many initiatives that are underway or planned for the future.

September 2008 Climate Change Law bulletin now available

Carbon offsets are no longer just a voluntary niche product in Canada. Rather carbon offsets are increasingly becoming a sought-after compliance tool for greenhouse gas emitters who are or will be regulated under provincial, federal and regional emission reduction initiatives. Many new offset projects will have to be implemented in Canada to meet this burgeoning demand. Companies with experience in a wide array of sectors including cattle farming, agriculture, forestry, bioenergy, waste management, methane capture, renewable energy, oil and gas, industrial processes, and transportation may be well poised to profit from this emerging market. Sophisticated regulated emitters may also be motivated to turn a compliance cost into a business opportunity by investing in offset projects. In a market whose scope will be determined by regulation, all market participants should consider taking advantage of immediate opportunities to influence the way that offsets will fit into provincial, federal, and regional emissions reduction initiatives. The September 2008 Climate Change Law bulletin discusses the opportunities to access and influence these emerging markets for carbon offsets.

WCI Draft Cap and Trade Design Prioritizes Forestry, Agriculture and Waste Management Offsets

Submitted by Grant Boyle

WCI’s July 2008 draft design recommendations suggest capped emitters will be able to use offset credits to meet 10% of compliance obligations.

Project types under “priority” consideration include: Agriculture (soil sequestration and manure management); Forestry (afforestation/reforestation, forest management, forest preservation/conservation, forest products); and Waste management (landfill gas and wastewater management).

According to the proposal, project types that reduce emissions covered by the cap-and-trade system ( such as electricity projects) would not be eligible to create offsets.

Starting in 2009 WCI Partners will coordinate to develop and approve standard protocols for the project types.

WCI Partners may approve and certify offset projects located throughout Canada, the United States, and Mexico, where projects are subject to comparably rigorous oversight, validation, verification and enforcement as those located within the WCI jurisdictions.

In the case of offset credits under the Kyoto Protocol's Clean Development Mechanism (CDM) and Joint Implementation (JI), the WCI Partners may establish “added criteria to ensure similar rigor to WCI approved/certified offset projects or other requirements”. The WCI Partners are also considering a method that restricts the use of offsets from projects located outside WCI jurisdictions for compliance purposes in the WCI.

BC Public Sector may purchase $24 million in offsets to be carbon neutral by 2010

Submitted by Grant Boyle

On June 26 B.C. released its Climate Action Plan, which outlines strategies that will help the province reach 73% of its goal of reducing GHGs 33% by 2020 from 2007 levels. The Plan outlines existing and upcoming policy initiatives that are intended to help reduce emissions from transportation, buildings, waste, agriculture, industry, energy and forestry in the province.

One of the legislated requirements highlighted under the Plan is for the province’s public sector to be carbon neutral by 2010. Under the BC Greenhouse Gas Reduction Act, all provincial ministries, health authorities, school districts, colleges, universities, Crown Corporations and other government agencies must be carbon neutral as early as 2010.

Public sector organizations must publically report emissions, reduce emissions and offset any remaining emissions. The government will set up the Pacific Carbon Trust as a new Crown Corporation to meet public sector demand for offsets. The 2008 Budget provides $24 million to invest in GHG-reduction projects. Although, the government has not indicated what type of offsets the Trust will accept, the Plan says that the initial mandate of the Trust is to offer “credible, low cost offsets” to the public sector. In light of Victoria’s indication that no regulations to implement BC’s Greenhouse Gas Reduction Cap and Trade Act will pass this year, the Pacific Carbon Trust’s mandate could drive the first compliance market for carbon offsets in the province, creating new opportunities for carbon reduction project developers.

The 2008 Budget also allocates around $100 million to support energy efficiency upgrades in public buildings and $15 million for communications tools that reduce the need to travel as measures to reduce emissions from the public sector.

BC introduces cap-and-trade legislation to complement carbon tax

Submitted by Andrew Lord

Having introduced a significant carbon tax earlier this year, the BC government unveiled a second plank in its aggressive effort to tackle climate change. On April 3, 2008, the BC government introduced Bill 18, Greenhouse Gas Reduction (Cap and Trade) Act (the "Act"). The Act would create a cap-and-trade system for greenhouse gas emissions in the province that could be an effective complement to the carbon tax.

Under the Act, the BC government would issue B.C. Allowance Units ("BCAUs"), each corresponding to a right to emit one tonne of carbon dioxide equivalent, to companies in designated sectors. Those companies would then only be permitted to emit the amount of greenhouse gases for which they held BCAUs. This is the "cap" that makes the policy environmentally effective. Those companies who emit more than their assigned amount of BCAUs would have several alternative compliance options, which together constitute the "trade" element that makes implementing the cap more economically efficient. Such companies could do the following:

• Purchase BCAUs from other companies who were able to cut their emissions below their assigned amounts;
• Purchase Recognized Compliance Units ("RCUs") from other jurisdictions (discussed below);
• Create or acquire BC Emissions Reductions Units ("BCERUs"), which will be generated by projects that avoid or sequester emissions, to offset their excess emissions; or
• Pay an administrative penalty.

The details of the BC cap-and-trade system will be developed in parallel with the Western Climate Initiative (the "WCI"). The WCI, whose signatories include BC, Manitoba, California, Oregon, Washington, New Mexico, Arizona, Utah and Montana, will implement a regional cap-and-trade system. By harmonizing the systems, BC hopes to create increased liquidity for carbon instruments. The Recognized Compliance Units mentioned above are expected to largely be sourced from WCI members.

The Act will also establish the administrative apparatus required to track the allocation and trading of the various units and to approve BCERUs and RCUs.

Carbon taxes and cap-and-trade systems are recognized as two ways of placing a price on carbon. The two approaches are significantly different both in the way they achieve the goal of reducing emissions and also in the breadth with which they may be implemented. With respect to the way a emissions are reduced, carbon taxes put a price on carbon in the expectation that consumers will shift demand away from carbon-intensive products. That price incentive should result in reduced emissions. However the result is not guaranteed, particularly if the price signal is not strong enough. Cap-and-trade systems, by contrast, legislate what amounts to a scarcity of emissions. Combined with measures to create a liquid market, that scarcity results in a price for carbon. However it is the legislated scarcity, and not the price signal, that controls the level of emissions. Because that scarcity can be controlled directly, reduced emissions can be guaranteed to a much greater extent than through carbon taxes. With respect to the breadth with which the two approaches can be implemented, a carbon tax can be implemented for all types of consumers, from big businesses to individuals, and can thus drive down emissions across the economy. In contrast, a cap-and-trade system is complex to administer and is thus better suited for large emitters than for individual consumers.

These counterbalancing differences make a carbon tax and a cap-and-trade system complementary. BC therefore appears to be undertaking a very sophisticated, progressive, and hopefully effective approach to addressing the problem of climate change. Check back here for updates as Bill 18 makes its way through the BC Legislative Assembly.