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$559 million in Green Infrastructure Investments announced for Greater Montreal Area

Following last week's similar announcement for Québec City, Ms. Line Beauchamp, Minister of Sustainable Development, Environment and Parks, and Mr. Steven Blaney, MP for Lévis-Bellechasse, today announced joint federal-provincial support for major Green Infrastructure Projects in the Greater Montreal Area (the "Projects").

The Projects represent an overall investment of $559 million and involve the construction of two facilities for organic waste treatment using anaerobic digestion, two composting centers and one pilot organic waste pretreatment facility, at a cost of close to $213 million. In addition, three more organic waste treatment facilities which would be constructed in Laval, Longueuil and Montreal's South Shore would benefit from additional joint federal-provincial financing of approximately $180 million, with the balance to be financed via municipal contributions.

The Projects will allow for the treatment of a large part of the organic waste generated in the Greater Montreal Area, including Laval and Montreal's South Shore. The biomethanization process used in the facilities will allow for the treatment of table scraps, septic sludge and organic waste from homes, factories and institutions, while the composting process will also treat table scraps, leaves and grass clippings produced in the municipalities and agglomerations. Ultimately, these Projects will limit the amount of waste sent to municipal landfill sites and allow, in the case of anaerobic digestion, for the production of bioenergy to replace fossil fuel and combustibles, thus reducing greenhouse gas emissions (GGEs).

Of the overall investment, the Government of Canada has committed to contribute close to $150 million, or up to one third of eligible costs. The federal contribution to the Project will be provided through the new, $1-billion, five-year, nation-wide Green Infrastructure Fund, which is part of Canada's Economic Action Plan announced in the January 2009 Budget. The Green Infrastructure Fund supports sustainable energy generation and transmission, as well as wastewater treatment and solid waste management at the municipal level.

As for the Government of Québec, it is to fund approximately $165 million of the Projects. The provincial contribution is being granted under the province's Program for the Treatment of Organic Matter through Biomethanization and Composting (French-only) (the "Program") which benefits from a total investment of about $650 million, of which at least $187 million is to come from the Government of Québec. Projects funded under the Program are to create approximately 5,200 direct and indirect jobs. The Program aims to implement one of the major components of Québec's new Management of Residual Materials Policy (French-only) by progressively banning the landfilling of organic matter by 2020, while contributing to the achievement of the province's GHG emissions reduction target.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Successful Project Descriptions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Québec applies California Standards to Light Vehicle GHG Emissions

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

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

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

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

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.

GDF SUEZ Completes New Brunswick's Largest Wind Facility

GDF SUEZ has completed construction and achieved commercial operation at Caribou Wind Park, located 70 kilometers northwest of Bathurst, New Brunswick. The largest wind operation in the province, the 99 MW facility will provide all of its power to New Brunswick Power to fulfill a 20-year power purchase agreement with the utility.

Upon completion of the project, David Hay, NB Power's President & CEO was quoted as saying "NB Power is focused on minimizing its environmental footprint through a number of initiatives such as diversifying our renewable portfolio."

Achieving commercial operation of Caribou Wind Park, which is GDF SUEZ's first generation facility in New Brunswick, brings the company's North American renewable energy portfolio to 509 MW, more than 40 percent of which is wind powered generation. The company also owns and operates two wind farms, which hug the west and north capes of Prince Edward Island: West Cape Wind Farm, with a generation capacity of 99 MW, and Norway Wind Farm, which generates 9 MW. GDF SUEZ claims that over one third of its power operations in North America are carbon-free or carbon-neutral facilities.

Producing enough electricity to supply as many as 30,000 homes, Caribou Wind Park, via New Brunswick Power, will provide power to about 2 percent of the electricity needs in the province.

Copenhagen - December 15 - China Still Not on Board

When we were in the line-up for registration this morning, someone remarked to us "if climate change isn't real, why are all these people here".

Good question.

That climate change exists is certainly not in not in dispute at COP 15. What is in dispute is how the world is going to manage it. A couple of big names spoke today - Secretary-General of the UN, Bai Ki-moon and the Governor of California, Arnold Schwarzenegger both gave speeches.

Today marked the formal opening of the final high-level stage of the conference. All the world leaders who are attending the conference will be arriving in the next day or two.

Secretary General Bai Ki-moon said "[w]e know what we must do. We know what the world expects. Our job here and now is to seal the deal, a deal in our common interest," adding that the world's leaders face "a defining moment in history". The Secretary-General also said that "three years of effort have come down to three days of action. Let us not falter in the home stretch. No one will get everything they want in this negotiation". He labelled these negotiations as the "most complex and ambitious ever to be undertaken by the world community". If the attendance alone is any indicator, he's probably right.

What's interesting is that there is an expectation on the world leaders and national governments to solve the issue by themselves - legislate emissions reduction requirements, come to some sort of agreement by which each nation will have to abide. What about on a smaller scale? This was the focus of the speech Governor Schwarenegger gave today.

"The world's governments alone cannot make the kind of progress needed on global climate change, they need everyone working. They need the cities, the states, the provinces and the regions. They need the corporations, the scientists, the individuals to create the determination and action for movement".

"I believe technology and economic focus will overtake the politics and regulatory efforts of national governments," he said. "We are beginning on a historic great transformation, a new economic foundation for the 21st Century and beyond". He also commented that the conference was in danger of "talking grandly" but failing - but even if national governments fail to agree, he said the rest of the world must take action at a "sub-national level".

The foundation of these comments is that it's not just world governments which have resonsibility for addressing climate change - it's everyone. What are we doing at the provincial level in Canada for example? What are you doing in your own home?

So what are the negotiations really going to accomplish? We have three days left - the American President and the Canadian Prime Minister both arrive on Thursday for the last two days of the conference. Canada's positoin here continues to be a tough one and Canada was awarded another "Fossil of the Day" awards this evening for something or other. Canada is definitely not the belle of the climate change ball here.

In any event, is Bai Ki-moon's request going to be granted? Will the world leaders be able to "seal the deal". The Wall Street Journal doesn't seem to think that the chances of a new climate accord are "particularly good". It reported today:

"That's brought home by the latest draft agreement, which leaves for later pretty much everything that's controversial: How much to cut greenhouse-gas emissions globally and in each country; who will pay for all that and how much; how to verify what other countries are doing on emissions; how to square the climate deal with international trade agreements, and more. At the same time, the sniping among countries has gotten more intense. Developing countries such as China and India have long taken shots at the U.S. position on climate change. But instead of finding common ground, U.S. and Chinese negotiators have been trading barbs".

It still looks like China is not on board with the idea of being accountable for its emissions. I am going to start sounding like a broken record, but in order for any international agreement to be meaningful, China, India and the other developing nations must be accountable. Todd Stern, the U.S. Climate Change Envoy took aim at China's reluctance: "If we are going to have an international agreement, as opposed to a bunch of individual countries doing their own domestic thing, but an international agreement where countries come together to work together, then they [China] have got to be prepared to put what they are doing into that international agreement." That doesn't sound like the words of someone who's optimistic about finding a solution in the last three days of Copenhagen.

There's still a question of whether the Kyoto Accord will be ditched entirely or extended, there's still a question of what the international emissions target should be and there's still a quesiton of who is going to be held accountable. Is all that going to get sorted out in the next 72 hours?

Hmmm.

So, it's going to be an interesting next three days. Lots going on tomorrow. Keep checking in.

And by the way, no, I did not meet The Terminator.

Copenhagen - What Happened Today

It's really nothing new.

The talks in Copenhagen seem to be confirming the status quo. Developing countries are still looking for someone to pay for climate change so they can continue growth. They are looking to the developed world to do this. Today some African nations walked out of the talks in protest over discussions to let the Kyoto Protocol expire and begin with a new treaty, one to which all countries are bound.

What does it really mean? It has to do with money.

Under Kyoto developing nations have no emissions reduction requirements. Countries to the Kyoto Protocol are to reduce their emissions or purchase international offsets if they don't (clearly it's not entirely this simple, but those are the basics). The purchase of these offsets (which for most industrialized nations are necessary in order to get their emissions below the cap) essentially amount to financial assistance by the developed to the developing world.

The developing nations are not accountable for emissions under Kyoto, nor is the United States, which neither signed nor ratified the treaty. If a new treaty is made, then most developed nations argue that in order to be effective and to involve the U.S., it must also bind the developing world. The developing world isn't particularly keen on this (see our previous blogs commenting on India and China). It would also mean that the financial assistance would stop.

