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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.

Joint Announcement of an Investment of up to $20 million to develop a Pilot Biorefinery in Thunder Bay

Today, the Honourable Tony Clement, Federal Minister of Industry, on behalf of the Honourable Lisa Raitt, Canada's Minister of Natural Resources, along with the Honourable Michael Gravelle, Ontario Minister of Northern Development, Mines, and Forestry, announced funding of up to $20 million to develop a forest biorefinery. The pilot project will test forest biomass for use in energy and next-generation forest products. The initial phase of the pilot project involves a feasibility study that will provide a complete analysis of the biorefinery's functions, including a pre-commercial process to extract wood fibres; identify market opportunities; assess output capacity of the demonstration plant; and determine full project costs.

An agreement was also reached by all partners to increase the research capacity and knowledge in the region, which will help Thunder Bay's reputation as a leading centre for bioeconomy research and innovation.

Of the project and agreement, Minister Gravelle was quoted as saying "The diversification of the forest industry in Ontario, including emerging innovative biofuel, is key to strengthening Ontario's forest sector now and into the future [...] we created the Centre for Research and Innovation in the Bio-Economy to bring business, government and communities together to develop new economic opportunities and help ensure a bright future for Northern Ontarians."

Located in Thunder Bay, the Centre for Research and Innovation in the Bio-Economy, or CRIBE, is a not-for-profit organization developed by the Ontario Ministry of Research and Innovation, which focuses on commercializing new forest products and technologies by working with leading researchers and industry. The province is currently investing $25 million in the CRIBE, which intends to attract world-class researchers and industry leaders to develop the next generation of renewable forestry bio-products.

Forest bio-products contribute an estimated $1 billion to Canada's economy and could one day be as important as the conventional forest economy.

Ontario emissions reduction targets unachievable with current policies

Ontario is not on track to meet its own emissions reduction targets. That is the conclusion of the Annual Greenhouse Gas Progress Report 2008/2009 released by the Environmental Commissioner of Ontario this week. The Commissioner's conclusion is a one-two punch for Premier McGuinty's government. It undermines Ontario's position in Copenhagen and makes Ontario's criticism of the federal government's climate change strategy ring hollow.

Ontario's Action Plan on Climate Change call for a step-wise reduction in greenhouse gas emissions. The government's targets are:

• 6% below 1990 levels of GHG emissions by 2014 (which accords with Canada's commitment under the Kyoto Protocol);
• 15% 1990 levels by 2020; and
• 80% below 1990 levels by 2050.

The government reports on its progress in a Climate Change Action
Plan Annual Report ("CAAP"). Having reviewed 2008/2009 CAAP, the Commissioner concluded that "the government will not meet either its 2014 or its 2020 reduction targets." Specifically, current policies will result in Ontario:

• falling 15 Mt short of the 2014 reduction target of 165 Mt;
• possibly experiencing an increase in emissions between 2014 and 2020, leaving the province nearly 10 Mt above the 1990 baseline and 35 Mt short of the 2020 reduction target of 149 Mt.

The Commission was particularly critical of the government's undue reliance on the phase out of coal stations to achieve timely reductions, of its "blind spot" for the contribution of natural gas fired generation to the province's emissions profile, and its lack of effort to address emissions from transportation. The Commissioner also cautioned the province against placing significant emphasis on the role of a future cap-and-trade system, noting that "the ECO remains concerned about the risks inherent in a process where key decisions about a future trading regime are largely in the hands of other jurisdictions."

As reported previously, Ontario has been trumpeting its aggressive reduction targets, both in the run up to Copenhagen, and in the context of its criticism of the federal government's more modest targets and inaction on the climate file. Ontario's position on both fronts does not ring as true in light of the Commissioner's report.

Hopefully, the government will take the Commissioner's criticism to heart. The opportunity to enact more effective climate change policies is certainly ripe. Hopefully the province will build on the momentum of the Green Energy Act to undertake innovative policies in other emissions intensive sectors.

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."

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."

Ontario passes cap-and-trade bill

The Ontario Legislature passed the Environmental Protection Amendment Act (Greenhouse Gas Emissions Trading), 2009 today. As discussed when the bill was introduced in May, the new legislation provides the legal foundation for a cap-and-trade system in Ontario.

