Lawyers in Canada: Davis LLP - Legal Advisors Since 1892

New York raids RGGI coffers to pay down deficit

On Wednesday, New York lawmakers approved the transfer of $90 million of Regional Greenhouse Gas Initiative ("RGGI") auction proceeds to help fill the state's $3.16 billion budget deficit. The move sets a very unfortunate precedent in the U.S. Fortunately, Canadian lawmakers appear intent on guarding against similar temptation in provincial climate change regimes.

Covering the power sector in 10 Northeastern and Mid-Atlantic states, RGGI is the United States' first cap-and-trade system. The emission cap, which will decrease by 10% by 2018, is administered by distributing emissions allowances to regulated facilities. Nearly all allowances are auctioned, with the intention that proceeds will be reinvested by the participating states in efficiency, renewable energy, and other clean energy technologies. To date, New York has raked in almost $180.7 million from the sale of allowances under RGGI.

The legislature's decision this week to "re-purpose" these proceeds is unfortunate for at least three related reasons. First, the decision compromises part of the environmental and economic effectiveness of RGGI by halving the amount of RGGI dollars currently available for investment in clean energy and green jobs in the state. As a result, the decision also undermines a key justification for auctioning permits, instead of giving them away for free. Finally, by moving the proceeds into general revenue, the decision lends credence to the criticism that cap-and-trade systems are really cap-and-tax schemes.

New York may therefore have set a precedent that will not only undermine the effectiveness of RGGI, but could also be used to undermine efforts to pass similar cap-and-trade legislation in Washington.

Fortunately, Canadian lawmakers have been more savvy in anticipating the temptation of politicians to dip into funds generated by emission reduction regimes. Under Alberta's Specified Gas Emitters Regulation, regulated entities can comply with emissions targets by paying $15 per tonne into the Climate Change and Emissions Management Fund ("CCEMF"). However, the CCEMF is legally segregated from general revenue, is managed by an arm's length entity (the CCEMC), and may only be used to support climate change mitigation and adaptation projects in the province. The province therefore cannot reallocate that money without rewriting its emissions management laws.

Ontario's cap-and-trade regulation, which was passed this week, contains similar protections. The proceeds of any allowance auctions in Ontario will be designed as "money received for a special purpose" under the Financial Administration Act (Ontario) and will be segregated in a "Greenhouse Gas Reduction Account." Funds from the account will only be available for "costs incurred by the Crown in administering the regulations [...] that relate to greenhouse gases and in carrying out or supporting greenhouse gas reduction initiatives."

CCEMC Announces Project Funding for 30 Clean and Green Projects

The Climate Change and Emissions Management (CCEMC) Corporation ("CCEMC") issued a press release this week that of the 223 projects submitted in its EOI process, thirty clean and green projects were being asked to submit Full Project Proposals under the CCEMC's 2009 Call for Proposals: Initial Full Project Proposal Stage.

The CCEMC has up to $120 million available for clean, green projects which address energy conservation and efficiency, greening energy production and carbon capture and sequestration. The CCEMC's Chair, Eric Newell, commented that "clean technologies will reduce emissions and enhance the economic and environmental value of energy resources - by supporting ideas and initiatives at the leading edge of the green economy, we will reduce emissions, and in the process, support green jobs".

The CCEMC's announcement demonstrates its commitment to technology, conservation and greening the energy mix. The projects and investments the CCEMC will be making, which are demonstrated in the projects being selected to move to the Full Project Proposal Stage, undoubtedly have collateral benefits associated with the establishment of green jobs and the development of the green economy.

Stay tuned - we'll keep you up to date on the CCEMC's process and the projects being selected to move forward.

223 Proponents Apply for CCEMC Funding

The Climate Change and Emissions Management (CCEMC) Corporation ("CCEMC") issued its 2009 Call for Proposals: Initial Expression of Interest Stage (the "EOI") on August 5, 2009. The response to the EOI has been, to say the least, overwhelming. According to the CCEMC website, 223 proponents have requested funding from the CCEMC for a total ask of $1.6 Billion Dollars.

This is astounding news. Why you ask? Keep reading.

What Does It Mean?

1. The response to the EOI has been overwhelming. Remember that the CCEMC was only incorporated in February. The Climate Change and Emissions Management Fund Administration Regulation, which delegates the powers, duties and functions of the Minister of Environment (Alberta) to the CCEMC was only enacted in May, 2009. That in less than a year the CCEMC has been able to request EOIs and receive responses from 223 proponents is staggering.