The United States is very clear - for them to buy in, all nations must participate. Canada agrees. However, despite that Canada contributes only about 2% of global emissions, it appears to becoming an international climate change target. Today Canada received two fossil awards (the presentation was shown on the big screen outside the Bella Centre to the amassed crowd of registants) and was the subject of a climate change "hoax" where Canada's emissions reduction goals were falsely identified in a phony news release.

It's not productive. Minister Prentice's Communications director pointed out as much to the press when asked to comment on the incident today. And Canada's reduction target continues to align with that of the United States. The Minister has been saying this for months.

Needless to say, it's still not clear what will come from these negotiations at this point. The Americans know that a binding international treaty will require them to walk a fine line between committing resources to finance the low carbon economy - both domestically and internationally - and what Congress has an appetite for.

Whether the negotiations result in an extension of Kyoto, the favoured option of developing nations, or an entirely new agreement, the favoured option of Canada remains to be seen. We'll know more in the next few days of "Hopenhagen", as they're calling it around here.

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."

Tonight's Munk Debates tackles one of the great public policy questions of our time: how should the world respond to climate change?

Days before the United Nation's historic Copenhagen summit, the esteemed Munk Debates will tackle one of the great public policy questions of our time: how should the world respond to climate change? Tonight's debate is set as follows: C02 levels in the atmosphere are climbing steadily higher. Some believe this is having a devastating effect on humans and nature, while others argue that the threat has been overstated. Is this the moment for a bold international treaty to curb carbon emissions? Or, are the social and economic costs of reducing C02 emissions too high in world where a billion people live on a dollar or less a day?

The event begins at 6:45 p.m. eastern time with a vote by the audience on the resolution being debated, tonight's being: Be it resolved Climate change is Mankind's defining crisis, and commands a commensurate response. The debaters then provide opening arguments and cross-examine each other. A question and answer period with the audience follows. A well-known moderator keeps the proceedings orderly. The debate wraps up with a summation by each debater and a second vote by the audience on the resolution. The final vote is tallied and the winning side announced at 9:00 p.m. eastern time.

Of the view that Climate Change is indeed mankind's defining crisis and therefore debating the PRO side are Elizabeth May, leader of the Green Party of Canada, environmentalist, writer, activist and lawyer active in the environmental movement since 1970, as well as George Monbiot, author of the best selling books Heat: how to stop the planet burning; The Age of Consent: a manifesto for a new world order and Captive State: the corporate takeover of Britain; as well as the investigative travel books Poisoned Arrows, Amazon Watershed and No Man's Land. George also writes a weekly column for the Guardian newspaper.

On the CON side and of the opinion that the Climate Change threat has been overstated is Bjørn Lomborg, who Time magazine named one of the world's 100 most influential people in 2004, the UK Guardian "one of the 50 people who could save the planet" in 2008 and Esquire, "one of the world's 75 most influential people of the 21st century". Lomborg is currently adjunct professor at the Copenhagen Business School and is the organizer of the Copenhagen Consensus Center, which brings together some of the world's top economists to set priorities for the world. Lomborg is also author of the best-selling The Skeptical Environmentalist and Cool It' in which he challenged mainstream concerns about the environment and argued that we need to focus attention on the most important problems first. Joining him will be Lord Nigel Lawson, Baron Lawson of Blaby, who was Chancellor of the Exchequer between June 1983 and October 1989. Lord Lawson is currently Chairman of Oxford Investment Partners and also of Central Europe Trust. He is the immediate past President of the British Institute of Energy Economics. Most recently his major interest has been the economics and politics of global warming, about which he has written a best-selling book, An Appeal to Reason: A Cool Look at Global Warming, which has made him a prominent and high profile climate change sceptic.

The Munk Debates are open to the public. CBC Radio's Ideas, The Globe and Mail and CPAC take each event's discussion to the larger public and tonight's debate can also be viewed via live webstream.

Québec announces its GHG reduction target: 20% below 1990 levels by 2020

Last week, Québec Premier Jean Charest and Minister of Sustainable Development, Environment and Parks, Line Beauchamp, unveiled the province's target to reduce greenhouse gas emissions (GHG) by 20% below 1990 levels by the year 2020. Seeking to be recognized as a Canadian leader against climate change, Québec has decided to set an objective similar to that established by the European Union.

In making the announcement, Premier Charest acknowledged that the province's target is very ambitious, especially given that 48% of its total energy requirements are currently satisfied by renewable energy sources. At approximately 11 tons per capita, or half the Canadian average, Québec already currently holds the best GHG emissions record in Canada. If it can achieve its 20% reduction target by 2020, the province would have the lowest level of emissions per capita in North America.

In announcing its target, the government stated that the proposed measures to be taken would show flexibility from one economic activity sector to another, notably by taking into account each one's overall reduction potential, international competitiveness, available technology and required transition measures. As an illustration of one particular sector's progress to date and to demonstrate that climate change does not necessarily have to come at the expense of economic growth, the Premier noted that the province's industrial sector had already achieved emissions reductions of over 7% in 2006, as compared to 1990 levels, despite the fact that Québec's GDP had increased by 41% over that same period.

As transportation accounts for 40% of Québec's GHG emissions, the government stated that it would be paying particular attention to that sector. In order to achieve the 2020 target, the government expects to make major investments in mass transit options and will take measures to encourage the increased use of intermodal transportation of goods. It also plans to introduce a GHG emission standard for light-duty vehicles equivalent to that in California. Also, as Québec-based corporations have demonstrated expertise in electric vehicle technologies, the government will encourage the development of that industry, as well as the use of such vehicles.

Lastly, through its participation in the Western Climate Initiative, the province will contribute to implementing the largest GHG cap and trade system in North America in 2012. The government expects that these actions will set the stage for a flourishing green economy by the year 2020 and will gradually reduce Québec's economic dependence on foreign oil. It will also lessen the economic impact of the anticipated oil crisis in the decades to come and improve Québec's trade balance.

With less than a week to go before the December 2009 climate conference in Copenhagen, the province of Québec has now clearly announced where it stands on climate change. In a statement aimed at her federal counterpart, Minster Beauchamp declared that "Through this ambitious target, Québec is showing its partners and the international community that it is fully committed to assuming its share of responsibility. By continuing to demonstrate strong leadership, we hope to change the position of the federal government leading up to the Copenhagen Conference."

Government of Canada Funds Alberta Carbon Trunk Line Carbon Capture and Storage Project

Today, the Canadian government announced $63 million of project funding support for the Alberta Carbon Trunk Line (ACTL) Project, a fully integrated, large-scale carbon capture and storage (CCS) project in Alberta.

The Honourable Lisa Raitt, Federal Minister of Natural Resources declared that "This innovative project further demonstrates Canada's international leadership in carbon capture and storage technology."

The ACTL Project, led by Enhance Energy in partnership with North West Upgrading, will be capable of gathering CO2 from several sources in the Alberta's Industrial Heartland and transporting the CO2 to existing mature oil fields throughout South-Central Alberta. These oilfields will see significant increases in production as CO2 is permanently stored in the reservoir. The capture and permanent storage of CO2 will result in significant reductions in emissions of greenhouse gases in Alberta. The initial supply of CO2 will come from North West Upgrading Inc. and Agrium Inc. The ACTL Project has the potential to facilitate permanent storage of up to two billion tonnes of CO2 when operating at full capacity. The impact potential is equivalent to taking 2.6 million cars off the road annually.

"As industry looks for a way to effectively deal with their CO2 emissions by keeping them out of the atmosphere, we are offering a much needed solution - a safe and secure storage destination for CO2," said Susan Cole, President and CEO, Enhance Energy.

$30 million of the project is funded through the $1-billion Federal Clean Energy Fund, with the remaining $33 million coming from the ecoENERGY Technology Initiative. The Clean Energy Fund is advancing Canada's leadership on clean energy technologies and the reduction of greenhouse gas emissions from energy production. According to the Canada-Alberta ecoENERGY CCS Task Force report, CCS technology could allow Canada to cut its greenhouse gas emissions by almost three-quarters of Canada's current annual emissions.

World's First Osmotic Power Prototype Opens Today in Norway

Today Statkraft, one of Europe's leading renewable energy companies, opened the world's first osmotic power prototype just outside Oslo, Norway. The prototype generates power by exploiting the energy available when fresh water and seawater are mixed. Osmotic power is a renewable and emissions-free energy source that Statkraft has been researching since 1997 and that will be capable of making a substantial global contribution to eco-friendly power production.

The company's President and CEO, Bård Mikkelsen stated: "This new technology generates electricity simply by mixing water. New solutions to meet the climate challenges might be closer than we expect [...] we are proud to be presenting a renewable energy source which has never been harnessed until now."