While reams of regulations will have to follow before such a system "goes live", the passing of this bill and of the related emissions reporting regulations this week suggests that Ontario is moving forward with its plans to regulate greenhouse gas emissions at the provincial level. As discussed earlier, the announcement may be seen as part of a trend by several provinces (also including Alberta, BC and Quebec) to take bolder action than has been proposed by the federal government. The timing of the announcement suggests that Ontario wants to have a fresh achievement to talk about in Copenhagen next week.

The proposed scheme will cover carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulphur hexafluoride, and "any other contaminant prescribed as a greenhouse gas by the regulation." It provides the government with the power to create tradable instruments (i.e., emissions allowances), which may be distributed for free or auctioned.

As highlighted in the accompanying press release, "the act allows Ontario's program to link to other systems in North America and abroad. Aligned systems would maximize trading opportunities for industry, helping them to make GHG reductions at lowest cost." Fungibility of credits across the border is key to making such a system affordable, a reality that continues to escape some federal policy makers who still advocate for a national system based on emissions intensity, instead of absolute emissions.

The most significant revision since the bill was introduced was the addition of provisions relating to the collection and use of proceeds received by the government from the distribution of allowances. Taking a cue from Alberta's Climate Change and Emissions Management Fund, the bill attempts to segregate such proceeds for use in climate change initiatives. The bill requires that such funds be designated under the Financial Administration Act (Ontario) as "money received for a special purpose and placed in a "Greenhouse Gas Reduction Account." Funds from the account may only be used 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." Unlike Alberta's approach (and the federal Turning the Corner plan), the new legislation does not appear to contemplate that regulated emitters will be able to pay into the Greenhouse Gas Reduction Account in lieu of reducing emissions or acquiring allowances or offsets.

Ontario passes greenhouse gas reporting regulation

On December 1, Ontario passed O. Reg. 452/09 (the "Regulation") which requires large emitters to report their greenhouse gas emissions to the Ministry of the Environment ("MOE"). The Regulation, which will force companies to focus on their emissions while giving the MOE better data about the province's emissions profile, is seen as an important step towards the creation of a cap-and-trade system in the province.

The Regulation, which applies to 26 types of facility, requires the following:

• reporting of specified GHG data by all facilities that are emitting 25,000 tonnes of carbon dioxide equivalent (CO2e) or more per year;
• annual reporting of GHG emissions, starting with 2010 emissions;
• mandatory use of identified standard quantification methods to quantify emissions starting with 2011 emissions;
• flexibility to use the best alternative quantification methods for 2010 emissions;
• annual third-party verification of emissions, beginning with 2011 emissions;
• emission reports to be submitted on June 1 starting with 2010 emissions in 2011; and
• verification to be completed by September 1 starting with 2011 emissions in 2012.

The delay of third party verification until the 2011 reporting year is intended to allow the required professional services capacity to grow in the province. The flexibility to use best alternative verification methods in 2010 is similarly intended to smooth the transition to standardized reporting requirements in 2011.

In an interesting compromise, the Regulation allows regulated emitters to deduct up to 15,000 tonnes of carbon dioxide generated from a facility through the combustion of biomass, the theory being that the combustion of biomass, which draws CO2 from the atmosphere as it grows, is carbon neutral. In contrast, BC's regulation provides that all carbon dioxide from wood biomass, or the wood biomass component of mixed fuels, is not to be included in the determination of thresholds. The EU ETS takes a similar approach, where emissions from biomass must be reported but are "zero-rated" for the purposes of determining if a facility has stayed under its emissions limit. It is unclear why Ontario adopted a "halfway house" approach to the combustion of biomass.

The MOE has also issued a companion Guideline for Greenhouse Gas Emissions Reporting that details exactly how facilities are to report their emissions.

In crafting the Regulations, Ontario sought to ensure that Ontario's regulatory system for greenhouse gases will be harmonized with whatever system will ultimately be adopted south of the border (note the absence of any concept of "emissions intensity", as found in federal and Albertan approaches). The Regulations have therefore been modelled significantly on the approach proposed by the Western Climate Initiative as well as the September 22, 2009 EPA ruling on GHG reporting.

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.

Premiers McGuinty and Charest reassured by Minister Prentice

Early this week, we reported on federal Environment Minsiter Jim Prenctice's cross-country tour to discuss his plans for federal climate change regulations. That tour hit Toronto this week, but did not evoke the negative reaction that has been reported in other parts of the country. The Toronto Star reports that Ontario Premier Dalton McGuinty and Quebec Premier Jean Charest said that Environment Minister Jim Prentice has privately told them the upcoming federal scheme to reduce greenhouse-gas emissions would be fair to their provinces.