2. The sheer number of proponents and amount of the ask demonstrates how interested Albertans and Industry in Alberta are in climate change technology and initiatives. There's a lot going on in Alberta right now in the area of climate change initiatives as evidenced by the fact 223 proponents have applied for funding.

3. The number of proponents and the success of this first EOI shows that Alberta Environment and the Government of Alberta were absolutely right in anticipating and recognizing the importance of establishing a climate change technology fund and the structure of the CCEMC. (For more information on the importance and uniqueness of the Climate Change and Emissions Management Fund, click here.

4. The CCEMC has up to $120 million for project funding for the 2009 Call for Proposals. Up to 50 percent of monies will be invested in green energy production, 20 percent in energy conservation and energy efficiency and 30 percent in implementing carbon capture and storage. Although there is only $120 Million available at this time, there will be further rounds of calls for proposals as more funds are received from the current and future compliance years. The CCEMC will consider the EOIs and the funding envelopes outlined above and select the very best for the full proposal stage.

5. The fact that the CCEMC is through the first stage in its process for calling for projects is a first in Canada and is clearly the most significant event in the world of climate change innovation in this country. The model for climate change funding in Alberta is working to create action.

The evaluation of the EOIs received by the CCEMC is currently in progress. Proponents whose projects are being selected to submit full project proposals will be notified by November 13, 2009. An annoucement of those selected to submit full project proposals will be made shortly thereafter....just in time for the UNFCCC Conference of Parties in Copenhagen in December. Alberta will truly have the technology fund showpiece at the conference and has much to be proud of.

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?

$865 MILLION in CCS Funding Announced Today

The Alberta and Federal Governments formally announced $865 of funding for a commercial carbon capture and storage project today. Shell Canada was "first out of the gate in the carbon capture effort [today], winning pledges of $865 million in provincial and federal aid for its Quest pilot project", the Edmonton Journal reports. The funding was announced by Alberta Energy Minister Mel Knight and federal Natural Resources Minister Lisa Raitt who said "the most viable emissions-reducing technology for fossil fuels is carbon capture and storage. The government of Canada is delivering results by supporting new, clean technology innovation, positioning Canada as a leader in this technology development and resulting in significant benefits for our environment".

We've blogged a number of times that Alberta, with its small population of 3.6 million, is leading the way, certainly within Canada, but perhaps in North America, in directing funds to address climate change. The announcment today is the first "spend" from Alberta's $2 billion CCS Fund. The federal government has a $1 billion Clean Energy Fund. $850 million of the Clean Energy Fund can be used to developing commercially viable technologies including CCS.

Alberta has signed a letter of intent with Shell to contribute $745 million in funding for the Quest CCS project over the next 15 years. Ottawa kicked in an additional $120 million through the Clean Energy Fund.

Shell Canada spokesman Graham Boje praised the province and federal government "for their leadership and vision on advancing the deployment of CCS...finding ways to reduce greenhouse gas emissions is one of the most important challenges facing society, and developing a substantial CCS capability with governments and key stakeholders is one of our greatest priorities".

Shell Quest aims to store up to 1.2 million tonnes of CO2 per year from its current upgrader in Fort Saskatchewan and that upgrader's expansion, which is under construction. The existing upgrader produces 155,000 barrells of synthetic oil per day and 1.5 million tonnes of CO2 per year. The expansion will produce an additional 100,000 barrells per day with proportionate CO2 emissions.

It's October. It can't be a coincidence that this annoucement comes a mere 59 days before the Conference of the Parties starts in Copenhagen, Denmark. Right now, CCS is one of Canada's good news climate change stories. But if you're thinking that CCS is the only thing in Alberta's bag of climate change tricks, think again.

Don't forget that Alberta has this unique creature called the Climate Change and Emissions Management Fund, which is administered by the CCEMC. The CCEMC closed its 2009 Call for Proposals: Initial Expression of Interest Stage on September 30. Stayed tuned in the next few days to learn more about the EOI process.

The CCEMC and the administration of the Climate Change and Emissions Management Fund

We introduced you to the Climate Change and Emissions Management (CCEMC) Corporation in May. Since then the CCEMC has announced its Board and has received $43,000,000.00 from the Climate Change and Emissions Management Fund.