The prototype, which was developed in cooperation with R&D organisations from many countries, will have a limited production capacity and is intended primarily for testing and development purposes. The aim is to be capable of constructing a commercial osmotic power plant within a few years' time.

The global potential of osmotic power is enormous, being estimated at between 1,600-1,700 TWh per annum, which is equivalent to 50 percent of the European Union's total power production. Osmotic power plants can, in principle, be located wherever fresh water runs into the sea; they produce no noise or polluting emissions and they can be integrated into existing industrial zones, for example, in the basements of industrial buildings.

The project has attracted a lot of international interest, and several foreign guests attended the opening, which was conducted by Her Royal Highness Crown Princess Mette-Marit of Norway.

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.

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.

International Energy Agency launches World Energy Outlook 2009 in London

The International Energy Agency>International Energy Agency ("IEA") today launched its annual flagship publication in London. The World Energy Outlook 2009 (WEO 2009) looks at the impact of the economic downturn on energy use, CO2 emissions and energy investment and what will be required at the UN climate conference in Copenhagen to put together an agreement that stops global temperatures rising at a price that is affordable. The WEO 2009 also focuses on the natural gas resource base, current trends and the role gas will play in the future energy mix. Finally, the publication includes a review of energy in Southeast Asia, looking at that fast-growing region and its implications for global energy markets.

The IEA's Executive Director, Mr. Nobuo Tanaka declared that "World leaders gathering in Copenhagen next month for the UN Climate summit have a historic opportunity to avert the worst effects of climate change. The World Energy Outlook 2009 seeks to add momentum to their negotiations at this crucial stage by detailing the practical steps needed for a sustainable energy future as part of a global climate deal" and added that "WEO 2009 provides both a caution and grounds for optimism. Caution, because a continuation of current trends in energy use puts the world on track for a rise in temperature of up to 6°C and poses serious threats to global energy security. Optimism, because there are cost-effective solutions to avoid severe climate change while also enhancing energy security - and these are within reach as the new Outlook shows".

In conjunction with the WEO 2009, the IEA has also released an Executive Summary which provides an overview of the publication's key findings and topics, as well as a Fact Sheet, which provides data in a bullet-point format on the following questions and issues: (1) The sustainability of our current energy pathway; (2) The Impact of the financial crisis on Energy Investment (3) Natural gas' role in the global energy mix; (4) What a low-carbon energy future might look like; (5) The impact of the financial crisis on the outlook for CO2 emissions and global climate; (6) Assumptions on Energy Prices, volatility and the future of cheap energy.

Copies of the World Energy Outlook 2009 can be ordered from the IEA Bookshop.

Another $769 Million in CCS Funding Announced

Like Alberta, Canada is putting its money where it's mouth is. On October 14, 2009 Prime Minister Stephen Harper traveled to Wabamun, Alberta, the site of the Keephills Power Plant, to announce $769 in funding for carbon capture and storage. The pledge will retrofit Keephills, a thermal coal power plant on the shores of one of the Edmonton areas largest lakes. Alberta will spend $436 million over the next 15 years on the project, with most of the money coming from its $2-billion Carbon Capture and Storage Fund. Ottawa is kicking in $343 million from its Clean Energy Fund.

"Our government is determined that Canada remain a world leader in in the use of this state-of-the-art technology," the Prime Minister said, adding "Carbon capture and storage could not only drastically reduce our emissions but by exporting it to other countries we could also make a major contribution to the reduction of global emissions".

The announcement comes on the heels of last week's Alberta/Canada announcment that the governments were spending $865 million on the Shell Quest project. The October 14 annoucement relates to a letter of intent the Alberta government has signed with Transalta Utitlities, who owns Keephills, to build a pioneer project, which Premier Ed Stelmach says will be the first of its kind in the world. The Premier remarked "[i]t'll be the first major CCS project to involve coal-fired power generation and the potential for such a project is enormous. Coal is the most abundant fossil fuel and the most commonly used source of electricity in the world". Alberta gets about 2/3 of its power from coal fired sources - about 6400 megawatts. The technology developed in the Keephills project has the potential to be used to retrofit other coal fired plants around the world.

Clearly both the Alberta and Canadian governments recognize that the time for action is now. With Copenhagen in a couple of very short months, Canada will have many good news stories to share with the world. With last week's major CCS announcement, the CCEMC and its administration of Alberta's Climate Change Emissions Management Fund and now this additional commitment, Canada and Alberta have demonstrated a huge financial and strategic commitment to addressing climate change (more so than the US?).

What will others be bringing to the table in December?

The Clean Energy Dialogue Continues...

Energy/Environment High on Priority List for New US Ambassador to Canada

We have blogged many times about the Clean Energy Dialogue between Canada and the United States, which was begun when the U.S. President made his first official vist to Canada back in February. Looks like the Clean Energy Dialogue continues. Barack Obama's new envoy to Canada, US Ambassador David Jacobson, who officially started his term on Friday, said energy and environment issues are high on the agenda in discussions between the two countries.

After a ceremony at Rideau Hall with Governor General Michaele Jean where his credentials were formally accepted, the US Ambassador said "I also believe that the issues that predominate in the relationship between the United States and Canada are the kind of issues that I have spent a lifetime dealing with".

Canada A Pillar of Energy Security

In his remarks, Mr. Jacobsen acknowledged that U.S. and Canadian energy security and environmental concerns would be closely linked and up for discussion in the near future.

While U.S. lawmakers released a cap and trade bill into the Senate last week which includes measures smacking of protectionism, Mr. Jacobsen indicated he would soon start to participate in ongoing discussions about these measures, although added that he believed the talks have so far been constructive and cordial.

"Canada is a pillar in the energy security of the United States," he said. "There are also environmental issues that we all know about that are getting more and more important every day, and I expect that I will spend a lot of time dealing with those."

Another Chicago Connection

Mr. Jacobson is a former lawyer, who, like John Podesta, an influential member of the President's transition team and advocate of cap and trade, is also from the President's hometown of Chicago. Mr. Jacobson had been serving in the White House as an advisor on diplomatic postings.

What Does It Mean?

With China on the hunt to buy into Alberta's oilsands, which, let's face it, are the key to energy security for both Canada and the United States in the decades to come, and with the appointment of David Jacobsen, who seems to realize this, it is certainly a very interesting time to be in Ottawa! Perhaps protectionism may have to take a back seat to ensuring Americans have a safe and secure supply of energy.

We'll see. It may all become more clear in December when the world convenes in Denmark.

Waste-to-biofuels plant to use residual heat and synthetic gas from its process as heating and cooling energy for residents and institutions on outskirts of Edmonton

Enerkem, a waste-to-biofuels and green chemicals technology company, today jointly announced a community energy initiative that will heat a Strathcona County neighbourhood, using the residual heat and synthetic gas from its process employed at its Edmonton waste-to-biofuels plant. On hand for the joint announcement were Alberta Environment Minister Rob Renner, City of Edmonton Mayor Stephen Mandel, and Strathcona County Mayor Cathy Olesen.
Enerkem's community energy project received $7.45 million grant funding from the Government of Alberta from the Clean Air and Climate Change-Technology and Innovation Program, under Alberta's share of the Canada ecoTrust. The project was selected because of its great potential in reducing greenhouse gas emissions for the Edmonton Region, by providing a clean alternative source of energy.
The Enerkem GreenField Alberta Biofuels plant will provide the residual heat and synthetic gas from its process as heating and cooling energy for residents and institutions in the Emerald Hills area. Strathcona County will use the innovative alternative to natural gas in a heating loop in Sherwood Park. Once operational in 2012, the Enerkem renewable energy project will reduce greenhouse gas (GHG) emissions by about 7,000 tonnes per year.

Chinese Launch Voluntary Carbon Standard

We have blogged a number of times that if the world is going to make meaningful inroads to the global reduction of emissions, the discussions at Copenhagen in December will have to include real contribution from developing nations, specifically India and China.

China had an interesting announcement today. The Chinese government announced that China will launch a framework for voluntary emissions trading in the global voluntary carbon market. The China-Bejing Environmental Exchange will be a government backed platform for trading carbon in the Chinese voluntary carbon market.

China is the world's top producer of greenhouse gas emissions, in terms of total emissions, although its per capita emissions are far below that of the United States. In previous months, China has been pretty steadfast in its opposition to a global cap on greenhouse gas emissions, excusing itself in the name of opportunity and advancement, much like India has done. Nevertheless, voluntary carbon standards are a step in the right general direction.