Premier McGuinty was reassured that the proposed federal system:

• will be compatible with the U.S. system;
• will not place Ontario at a disadvantage in comparison to other parts of Canada;
• will not disproportionately burden Ontario;
• will not cause a transfer of wealth from Ontario to other parts of the country.

Premier Charest agreed, but continues to take issue with Ottawa's insistence on using 2006 as the base year for emissions, instead of the internationally recognized 1990 baseline.

Minister Prentice clarified that there has "never been any suggestion on my part that the oil sands or any industry would receive special treatment in any of my consultations." However, he did not specifically exclude the possibility that some industries could be subject to hard caps while others, notably the oil and gas sector, may be required to meet intensity-based targets.

Quebec and Ontario's primary concern appears to be harmonizing with the U.S. to avoid any adverse trade consequences.

OPG shuts down 4 coal-fired units ahead of schedule

Ontario's Ministry of Energy and Infrastructure announced today that OPG will close four of the province's coal-fired generating units in 2010, well ahead of the 2014 deadline for phasing out coal. The Ministry describes the closures as "landmark progress on Canada's largest climate change initiative."

The closure could also be described as long awaited progress, as closure of all coal-fired generation was originally promised for 2007.

The 4 units supply about 2,000 MW (or about 6% of the province's installed generation capacity). Some of that supply may no longer have been needed as electricity demand has contracted in recent months. OPG is hoping to convert some or all of the remaining 11 coal-fired units to burn biomass.

Some observers wonder if the move goes far enough. With electricity demand significantly reduced as a result of the recession and hundreds of megawatts of new generation already under development, many environmentalists would like to see more of the coal units closed ahead of the 2014 deadline.

Other observers wonder if the move goes to far. Not everyone supports the closures. Industry analyst Tom Adams believes that coal-fired generation can idle at lower levels and ramp up more quickly than gas-fired generation. Coal may therefore be a better backstop for intermittent power sources like wind and solar.

Phasing out coal is but one part of Ontario's strategy for moving to a more renewable supply mix. Industry stakeholders are waiting anxiously for the government and the OPA to finalized the regulations and feed-in tariff introduced under the Green Energy and Green Economy Act, 2009. The Ministry said that today's announcement "launches Ontario's ten steps to transition the province to electricity generated from green energy which will open investment and opportunities in Ontario's green economy." We are seeking clarification about steps 2 through 10 - stay tuned.

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.

Canada, Ontario push out start of climate change regulations

Both the federal and Ontario provincial governments have decided to delay regulations that would mandate reductions in greenhouse gas emissions. The modified schedules more closely align with the expected legislative timetable south of the border.

Federal announcement

Federal Minister of the Environment Jim Prentice announced on May 28 that hard emissions targets will now come into effect beginning in 2012 and will be phased in through 2016. The shift to a 2012 start date is consistent with the federal government's strategy of aligning Canadian environmental, energy and economic policy with that of the Obama administration in the U.S. "In terms of our industrial competitiveness, protecting jobs, investments, we will need to ensure that the application dates for Canadian climate change policies are harmonized with the United States," the Globe and Mail reports Mr. Prentice as saying, "or at least that we give close consideration to how and when individual sectors of the American economy will be regulated."

However, the new timeline is a significant departure from that set out in the federal Turning the Corner plan, which called for regulations to take effect on January 1, 2010. The 2012 start date means that Canada will have no regulations in place before the end of the first commitment period under the Kyoto Protocol, Canada's targets for which Prime Minister Harper has described as unachievable since his campaign for office in 2006. Critics note that the change is out of step with the fierce urgency of now recently highlighted by a group of Nobel laureates.

Some suggest that the announcement will hurt Canada's credibility during the negotiations in Copenhagen later this year (see e.g., Climate Action Network Canada and the Pembina Institute). However, Mr. Prentice made it clear that the government will make public "a full suite of policies that relate to all sources of greenhouse gas emissions" before Copenhagen.

Ontario's acknowledgement

Also on May 28, Ontario's Minister of the Environment John Gerretsen acknowledged that the provincial Liberals had pushed back their cap-and-trade implementation date to 2012. The acknowledgement followed the tabling of framework legislation for the proposed cap-and-trade system.

2012 coincides with the expected start of the first phase of a cap-and-trade regime under the Western Climate Initiative, of which Ontario is a member. However, the new start date is two years later than the 2010 date in the Ontario-Quebec cap-and-trade MOU signed almost exactly a year ago.