As we reported in our bulletin, the CCEMC is an independent, arm's length, not for profit organization which is tasked with administering the Climate Change and Emissions Management Fund, to which industry contributes as a compliance option under the Climate Change and Emissions Management Act. Compliance monies have been received into the Fund for 2 periods - the "stub" period for 2007/2008 and the 2008/2009 year, ending March 31, 2009. Alberta Environment reports that the Fund now sits at $122.4 million.

We predicted back in May that the establishment of the CCEMC means that the monies the Fund will begin to be used for the purposes set forth in the Act - for reducing emissions of specified gases or improving Alberta's ability to adapt to climate change. The Fund is the first of its kind anywhere in the world - it is unique for a variety of reasons, not the least of which is that the monies have been specifically from general revenue of the Government of Alberta and segregated to address climate change. The CCEMC has been tasked with its administration - not a small feat.

What's the next step for the CCEMC? We should know very soon. The CCEMC will call for expressions of interest in the coming days - there will be more on the expressions of interest process to follow.

Whatever the next step looks like, one thing is clear. Because the Fund's purposes are set forth in legislation, the projects the CCEMC funds must provide for the reduction of emissions of specified gases or improve Alberta's ability to adapt to climate change. And what is particularly important is that it's not just the promise of reduction, but measurable change that is required of these projects - projects will require clear accountability on performance metrics in order that the monies from the Fund are meaningful.

Provinces, Canada, other countries - frankly the world - are watching the CCEMC and how the CCEMC works to measurably address climate change. They are watching now and they will be watching in December in Copenhagen. Stay tuned to our blog - we'll have much more information for you in the coming days.

Minister Prentice Concludes International Climate Change Trip

Environment Minister, Jim Prentice, concluded a series of important international climate change discussions today in London. The Minister participated in the World Business Summit on Climate Change in Copenhagen, the Major Economies Forum in Paris, and a carbon capture and storage conference in Bergen. The Minister ended his trip in London, where he had extensive discussions his UK counterpart, the Rt Hon David Miliband.

All roads continue to lead to Copenhagen, as we've been saying for a number of months (see here, here and in particular here. In a May 24 speech at the World Business Summit, to which he was invited by the Danish Minister, Minister Prentice remarked:

"I think the fundamental question for business leaders here today is how do we build confidence and momentum towards Copenhagen, and in particular for the business leaders and the companies [those business leaders] represent, what responsibility do you have and what role do you play in that process".

The Minister also indicated to that he is optimistic about the prospect of achieving international agreement on climate change strategy in Copenhagen and cautioned leaders about "green protectionism".

The Minister confirmed to media this morning that Canada's climate change policy would be unveiled in advance of Copenhagen and reiterated Canada's commitment to 20% by 2020 relative to 2006 levels. He advised that the specific domestic approach would be tabled first in Canada and then at the international level.

One of the most important points to come out of the discussion this morning, is the continental approach to climate change, which Minister Prentice has previously indicated is so vital.

Canada's trading relationship with the United States is the biggest trading relationship in the world. Clearly any federal climate change strategy must work in concert with the U.S. approach to climate change. Any policies which Canada develops to address climate change must also reflect Canada's national interest. We have blogged many times about meaningfulness of co-operation on both a North American and global basis. In his remarks to the media today, Minister Prentice further reiterated these important points.

However, the Minister also stressed that while Canada's climate policy must be concordant with that of its neighbour to the south, it does not mean that the policies will be exactly the same all the time. Minister Prentice gave fuel economy standards as an example of where it is in Canada's best interest to mirror that of the United States - the auto industry is truly cross border and having identical fuel standards makes sense. But there are other areas, electricity generation, for example he said, where they are not the same. The Minister asserted that while Canada's policies would work on an equivalent basis with those of the U.S., they need not be identical. For the time being, the United States has not yet arrived at a domestic policy or target. As a result, it is difficult for "Canada to define continental solutions".

What Canada's policy will ultimately be is important. But what is truly and fundamentally important is making progress - how will we find real solutions for climate change? The answer: Technology. Transformative change will only be able to occur through investments in technology. In his Copenhagen speech, Minister Prentice emphasized this point:

"[T]he challenge before us is all about technology. That just cannot be overemphasized, because we're talking fundamentally about a transformation of the capital stock, the technological investments in our society. This will take time. It will take massive investments...".