According to Reuters, "[t]rade in the global voluntary market, mostly driven by companies looking to reduce their carbon footprints ahead of expected emissions rules, more than doubled last year to more than $700 million". Voluntary carbon standards provide a framework for polluters to get emissions cuts verified and for the creation of credits that can be sold in voluntary carbon markets.

The announcement today comes on the heels of China's assertion on September 22 that it would tie emisions reductions to economic growth. Given these recent announcements and the fact that China seems to be ramping UP to Copenhagen and not down, we'll have to keep a close eye on Chinese climate change policy in the coming months to see how their policy might drive how Copenhagen discussions unfold. More importantly, are these Chinese announcements the real thing or is the Great Wall really just a Great Hype? More tomorrow.

CN unveils on-line GHG Emissions Calculator to allow customers to assess transportation carbon footprint

CN today unveiled an upgraded on-line greenhouse gas emissions (GHG) calculator that estimates total carbon emissions for shipments across multiple modes of transportation.
CN, recognized as the most fuel-efficient railway in North America, provides the free on-line GHG calculator to the general public on its website. Upon entering basic shipment point-to-point information, the tool generates carbon-emission estimates using a combination of vessel, rail and truck, such as containers moving internationally from Asia to North American destinations along CN's network or domestic shipments using a combination of rail and truck or a single mode of transportation.
The GHG calculator allows manufacturers, importers, exporters, shippers, wholesalers or retailers to assess the carbon footprint of their shipments using single or multiple modes of transportation. Use of the GHG calculator to estimate GHG emissions makes clear the environmental advantage of rail over truck, which has been shown to be up to six times more energy-efficient, because rail consumes a fraction of the fuel to transport one tonne of freight one kilometre. In fact, CN claims that it can move one tonne of freight 197 kilometres on just one litre of fuel. Certainly a convincing argument to invest in the North-American rail system!
In addition to being a powerful environmental conscience-raising initiative, dissemination and use of such tools once again demonstrates the growing competitive advantage that reducing one's carbon emissions represents.

Government of Australia to accept long-term CO2 sequestration risk on $37B Gorgon LNG Project

A recent Bloomberg article highlights a basic yet key legal consideration related to CO2 capture and sequestration that major corporations are looking into when deciding on what projects to invest in: long-term liability related to CO2 sequestration.

The article relates how following the Australian government's acceptance of long term liability linked to the potential escape from sequestration of carbon dioxide captured from the project, partners Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell Plc gave the green light to a joint $37 billion investment in the Gorgon liquefied natural gas development project off the northwest coast of Australia.

The Gorgon project, which calls for the development of Australia's largest natural gas discoveries to date, represents the continent's single most important resources project and investment. The project includes the construction of a liquefied natural gas facility with an annual capacity of around 15 million tonnes per year on Barrow Island and incorporates stringent environmental standards designed to protect the island's natural heritage. Plans also call for development facilities installed directly on the ocean floor, in water close to 1.5 km deep. Two subsea pipelines with a combined length of 240 kilometres will carry the gas to facilities on Barrow Island.

Inclusion of CO2 capture and sequestration facilities in the project design stem from Australia's planned introduction of a carbon trading and pollution reduction system in 2011. The planned facilities will capture the naturally occurring carbon dioxide extracted during the liquefaction process and inject it into porous rock more than 2 km beneath Barrow Island. The CO2 capture and sequestration component will cut the project's emissions by an estimated 40 percent.

The project will start exporting gas in 2014 and have a lifespan of at least 40 years. The project partners have entered into LNG supply agreements with companies in China, India, Japan and South Korea.

Other than the state and federal government's confidence in the existing sequestration technology associated with the project, it's importance in creating wealth, jobs and investment justified government acceptance of liability. It is believed that Gorgon may generate A$300 billion in sales in its first 20 years of operations.

The Australian government's decision to cover long-term-liability will certainly set a precedent in the resource-rich nation and most likely beyond its borders as well. Although the specifics of the agreement have not all been made public, the project partners are said to retain liability for carbon storage during the project's construction and operation phases and for at least 15 years after its closure. The government's liability, triggered in 2069, would then be assumed in an 80-20 percent proportion between the Commonwealth and state governments.

This recent development highlights the crucial importance that climate change, carbon regulation and the resulting development and implementation of carbon capture and sequestration technologies are playing in major fossil energy project investment decisions. Likewise, when attracting such investment and negotiating with project sponsors, governments in jurisdictions around the world will now need to carefully consider the serious legal implications of long-term liability related to such technologies.

U.S. - Canada Clean Energy Dialogue - First Report

Yesterday Canadian Environment Minister Jim Prentice and U.S. Energy Secretary Steven Chu delivered an update on the two nations' clean energy dialogue (CED), which was first announced when President Obama met with Prime Minister Stephen Harper in Ottawa this past February. The release of the report coincided with Prime Minister Harper's meeting in Washington D.C. with President Obama at which energy was on the agenda and after which Harper reminded the U.S. at a press briefing that: "[...] Canada is by far the largest supplier of energy to the United States. And [it is] determined to be a continental partner in dealing with the [...] linked problems of climate change and energy security [...]".

The three key areas on which Harper and Obama had asked their respective delegates to work together on under the auspices of the CED were: (1) The development and deployment of clean energy technology; (2) the building of a more efficient energy grid, based on clean and renewable generation; and (3) expanding R&D into clean energy.

As part of the countries' collaboration on carbon capture and sequestration (CCS), the report states that the countries will expand on existing collaboration in CO2 injection and storage testing, share information from large-scale CCS demonstration projects such as the Weyburn-Midale project in Saskatchewan, in which carbon dioxide is piped from the Great Plains Synfuels plant in North Dakota to an oilfield operated by EnCana and injected for use in enhanced oil recovery. The report goes on to insist on working towards a consistent regulatory framework between the countries, which would include compatible CCS project rules, standards, and monitoring, as well as verification and accounting principles. Bilateral meetings between Canadian and American CCS experts are planned in mid-2010 and 2011 to share best practices and provide updates on joint activities. The two nations intend to form the "Canada-U.S. CCS Collaboration" under the existing Trilateral Energy Science and Technology Agreement, which also includes Mexico and hope to formalize the arrangement through an implementation agreement by the end of 2009.

As a result of the continued growth in electricity demand, collaboration between the two nations regarding the North American power grid will focus on the open exchange of information and electricity research, development and deployment (RD&D), reliability standards, cyber security and interoperability guidelines. Upgrades to the electric power grid will aim to increase its efficiency and promote connection to clean energy sources, as well as the use of clean energy technologies.

Joint commitments regarding Clean Energy RD&D are meant to boost economic opportunities for the CED partners and the two are to develop a "Clean Energy RD&D Collaboration Framework" and a technology roadmap which would allow both nations to meet their respective 2050 greenhouse gas reduction targets. The Framework and Roadmap would notably foster a unique North American market through common codes, standards and incentives, along with collaborative research and development, sharing of information , facilities and scientific infrastructure.

The Canadian Environment Minister and U.S. Energy Secretary are expected to release the next CED report in the spring of 2010, ahead of the next bilateral meetings.

Western Premiers Sign MOU on CCS Technology and Policy

The Premiers of Alberta, Saskatchewan and Manitoba held a joint cabinet meeting in Calgary on September 11, 2009. During the meetings, the provinces signed two key agreements, including a Memorandum of Understanding on Carbon Capture and Storage Technology and Policy, which "focuses on advancing co-operation on energy research and technology". Also highlighted were the concepts of "strengthening internal trade, innovation and international marketing, further developing Canada-U.S. relations and committing to improvin pension coverage for workers".

Of the MOU, Premier Stelmach remarked "collaboration in the West has best positioned our provinces to lead Canada both economically and in the development of clean energy technologies such as carbon capture and storage. By joining forces with B.C. and Saskatchewan, we can better develop and deploy this innovative technology, helping to meet climate change objectives and making us international leaders in this technology".

The second key agreement, the "Western Economic Partnership" is an interprovincial trade agreement designed to be the largest barrier-free trade and investement market in Canada.

The CCS MOU is the next in a series of steps Alberta has taken to advance CCS technology and deployment. Alberta announced its $2 billion CCS fund in 2008. The monies in the CCS fund are in addition to monies in the province's Climate Change and Emissions Management Fund, which is administered by the CCEMC. For the 2009 Call for Proposals, 30% of available funds may be used to advance CCS technologies and innovation.

When Canada goes to Copenhagen in a few months, this newest announcement by the Western provinces will be another point of climate change achievement.

We will continue to keep you posted about the Memorandum of Understanding among the three provinces. Stay tuned!