The need for the delay is attributed to the change in administration in the US and to delays in Ottawa. However, Ontario Premier Dalton McGuinty had previously declared that Ontario should move faster than Ottawa and Washington, saying, "we want to ensure that we have in place a framework at least, before we can even talk about putting a price on carbon ... that allows Ontario businesses to know where the future's going to be and so that we can influence the debate which I think will unfold."

Ontario introduces cap-and-trade bill

Ontario's Ministry of the Environment tabled the Environmental Protection Amendment Act (Greenhouse Gas Emissions Trading), 2009 (the "Bill") today. The Bill amends the Environmental Protection Act (Ontario) ("EPA") to lay the groundwork for implementing a cap-and-trade system in the province.

The Bill proposes to revive s. 176.1(1) of the EPA to read as follows:

"The Lieutenant Governor in Council may make regulations establishing programs and other measures for the use of economic and financial instruments and market-based approaches, including without being limited to emissions trading, for the purposes of maintaining or improving existing environmental standards, protecting the environment and achieving environmental quality goals in a cost effective manner."

The Bill then specifies a non-exhaustive list of types of regulations that may be made to create the cap-and-trade system. The Bill appears to leave open the question of whether allowances will be auctioned or given away free of charge. It also contemplates trades with jurisdictions outside of Ontario. This is consistent with Ontario's membership in the Western Climate Initiative.

The Bill also provides for regulations that designate "a person or body to administer programs and other measures" established under the proposed act. For example, Ontario could choose to establish an arm's length corporation to administer allowance auctions and to distribute the revenues received thereunder.

Huge amounts of regulatory detail must still be drafted. The full details of Ontario's plan are therefore still unknown. Some indication of Ontario's plans may be found in a discussion paper included with the Bill (but originally released in December).

Both the proposed legislation and the discussion paper have been posted on the Environmental Registry for a 60-day comment period until July 26, 2009.

Stay tuned for more details.

Quebec tables cap-and-trade bill

The government of the Province of Quebec has tabled Bill 42 to introduce a cap-and-trade system in the province. The Globe and Mail reports that the bill may be passed as early as June, with reporting obligations beginning next fall. The first caps will be implemented for the period of 2012 to 2015.

The Globe quotes Quebec Environment Minister Line Beauchamp as saying, "we hope Quebec's participation in this common market with Ontario, Manitoba, British Columbia will incite the federal government to co-operate with the provinces to develop a Canadian carbon market compatible with what is taking place elsewhere in the world."

Ontario is apparently set to follow suit in the coming weeks. Ontario Premier Dalton McGuinty recently said, "we [the leaders of Ontario and Quebec] both agree that we have an opportunity, even a responsibility here in Canada, to put in place a carbon-exchange register that will, one way or another, serve as kind of a pilot project that the federal government and maybe even the government in Washington can use as a base for a national program."

Ontario and Quebec signed an accord last year to implement a joint cap and trade scheme. Along with Manitoba and British Columbia, they are also members of the Western Climate Initiative ("WCI"), which is committed to implementing a regional scheme by 2012.

The announcements follow on a report by the federal Environmental Commissioner (discussed here) that is critical of the federal government's existing emissions reduction plans. Ottawa has been signalling recently that it may update its plan to achieve its goals of protecting Canada's interests while harmonizing to the greatest extent possible with developments south of the border.

Ontario launches time-of-day electricity pricing initiative

Ontario has begun implementing time-of-use electricity pricing. Beginning in June, 10,000 homes in Toronto will pay different prices for electricty depending on the time of day when the power is consumed. The province expects to roll out time-of-day pricing to a million homes by next summer.

Under the new pricing scheme, consumers will pay the following:
- On-peak: 9.1 cents
- Mid-peak: 7.6 cents
- Off-peak: 4.2 cents

As detailed here, on-peak, mid-peak and off-peak periods between weekdays and weekends and between winter and summer.

Time-of-day pricing is made possible by new smart meters, which Ontario's electricity distributors have been installing over the past few years.

However some have criticized Ontario's smart meters for not being smart enough. Currently, the meters do not provide real-time consumption feedback to customers. Many feel that time-of-day pricing will not have a significant impact on consumption unless consumers can, to us an anachronism, watch their meters spin.

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?"

Has Ontario killed the electric car?