"Massive" investments in technology and transformative change have already started. Canada, and Alberta in particular, has already demonstrated it is serious. The Canadian government has pledged $1 billion to carbon capture and storage technologies. The Alberta government another $2 billion.

Perhaps the most unique sources of funding is the Climate Change and Emissions Management Fund.. The $122.4 million from 2007 and 2008 compliance years will be specifically allocated for purposes related to the reduction of emissions or improving the ability to adapt to climate change. With all these investments in transformative technology, we are leading the way.

Introducing the Climate Change and Emissions Management (CCEMC) Corporation

Alberta Environment announced today that the Climate Change and Emissions Management (CCEMC) Corporation ("CCEMC") will manage and administer the Climate Change and Emissions Management Fund. The CCEMC is a not-for-profit corporation which is arm's length and independent from government.

Alberta is one of the few jurisdictions in North America with a functional climate change regulatory system. In enacting the Climate Change and Emissions Management Act (the "Act"), Alberta was first in North American to pass climate change legislation requiring industry to reduce emissions below a set threshold.

Large emitters have three compliance options under the Act:

1. Make facility improvements to reduce emissions below the required threshold

2. Purchase Alberta-based carbon offset credits; or

3. Pay $15 for every tonne over target into the Fund.

The Climate Change and Emissions Management Fund (the "Fund"), which is established under the Act, is a critical element of Alberta's long term Climate Change Strategy to achieve provincial and national greenhouse gas reductions targets. Its unique characteristic as a compliance mechanism under targeted climate change legislation makes it singular in the world. Monies flowing into the Fund are segregated and targeted specifically to addressing climate change.

Under the Alberta model, the Ministry of Environment collects monies paid into the Fund from specified emitters. These monies do not form part of the General Revenue of the Province of Alberta and cannot be diverted for other objects. Rather, these may only be used to satisfy the purposes of the Fund set out in the Act.

The Act provides that the Fund may only be used for purposes related to reducing emissions of specified gases or contributing to Alberta's ability to adapt to climate change. The CCEMC is aligned with the purposes of the Fund set forth in the Act. The Minister of Environment will maintain responsibility for receiving payments from industry and transferring the dollars to the CCEMC. The CCEMC will invest money collected from industry into initiatives and projects that support technologies to reduce greenhouse gas emissions and improve the ability to adapt to climate change.

It is expected that the CCEMC will begin accepting funding proposals in the second half of fiscal 2009/2010. Eric Newell has been named as the Chair of the CCEMC - Mr. Newell is the recipient of the Order of Canada and has extensive experience in industry.

Robert A. Seidel, Q.C., who is the National Managing Partner of Davis LLP and Jennifer Cleall are legal advisors to the Climate Change and Emissions Management (CCEMC) Corporation.

New Legislation Under Alberta's Climate Change Regulatory Framework

Further to yesterday's blog announcing that the Climate Change and Emissions Management (CCEMC) Corporation would be administering the Climate Change and Emissions Management Fund, the Alberta Government has also passed the Climate Change and Emissions Management Fund Administration Regulation, AR 120/2009.

The Regulation is passed pursuant to the Climate Change and Emissions Management Act , which permits the Lieutenant Governor in Council to make regulations "respecting the establishment or designation of delegated authorities (s. 60(1)(u) and "respecting the delegation to one or more delegated authorities of the performance of any of the Minister's duties or functions, or the exercise of any of the Minister's powers, under this Act or the regulations, other than a power to make regulations and a power to delegate" (s. 60(1)(v)(ii)).

Section 1 of the Regulation designates the CCEMC as a delegated authority. Section 3 of the Regulation delegates the "performance of the Minister's duties and functions and the exercise of the Minister's powers in respect of holding, administering and making payments of the money paid to the Corporation from the Fund under section 4(1) to the CCEMC. The Regulation also permits the Minister to pay all or some of the Fund to the CCEMC and states that the money paid to the CCEMC from the Fund "belongs to the Corporation" (s. 4(2)).

Other provisions of the Regulation address reporting requirements, compliance with FOIPP and the inspection and audit abilities of the crown.

Robert A. Seidel, Q.C., who is National Managing Partner of Davis LLP and Jennifer Cleall are legal advisors to the CCEMC.