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

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

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

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

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

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

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

The Mission comprises several complementary initiatives:

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

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

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

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

Nova Scotia Power to cut emissions by 10% by 2020

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

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

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

A Changing Climate Position in China?

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

Are we going to start to see signs of that?

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

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

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

Julian Wong from the CAP, reports:

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

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

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

International Climate Funds Disburse Billions?

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

It's an expensive proposition.

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

Hundreds of Billions? That's big money.

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

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

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

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

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

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

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

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

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

Major Investments in Biofuels Development

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How does this affect Canada?

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

Stay tuned. We'll keep you posted.

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

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

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

What Does This Mean

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

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

The 2009 Call for Proposals

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

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

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

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

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

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

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

About the CCEMC

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

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

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

The Fund

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

With assistance from Grant Boyle, Articling Student

BC Green Agenda Hits Big Bump

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

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

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

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

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

However, the decision raises a couple of issues:

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

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

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

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

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.

Clean Energy Dialogue Roundtable Meeting Concludes

The Clean Energy Dialogue between Canada and the United States continued this week as meetings between the two nations wrapped up in Washington.

The public-private meeting, held June 29-30 at the Department of Energy Headquarters in Washington, DC, brought together industry and government leaders to expand bilateral clean energy cooperation.

US Energy Secretary Steven Chu expressed optimism following the talks, stating that "by working together to develop clean energy technologies and combat climate change, the United States and Canada can spark an economic recovery that will benefit both of our nations."

The Clean Energy Dialogue was announced in February 2009 following the first meeting between Prime Minister Stephen Harper and President Barack Obama in Ottawa. Established with the intention of expanding clean energy research and development in the United States and Canada, the Clean Energy Dialogue strives to develop and deploy clean energy technology; and build a more efficient energy grid based on clean and renewable energy in an effort to reduce greenhouse gases and combat climate change.

The meeting marks a significant advancement in implementing Canada's Climate Change Plan and Economic Action Plan, both aimed at supporting a cleaner more sustainable environment. Through promised collaboration on specific areas such as biofuels, clean engines, and energy efficiency, the Clean Energy Dialogue will help Canada meet its greenhouse gas emissions reduction targets and aid its commitment to ensure that 90 percent of electricity be provided by non-emitting sources by 2020.

Discussions at the Roundtable meeting involved the initial development of an Action Plan to be presented to Minister Prentice and Secretary Chu in mid-July. The expected deadline to present a finalized joint Action Plan on Clean Energy to Prime Minister Harper and President Obama is August 2009. Consultation with the provinces and private sector leaders will continue over the next few months to achieve such goal. If all of these milestones are met, momentum towards Copenhagen in December will be at an all time high.

We will continue to monitor the Clean Energy Dialogue and will report back to you regarding the Action Plan and provincial consultations as information becomes available.

With assitance from Corie Flett, Summer Student.

US Congress Passes Climate Change Bill

The U.S. House of Representatives passed what is being called "historic" climate change legislation on Friday. The Waxman-Markey bill passed through Congress by a vote of 219-212. Eight Republicans voted in favour of the bill; forty-four Democrats voted against it.

The Waxman-Markey bill went through countless revisions before it was passed on Friday. In its final form in Congress, the Bill contained over 1300 pages and according to the New York Times, "the bill's sponsors were making deals on the House floor right up until the time of the vote".

Proponents of the bill are hearlding its passage as "a staggering achievement" and one which will pave the way for "an international deal in Copenhagen this December - as well as a bilateral deal with China, hopefully sooner". Detractors on the other hand, called the bill "a national energy tax and predicted that those who voted for the measure would pay a heavy price at the polls next year".

At the heart of the bill is a cap and trade system which sets an overall limit on greenhouse gas emissions, but allows industry to trade emissions permits among themselves. The cap would grow tighter over the years, pushing up the price of emissions and ideally, driving industry to renewable and other clean sources of energy.

The legislation is "a patchwork of compromises" and certainly not what was originally envisaged by its sponsors. In its final form, the bill has a goal of 17% reductions in emissions relative to 2005 levels by 2020 and 83% by 2050. These numbers were loosened in order to woo fence-sitting Representatives in the weeks and days before the vote. In comparison, Canada has set a goal of 20 by 2020 relative to 2006 levels and 60 - 70 by 2050. If the US targets remain the same and the bill becomes law, Canada's targets may eventually align with the US levels.

Interestingly, but perhaps not surprisingly, it appears that the Democrats who voted against the bill were motivated by policy and economics and not by ideology. These representatives are primarily from areas dependent on coal for electricity and heavy industry for jobs and economy. You can see an interative map of the Congressional vote here. In contrast, the Republican supporters of the bill came from California, Delaware, New Jersey and New York.

It looks like the closeness of the vote, with 44 people from the majority Democrats voting AGAINST the bill, means the hard work is really yet to come for the President and the bill's sponsors. It is not certain what the legislation may look like in its final form - if we had a crystal ball, we'd love to be able to tell you. However, what is clear is that the discussion is not over. The bill goes to the Senate next before it lands in its final form on the President's desk.

Watch for our bulletin on the Waxman-Markey bill and our analysis of what the bill may mean for us in Canada in the next day or so.

Offset System for Greenhouse Gases Announced

If you've been following our blogs, you'll have read about our thoughts with respect to the federal government's implementation of national climate change initiatives (read up on it here) . With the provinces scrambling to enact their own legislation, delayed federal regulation could prove difficult to align with existing provincial systems and become problematic to implement.

Have the winds of change begun to blow? Canada's Environment Minister, Jim Prentice, announced today that the Federal Government will be moving forward with its Offset System for Greenhouse Gases. The system represents a significant advance towards finalizing Canada's domestic regulatory framework for greenhouse gas emissions and establishing a Canadian carbon market. In its current form, the Offset System will establish tradable carbon credits and a forum in which businesses and individuals can buy and sell credits for use in voluntary or regulated greenhouse gas systems. For instance, those companies subject to greenhouse gas emissions regulations will be able to purchase offset credits for compliance purposes. Small businesses, individuals and even travellers who wish to voluntarily offset the greenhouse gas emissions from their activities, will also be able to acquire and utilize carbon offset credits under the proposed regime.

Apart from encouraging cost-effective domestic greenhouse gas reductions in areas that will not be covered by planned federal greenhouse gas regulations, such as the forestry and agricultural sectors, potential offset projects could vary considerably, ranging from new forest creation to methane capture.

Although plans to move forward with the development of the Offset System seem to have cemented, the scheme's logistics have yet to be finalized. In August, 2008 a draft guide proposing the rules and guidance to quantify greenhouse gas reductions for projects in Canada's Offset System was published in the Canada Gazette. This will be followed by the June 12 release of two more draft guides containing proposed rules and guidance on the requirements and processes used to generate offset credits and to verify the eligible greenhouse gas reductions achieved from a registered project. Interested parties will have 60 days to comment on these guidance documents and all three Offset System guides are expected to be finalized by fall of 2009.

With so much still brewing in the Canada's climate change kitchen, we've only begun to shed light on this new development. Stay tuned for more on the Davis blog as things begin to heat up!

Eileen Rhein, Summer Student and Jennifer Cleall

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.

20 Nobel laureates implore leaders to act to prevent temperatures from rising more than 2C by 2050

A group of 20 Nobel prize winning scientists, economists and writers recently released a call to action in advance of the climate treaty negotiations in Copenhagen later this year. The St. James Palace Memorandum points to compelling evidence that the increase in average temperatures must be held below 2 degrees Celcius to avoid "unmanageable climate risks." The memo calls on leaders to recognize the "fierce urgency of now", stating that the scientific evidence gives leaders a "clear mandate to accelerate the actions that need to be taken." The memo leaves no room for debate as to whether climate change is an issue that needs to be addressed: "Political leaders cannot possibly ask for a more robust, evidence-based call for action."

To avert unmanageable climate risks, the memo asks leaders to deliver three things:

• An effective and just global agreement on climate change that will ensure that emissions peak no later than 2015, decline by 24-40% relative to 1990 levels by 2020 and by at least 50% by 2050. Such an agreement should put a price on carbon while recognizing the need for developing countries to overcome poverty but develop sustainably.
• A low carbon energy infrastructure that is based on energy convservation and efficiency, as well as the widespread deployment of green generation technology and smart grids. Appropriate financial and regulatory systems must be created to spur green growth and to ensure that developing countries leapfrog to a low carbon economy.
• Tropical forest protection, conservation and restoration, through the accelerated negotiations of a long-term UNFCCC agreement on halting deforestation and on forest restoration. This initaitive is critical given that deforestation and forest degradation by humans is the source of over 20% of global emissions.