On March 21, Ontario enacted amendments to regulations regarding the use of low speed electric vehicles ("LSEV") on the province's roads and highways. As reported by the CBC, the new rules are too strict for key players in the industry.

Catherine Scrimgeor of Toronto-based ZENN Motors is quoted as saying, "the ZENN [electric car] as it exists right now - the ZENN car that we sell in Quebec and the United States - will not be marketed in Ontario." ZENN, which stands for "zero emission no noise", is one of the province's most vocal proponents of LSEVs.

The new regulations are part of a pilot project of the Ministry of Transportation (Ontario). In enacting the regulations, the Ministry attempted to balance the benefits of getting LSEVs on the road with the risks that their drivers would face when surrounded by conventional vehicles. The regulations were developed in part with reference to a study of the issue prepared by the National Research Council Canada.

O. Reg. 449/06 Pilot Projects - Low-Speed Vehicles and R.R.O. 1990, Regulation 611, Safety Inspections (applies in part to LSEVs), which are both regulations under the Highway Traffic Act, are available online.

Ontario launches $250 million Emerging Technologies Fund

On March 18, the Ontario Ministry of Research and Innovation announced the launch of a new Emerging Technologies Fund (the "Fund"). The Fund is intended to help emerging companies cross what the Toronto Star describes as the Valley of Death, the gap in financing that swallows many proven products before they can be commercialized. Companies "with a significant Ontario footprint" that have innovated in the clean technology, life sciences, digital media and information communication technology will be entitled to apply for funding.

The Fund does not provide grants. Rather it will match investments by venture capitalists and angel investors dollar-for-dollar on the same terms as the private sector investors. The Fund will therefore take an interest in the companies it funds. "The goal is for the fund to be self-sustaining through return on investment," according to a statement from Minister John Wilkinson, although he acknowledged that the Fund is also taking on the risk that some companies will fail.

As reported by the Star, venture capital funding for tech companies is very tight in Ontario, which has forced many entrepreneurs to look to the U.S. for financing. The economic downturn has made raising money anywhere that much more difficult. Many are hopeful that the half-billion dollars unlocked by the fund will help innovation flourish in Ontario.

The Fund appears to complement the federal government's Sustainable Development Technology Canada ("SDTC") funding program (see our recent posting about new SDTC funding). SDTC describes the innovation funding chain as having the following stages:

• fundamental research
• applied reserach
• technology development and demonstration (i.e., pilot to full scale demonstration)
• product commercialization and market development
• market entry

SDTC identified a huge funding gap at the technology and demonstration phase, which SDTC funding helps to address, and a smaller gap product commercialization and market development, which is underserviced by venture capitalists and angel investors. It remains to be seen whether the Fund will focus only on the commercialization phase gap or also help fill the demonstration phase gap.

The program details are still under development and are expected to be published by June.

IESO: Ontario still on track to phase out coal

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

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

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

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

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

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

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.

Ontario to Jump Onboard the WCI

On July 18, 2008 Ontario’s Premier Dalton McGuinty announced that Ontario is moving from ‘observer’ status to a member of the Western Climate Initiative (WCI), which includes BC, Manitoba, Quebec, Arizona, California, New Mexico, Oregon, Washington, and Utah. The WCI is a group of Canadian provinces and U.S. states banding together in a regional initiative to address climate change. Alaska, Colorado, Idaho, Kansas, Nevada, Wyoming, Saskatchewan and the Mexican states of Sonora Baja California, Chihuahua, Coahuila, Nuevo Leon and Tamaulipas have observer status. The WCI expects to complete design recommendations of a regional, multi-sectoral cap and trade program by August 2008 and roll out the program by 2010.

More details on the WCI can be found in our new Climate Change Law Bulletin - Issue No. 1 (July 1, 2008): Emerging GHG Compliance Emissions Trading Systems in North America.

Ontario and Quebec announce cap-and-trade alliance

Cap-and-trade is coming to central Canada. Premiers Dalton McGinty and Jean Charest announced this week that Ontario and Quebec would work together to implement a cap-and-trade system for the two provinces. The target will be to reduce emissions to 1990 levels (which would still fall short of Canada's Kyoto commitments). Premier McGinty said the system should be implemented by 2010.