Kofi Annan's Global Humanitarian Forum releases report on human impact of climate change

The Global Humanitarian Forum, a think tank chaired by Kofi Annan, former secretary general of the UN, released a report on the human impact of climate change. The report presents a bleak picture of the current and projected impacts of climate change on the world's population. However, it holds out hope that climate change policy can be developed quickly enough to avert the worst of the impacts.

The report estimates that 325 million people are seriously affected by climate change each year. Of these, 300,000 are killed - a death toll similar to that of the Indian Ocean Tsunami. Increasingly severe storms, floods, droughts, shifting rainfall patterns, heat waves, and rising sea levels not only kill and dislocate people in the short term, but also compromise food and water supplies over the long term. These effects are felt disproportionately (and arguably unjustly) by people in developing countries, particularly in the semi-arid dry land belt countries from the Sahara to the Middle East and Central Asia, sub-Saharan Africa, South and South East Asia, and small island developing states.

The total current economic cost of climate change is pegged at $125 billion per year, which is greater that all of the foreign aid that flows to developing countries each year.

The numbers are expected to get much worse by 2030, with deaths rising to 500,000 per year and the cost ballooning to $340 billion annually.

While the report acknowledges that the estimates are subject to significant uncertainty, it expresses confidence about the order of magnitude. It was reviewed by leading international experts, including Rajendra Pachauri of the IPCC, Jeffrey Sachs of Columbia University, and Barbara Stocking of Oxfam.

The release of the report was timed to help put a human face on the issue of climate change in the run up to negotiations in Copenhagen later this year. Mr. Annan intends the report to be a call to action: "Just six months before the Copenhagen summit, the world finds itself at a crossroads. We can no longer afford to ignore the human impact of climate change. Put simply, the report is a clarion call for negotiators at Copenhagen to come to the most ambitious international agreement ever negotiated, or continue to accept mass starvation, mass sickness and mass migration on an ever growing scale."

Canada Continues to Co-operate on Climate Change

We have blogged many times about Canada's commitment to address climate change both continentally and internationally. Today we explore how the co-operation continues.

May 24, 2009 represented the official commencement of the international energy efficiency framework. Energy leaders from around the world met in Rome for the G-8 Energy Ministers Meeting to launch the International Partnership for Energy Efficiency Cooperation (IPEEC), a high-level forum for facilitating improvements in global energy efficiency and encouraging market implementation of key energy efficiency technologies. The signatories included the entire Group of 8 (G8), which consists of Canada, France, Germany, Italy, Japan, the Russian Federation, the United Kingdom, and the United States, as well as key emerging economies, including Brazil, China, India, Mexico, and the Republic of Korea.

Discussions about IPEEC began in June 2008, when the G8 countries, China, India, South Korea and the European Community decided to establish the International Partnership for Energy Efficiency Cooperation, at the Energy Ministerial meeting hosted by Japan. The signing of the IPEEC terms of reference on May 24, 2009 put the discussions into action.

The purpose of the partnership is to facilitate those actions that yield high energy efficiency gains in recognition that improving energy saving and energy efficiency is one of the quickest, greenest, and most cost-effective ways to address energy security and climate change and ensure economic growth.

IPEEC will provide a forum for discussion, among developing, transitional and industrial nations to engage in consultation and exchange of information on a voluntary basis. It will not develop or adopt standards or efficiency goals for the partners.

It was decided at the May 24, 2009 meeting that the first order of business for IPEEC would be to establish a Sustainable Buildings Network, a compilation and summary of national energy efficiency action plans, an inventory and review of international energy efficiency initiatives and improved methods for measuring and verifying progress towards domestic energy efficiency goals.

The launch of IPEEC comes in response to conclusions at G8 Environment Minister's Meeting that countries begin processes with the ultimate goal of a global platform on low CO2 impact technology.

Canada's participation at the IPEEC meetings is further evidence of its commitment to co-operation on a global level to address climate change. Copenhagen is 6 months away - wonder what impact this co-operation will have by then? We'll keep you posted.

Jennifer Cleall and Corie Flett, Summer Student

Bad news from MIT: climate change likely to be worse than expected

A new study from MIT concludes that the earth's temperature is likely to rise 5.2 degrees Celsius by 2100, much higher than the 2.4 degree increase commonly cited from a 2003 study. "There is significantly more risk than we previously estimated," said Ronald Prinn, the study's co-author and the co-director of the Joint Program and director of MIT's Center for Global Change Science, adding that "there's no way the world can or should take these risks."

The model used by MIT in the new study considers a much more comprehensive range of factors. In particular, it is the only climate change model that includes "detailed treatment of possible changes in human activities as well - such as the degree of economic growth, with its associated energy use, in different countries."

MIT rans its statistical model 400 times to arrive at the median probability surface temperature increase of 5.2 degrees, which has a 90% probability range of the predicted increase is 3.5 to 7.4 degrees. The Telegraph quotes Friends of the Earth climate campaigner Tom Picken as saying that "The consequences of such changes would be off the known scale. They are unthinkable. A 7.4C rise would mean severe ecosystem collapse worldwide, with total economic collapse in many parts of the world. The planet would face resource wars between people, and you can safely say many, many hundred of millions of people would die."

The 3.5 to 7.4 degree range assumes that the world does not initiate a significant policy response to the issue of climate change. Somewhat more encouragingly, the research team ran a second version of the model based on an aggressive policy response. That version predicted increases similar to the 2003 model.

Taking a cue from the marketing world, the team illustrated the differences between the two possible outcomes using two roulette wheels.

Obama Sets a Shorter Timeline for Tailpipe Emissions

We have blogged a couple of times about proposed new standards for tailpipe emissions in Canada and the United States. Yesterday, President Obama's administration announced plans to put those standards into practice in 2016, four years earlier than originally expected. The program covers the 2012 model year through to the 2016 model year and, according to the White House website, "ultimately requires an average fuel economy standard of 35.5 mpg in 2016".

In his speech, the President asserted that the new standards would have a projected reduction in oil consumption of 1.8 billion barrels over the life of the program, "more oil than [the United States] imported last year from Saudi Arabia, Venezuela, Libya, and Nigeria combined". How much oil is this? In 2008 the U.S. imported 3,570,848 thousand barrels of crude oil. Of those barrels, the U.S. imported from a total of 42 different countries. The top 5 importing countries were: Canada (19.8%), Saudi Arabia (15.4%), Mexico (11.8%), Venezuela (10.6%), and Nigeria (9.4%) for a total of 67% of its imports. Of the countries mentioned by the President above, the United States imported about 0.7% of its oil from Libya in 2008. "[M]ore oil than the [United States] imported last year from Saudi Arabia, Venezuela, Libya and Nigeria combined" is equal to about 36.1% of U.S. yearly imports.

What does this mean for Canada? Environment Canada previously announced new emissions standards for Canada. Minister Prentice has said"what we're striving for is a North American standard because we know there's only one North American automobile industry". Today, the Minister confirmed that the Canadian government will match the new standards. According to the Globe and Mail, "Michael Martin, Canada's lead negotiator on international climate change talks, said the new auto standards will be one part of a 'suite of policies' that Canada will be adopting before" Copenhagen in December. This is further evidence of Canada's commitment to address climate change in North America.

We will be carefully monitoring what other policies are in that suite...

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.

Alberta's Climate Change Compliance

As we blogged yesterday, the Alberta Environment reported a reduction in greenhouse gas emissions in Alberta. The emissions reductions come as a result of facilities compliance under the Climate Change and Emissions Management Act (the "Act").

"Alberta is building a strong foundation of experience as we take action to balance the environment, energy and the economy," said Premier Ed Stelmach. "As the only jurisdiction taking this kind of concrete action, we have valuable insight into how we can work with our national and international partners to make real and lasting emission reductions without harming the economy or threatening energy security."

The Act and the associated Specified Gas Emitters Regulation, require that facilities which emit more than 100,000 tonnes of "specified gases" must improve their emissions performance by 12 percent relative to an established baseline rate. Facilities may achieve compliance by reducing their emissions, purchasing emissions offsets in the Alberta offset system or pay $15.00 per tonne over their target into the Climate Change and Emissions Management Fund ("Fund").

In its press release, Alberta Environment also announced that $82.3 million was collected into the Fund in the 2008 compliance year (which ended March 31, 2009), bringing the total paid to $122.4 million. A detailed report will be released later in the year when the industry audits are complete. We'll keep our eyes out for it and keep you updated.

G8 Environment Ministers Meeting in Italy - the Agenda

The 2009 G8 Summit will be held on the island of La Maddalena, Italy from July 8 to 10. In the months leading up to the Summit, the host country has organized a series of ministerial meetings, including the G8 Environment Minister's meeting, which is being hosted by the City of Siracusa on the Sicilian coast, from April 22 - 24.

Climate change and the preservation of biodiversity are the two main issues on the agenda in Syracuse. The goal of the Environment Minister's meeting is to "send out an important political message on biodiversity and to facilitate dialogue on the issue of climate change ahead of the Copenhagen conference in December of this year, where the debate is going to focus on the world's "post-Kyoto" setup".

The agenda for the meeting indicates that discussions with respect to new technologies to foster economic recovery and promote clean energy will be paramount. According to the official website, "the discussion is going to focus on how to promote clean energy technology in order to address the dual challenge of climate change and energy security".

In addition to the Ministers from the G8 countries, representatives of Czech Republic, in its capacity as EU duty president, China, India, Brazil, Mexico, Indonesia, South Africa, Australia, the Republic of Korea, Egypt and Denmark have also been invited to attend. Denmark is hosting the 2009 Climate Change Conference in Copenhagen in December.

The meeting will facilitate discussions between Canada, the United States, which has pledged a commitment to international co-operation on climate change, and non-G8 counties, such as India, China and Mexico, all of whom our Environment Minister, Jim Prentice, has indicated must be actively engaged on climate change issues and challenges.

The first round of meetings begins tomorrow. We will be closely monitoring the results of these discussions and will keep you posted.

Alberta Budgets for Climate Change

The Alberta Government announced its 2009 Budget yesterday. Reading through the many pages of the document, it is clear that climate change is a priority for both the Department of Energy and for Alberta Environment. It is no surprise that climate change initiatives are addressed in more than one Ministry - climate change isn't the responsibility of just one area of government - it touches matters for which many are accountable.

Energy

Of the eleven goals outlined in the Energy Business Plan, six of them are related directly to climate change initiatives in the areas of renewable and alternative sources of energy, conservation of energy and carbon capture and storage. In some cases, strategies for meeting these goals are a combination of the above initiatives.

Renewable and Alternative Sources of Energy

A strategy for meeting Goal 4, to encourage value added development in Alberta, includes facilitating the development and utilization of alternative energy resources such as biofuels and waste to energy opportunities.

Goal 5, to make Albertan's aware of and understand existing and emerging trends relating to energy development and use in Alberta relates to renewable and alternative sources of energy, contains strategies to proactively identify, communicate and address emerging issues that face energy and mineral development in Alberta and to enhance provincial, national and international understanding of Alberta's energy resources and work being done to develop these in an environmentally sustainable manner.

Goal 8 is to ensure effective innovation policies and programs to achieve technology and processing improvements in the development of energy and mineral resources. Realizing Alberta's energy vision will include the development of new technologies or the enhanced deployment of already proven technologies, including renewable energy sources. One of the strategies under this goal is to work with other ministries (Environment?), research organizations and industry to develop an integrated, coordinated approach to research that supports environmentally sustainable energy development.

Carbon Capture and Storage

The Department of Energy identifies Carbon Capture and Storage as a significant opportunity for Alberta in two ways:

Value Added - Alberta has a unique opportunity to develop leading industrial and petrochemical upgrading and refining clusters based on transforming raw feedstocks into synthetic gas and gas liquids for petrochemical development. At the same time we can capture and store carbon emissions and produce electricity for the provincial grid.

CCS - CCS in its ultimate role, is an enabler of clean gasification processes and is a key technology component to realizing the commercial viability of clean fossil fuels. The Western Canada Sedimentary Basin is also one of the world's most attractive sites for storing carbon emissions. Ultimately, Alberta's expertise in the science of solutions will be valued and an exportable resource unto itself.

A number of the goals outlined in the Energy Business Plan specifically relate to CCS.

Goal 3 is to ensure energy and mineral resource development occurs in a responsible, environmentally sustainable manner and achieves the Government of Alberta's outcomes. To do so, the Department of Energy will work with other ministries and stakeholders to implement the provincial action plan on climate change and the recommendations from the Carbon Capture and Storage Development Council, in particular the implementation of carbon capture and storage research and demonstration projects.

Goal 7, that Energy infrastructure is built and sustained to support the Government of Alberta's objectives, includes the need to build infrastructure to support CCS.

Goal 8, ensuring effective innovation policies and programs to achieve technology and processing improvements in the development of energy and mineral resources, specifically mentions the need to develop technologies to realize large scale capture and use of carbon.

Conserving Energy

Goal 6 in Energy's Business Plan is to ensure that industry, citizens, and communities conserve and use energy wisely. Do to so, Energy intends to promote smart metering, smart grids and better consumption measurement; facilitate the reduction of energy intensity through gains in energy effi ciency and demonstrated government leadership; and support the development of an energy effi ciency policy framework and provincial legislation.

Expenditures

The Department of Energy intends to spend wisely in the areas of renewables, conservation and carbon capture and storage. $100 million for CCS alone has been budgeted for 2009/2010. Next year's forcast is triple that number.

Environment

One of the opening statements in Alberta Environment's Business Plan confirms its commitment to addressing climate change:

Leadership is provided to transition Alberta to an outcomes focused environmental cumulative effects management system, implement the provincial Climate Change Strategy, implement the renewed Water for Life strategy, develop all Alberta's energy resources, including the oil sands, in an environmentally sustainable way, and to provide Albertans, stakeholders and industry with information on government's role in ensuring environmental excellence and sustainable development while providing tools to reduce their environmental footprint.

Climate change is specifically identified as a significant opportunity and challenge for Alberta. The Alberta Environment Business Plan summarizes this opportunity and challenge as follows:

Climate change has been described as "the most complex collective action problem in human history". In the United States, President Obama sees climate change as putting "the planet in peril". Global action on this issue continues to build not only from an environmental perspective but in the areas of economics and politics. Albertans and the Ministry are in a unique position of providing global leadership on this issue. The Alberta government's recent announcement of resources towards climate change initiatives including carbon capture and storage is the single largest global expenditure to date. The challenges of managing our global energy resources in an environmentally responsible and economically sound and efficient manner, is creating opportunities for this province to reduce carbon while supporting global energy security.

The budget shows that there is $132 million in the Climate Change and Emissions Management Fund and is projecting another $95 million will be collected next year. March 31 was the date for compliance under the Specified Gas Emitters Regulation and final figures indicating contributions to the Fund should be available from Alberta Environment shortly.

Goal 1, that the cumulative effects of development on land, air, water and climate be managed to achieve Government of Alberta desired environmental outcomes, is the main goal in Alberta Environment's Business Plan which focuses on climate change.

This goal will be addressed using a variety of strategies, including:

• assist in ensuring Alberta's energy resources are developed in an environmentally sustainable way by supporting the Ministry of Energy in the implementation of carbon capture and storage research and demonstration projects
• Continue to implement the Climate Change Strategy through policy, program and infrastructure initiatives and assure appropriate governance of the Climate Change and Emissions Management Fund. This strategy will include programs that promote wise energy use across the province, emissions management, vulnerability assessment and climate change adaptation strategies to reduce Alberta's exposure to climate change risks, development of legislation to drive energy effi ciency and conservation, and support for energy innovation and carbon management initiatives designed to lower greenhouse gas emissions over the long term.
• Complete work with the Clean Air Strategic Alliance (CASA) to update Alberta's Clean Air Strategy and begin implementation of the strategy by applying the revised management framework and renewing the major elements of the provincial air system.

Lessons Learned

This Budget confirms a number of things we have been blogging about:

1. Alberta is a global leader in climate change initatives such as CCS - our government's $2 billion commitment to CCS is the world's largest

2. Cooperation is required - to address climate change domestically, government departments will work together. Both Environment and Energy Business Plans indicate that they will be working with other ministries to address climate change initiatives

3. Addressing climate change is a challenge, but it is also an opportunity for governments

Given the commitments outlined in this budget, Alberta will have much to be proud of at the Copenhagen Climate Conference in December.

Canada Steering to Achieve Reduced Emissions from Vehicles

Canada's Environment Minister, Jim Prentice, announced today that the government will introduce new regulations to limit greenhouse gas emissions from the automotive sector. The new regulations, which will be introduced under the Canadian Environmental Protection Act, 1999 are in keeping with the government's commitment to tougher standards for vehicles in the 2011 model year and beyond.

Given the Minister's remarks that Canada and the United States must co-operate to address climate change, the move to tougher emissions standards comes as no surprise. The American President directed his Department of Transportation to issue new fuel efficiency standards in January of this year and last week unveiled the new standard of 27.3mpg for the 2011 model year.