No other details of the proposal have been released. However, it is expected that the Ontario-Quebec system will be modelled at least in part on the Western Climate Initiative ("WCI"). The WCI is an alliance of states and provinces that will implement a regional cap-and-trade system. Quebec is a WCI member (as are Manitoba and BC) and Ontario is a registered observer. WCI released Draft Design Recommendations for its cap-and-trade system on May 16, 2008 (see our related posting) and will be issuing its final recommendations in September. BC has already indicated that it intends to harmonize its provincial cap-and-trade system with that implemented by the WCI. It is likely that Quebec and Ontario will follow suit.

As reported by the CBC, the announcement by Ontario and Quebec was met with scorn from Ottawa. Federal Environment Minister John Baird accused Premiers McGuinty and Charest of "political posturing" and claimed that "What the premiers are talking about is much in the line of what we're doing, but it's just talk." The Premiers got in their own jabs, with McGuinty accusing the Federal Conservatives of having a lack of imagination and Charest noting that the rest of the world is moving towards a cap-and-trade model, not the intensity-based approach being taken by Ottawa. Federal NDP leader Jack Layton also jumped into the fray, saying that the Premiers were filling a "vacuum of leadership" on the issue of cutting greenhouse gas emissions.

Ontario releases its 20-year Integrated Power System Plan

Submitted by Andrew Lord.

On August 29, the Ontario Power Authority filed its 20-year Integrated Power System Plan ("IPSP") with the Ontario Energy Board. According to the OPA's press release, the 4,000-page plan is intended to ensure a "reliable, adequate and sustainable long-term electricity supply for the province."

The plan is OPA's response to the government's Supply Mix Directive dated June 13, 2006. That Directive set out the following priorities and goals:

1) Maximize cost effective conservation to reduce demand by 1,350 MW by 2010 and by another 3,600 MW by 2025;

2) Maximize cost effective renewable generation to increase supply by 10,402 MW by 2010 and by 15,700 MW by 2025;

3) Make up remaining baseload requirements with nuclear power but limit installed in-service capacity to 14,000 MW;

4) Phase out coal-fired generation and replace it with committed and planned resources including gas-fired generation; and

5) Use gas-fired generation as needed to meet peaking requirements.

These priorities are in rank order. For example, the plan addresses the goal of maximizing conservation before addressing the goal of maximizing renewable generation. However, the ranking above does not necessarily represent the order in which actual projects will be undertaken. For example, a renewable energy project may be started before a conservation initiative provided that the conservation initiative will eventually be undertaken.

With respect to the controversial issue of nuclear power, the plan provides for the refurbishment of existing stations but expressly excludes the construction of any new nuclear generating capacity. Nuclear power will be used to fill a significant gap (85 TWh by 2027) between the projected baseload demand and the planned capacity from other sources. OPA also considered combined cycle gas turbine generation as a means of filling this gap. However, it concluded that nuclear power was the superior choice.

The plan also addresses Premier McGinty's very public goal of eliminating coal-fired generation by 2014. Taking into account other planned changes, the OPA concluded that there would still be a supply gap to be filled in certain regions after the coal plants were shut down. The plan will fill that gap with the construction of 1,400 MW of gas fired generation near the GTA, North York, and Kitchener-Waterloo-Cambridge-Guelph regions. Simple cycle and combined cycle gas turbines, as well as co-generation, will also be used to meet peaking requirements in the province.

Overarching all of the priorities in the plan is the issue of transmission. The IPSP repeatedly emphasizes that Ontario's transmission infrastructure will have to be upgraded to accommodate the new mix of generating capacity (particularly renewable generation capacity such as wind power, whose intermittent nature presents specific technical challenges for the grid). Upgrading that infrastructure will therefore present some of the earliest opportunities under the IPSP.

The plan also identifies the following objectives as being part of its near-term action plan for 2008 to 2010:

1) Conserving an additional 1,400 MW;

2) Procuring 2,700 MW of additional renewable resources; and

3) Procuring 2,150 MW of gas fired generation for the GTA, North York, and Kitchener-Waterloo-Cambridge-Guelph regions.

The second objective was put into motion two days before the IPSP was released. On August 27, Ontario announced that it intends to procure an additional 2,000 MW of green renewable power. This announcement doubles the McGinty government's renewable generation target to 4,000 MW. The Ontario Power Authority will commence the process for procuring the first 500 MW of additional generation by the end of 2007. All projects under the new directive must be over 10 MW. The directive therefore complements Ontario's ongoing Standard Offer Program under which the government has set fixed prices for electricity purchased from renewable generation projects under 10 MW.

Stay tuned for additional commentary about the IPSP and Ontario's energy future.