Final Canadian regulations are expected to come into force in 2010.

CO2 emissions regulation is part of the Canadian Government's effort to address climate change and its commitment to total GHG reductions of 20% from 2006 levels by 2020. Together with the Clean Energy Dialogue Canada has with the United States and the Major Economies Forum on Energy and Climate, of which Canada is a participant, addressing greenhouse gas emissions is high on the Environment Minister's priority list. As the writer blogged back at the start of the year all roads lead to Copenhagen in December.

An International Climate Forum

Multi-national cooperation with respect to climate change and clean energy is an idea that was recently embraced by Canada and the United States when both countries began the Clean Energy Dialogue.

The idea of an international collaborative approach to climate change is one that is supported not only by the President, the Prime Minister and Canada's Environment Minister, but as the writer blogged last week, the U.S. Energy Secretary, Steven Chu, as well.

President Obama has taken the idea of international cooperation one step further.

On March 28, the President announced the Major Economies Forum on Energy and Climate, with the group's first meeting set in Washington in April, followed by a summit in Italy in July. The leaders of 16 nations, as well as the Secretary-General of the UN have been invited to attend.

The White House commented that the purpose of the forum was to "help generate the political leadership necessary to achieve a successful outcome" at climate change negotiations in Copenhagen in December as well as establish "concrete initiatives and joint ventures that increase the supply of clean energy while cutting greenhouse gas emissions."

Participating nations include: Australia, Brazil, Canada, China, Denmark, the European Union, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, South Africa, the United Kingdom, and the United States.

Canada's participation in the Clean Energy Dialogue and its inclusion in the Forum positions Canada as a leader in the area of international cooperation on climate change. We will be watching for further news of the Forum and for Canadian leaders' comments this week.

Clean Energy Dialogue Finds a Friend in Steven Chu

The Clean Energy Dialogue between Canada and the United States was begun in February after President Obama visited Ottawa. Shortly after the historic meeting, our Environment Minister, Jim Prentice, met with his U.S. counterparts and others in Washington, D.C. to discuss how to move the Clean Energy Dialogue forward.

In interviews this week, Steven Chu, the U.S. Secretary of Energy was asked whether there should be international collaboration on energy research.

Dr. Chu's responded that "there is no reason why [energy research] should be compartmentalized" and said that it was particularly true for carbon capture and storage technology. Dr. Chu also commented:

"If countries actively helped each other, they would also reap the home benefits of using less energy. So any area like that I think is where we should work very hard in a collaborative way - by very collaborative I mean share all intellectual property as much as possible. And in my meetings with counterparts in other countries, when we talk about this they say, yes, we should really do this".

The focus of the Clean Energy Dialogue is the expansion of clean energy research and the deployment of clean energy technology. Both Canada and the United States realize that in order to address climate change new energy technologies must be created. It is not the responsibility of one country to go about this alone. It seems Steven Chu would agree.

CO2 a Pollutant in the US?

The Obama Administration continues its almost weekly announcements in its crusade against climate change. On Monday, the Environmental Protection Agency sent the White House a proposed finding that Carbon Dioxide endangers human health. Making a finding that CO2 endangers human health is something that both John Podesta and Todd Stern have been advocating for years through the Centre for American Progress.

Why is this announcement important? Currently CO2 is not considered a pollutant. Despite that CO2 is a greenhouse gas which contributes to climate change, it has not been considered a danger to human health by the United States - until now. If the EPA's proposed finding is accepted by the White House Office of Management and Budget, it would pave the way for the EPA to use the Clean Air Act to control emissions of CO2. It would also raise pressure on Congress to establish a cap and trade system to regulate emissions.

This does not mean that CO2 is going to be regulated immediately or that the administration will finalize rules for the regulation of greenhouse gases in the near future - these types of rules and a system for governing emissions could take years. However, if the White House finds that CO2 is a danger to human health, it is another link in the President's climate change chain.

The writer has blogged that linking environment and climate change to the economy would serve to centralize power in the federal government in the United States. The possible regulation of CO2 under the Clean Air Act by the EPA, a federal agency, is further evidence of that.

Canadian Climate Change Themes

The Clean Energy Dialogue between Canada and the United States was sparked in February after the Prime Minister met with President Obama. The President's Climate Change advisor, Carole Browner, met with the Minister of Environment to discuss Canada's approach to climate change during those meetings. A couple of weeks later, Canadian Ministers, including the Minister of Environment, traveled to Washington to meet with their American Counterparts. Since then, Jim Prentice has been busy speaking about Canada's response to climate change. A number of themes are emerging from the Minister's remarks:

1. Environment Policies are Instruments of Economic Renewal and Security : The Minister confirmed in a speech to the Institute of Corporate Directors on March 6, that Canada's environmental approach is to "make our national environmental policies positive instruments of economic renew and of national development". Environment policy and energy policy are inexorably linked. Canada has a history of environmental stewardship and has a responsibility to maintain that what at the same time creating wealth and building industry. Maintaining environmental integrity while enhancing our North American energy security is going to be a priority for the Federal government. We will start to see more overlap between Energy policy and Environmental policy.

2. Canada/U.S. Co-operation on Climate Change: This is no surprise. Since the President's visit in February, both the Prime Minister and the Environment Minister have said that Canada and the U.S. need to work together closely to address climate change. Minister Prentice has confirmed that Canada and the U.S. must work closely to build a new carbon economy and to ensure that "our policy and regulatory frameworks are coherent and supportive" and has called the relationship with the United States crucial in the context of the transformation to clean energy. There are a number of subthemes:

(a) Cap and trade: In a speech on February 27, Minister Prentice confirmed that Canada has committed to pursue a North-America-wide cap and trade system and that we will "work closely with the new U.S. administration to build the North American low-carbon economy". He is optimistic that Canada and the United States will arrive at a workable solution that defines "common or similar carbon reduction targets, that creates similar mechanisms to allocation emissions and...provides for the trading of credits on a North American basis".

(b) Fuel efficiency: Minister Prentice told the CBC on March 1 that Canada is prepared to go in the same direction as the United States and that he supports one fuel efficiency standard for the two countries.

(c) New technologies: The Minister remarked that Canada and the United States have a strong and shared interest in promoting the development and deployment of clean energy technologies. The Clean Energy Dialogue will include discussions about Carbon Capture and Storage, an interconnected electricity grid, nuclear energy, wind, solar, hydro and other "more remote renewable sources of energy". Canada's action plan has Canada "on course to reduce domestic greenhouse gas emissions by 20% by 2020 and by 60 to 70% by 2050". In order to achieve these goals, Canada must invest in new technologies.

3. Canada Must be a Leader : Canada is one of the top ten energy consumers in the world. Our challenge is to "stand among the world's elite as a clean energy superpower" and to demonstrate that Canada is a user of clean energy. The Minister told his March 6 audience that the government is "committed to ensure that Canada is actively and constructively engaged in the [Clean Energy Dialogue]" and that it "intends to be a leader and a responsible partner in defining the way forward".

4. International Agreement : both the United States and Canada seem to be setting their sights on Copenhagen in December and both countries believe that in order for climate change policies to be effective domestically, international co-operation is required. Canada's climate change policy is "based on a clear desire to include all of the major emitters in the world". Major emitters would include China and India and other developing nations.

5. Climate Change is Everyone's Responsibility : Although the impetus for climate change has to come from government with active participation and engagement of industry, the responsibility extends to all citizens "from all walks of life". Canada's climate change strategy will involve "how we consume and conserve energy in our homes and in our offices". In his February 27 speech, Minister Prentice remarked:

Thirty years ago, drunk driving was tolerable. It's not anymore. Twenty years ago, it was acceptable to drive without a seatbelt. It's not anymore. Up until a few years ago, Canadians could smoke anywhere in public. They can't anymore. Attitudes shifted. Behaviours changed. The same needs to happen with the environment.

Watch for these themes to start emerging in other departments of the federal government. Climate change is one of the most important issues facing governments today. We'll keep you posted on new developments in Canada. Stay tuned.

And the Clean Energy Dialogue Begins

Our Environment Minister took a trip to Washington to meet with U.S. legislators and to promote the Clean Energy Dialogue this week.

On Monday Minister Prentice met with Senator John Kerry, who is the head of the Senate foreign relations committee. On Tuesday, the Minister met with Energy Secretary Steven Chu, Todd Stern, the special envoy on climate change and Lisa Jackson, the new head of the Environmental Protection Agency.

The Minister's discussions this week in Washington focused on the "expansion of clean energy research and the deployment of clean energy technology".

The Canadian press seemed to expect that the discussions would focus on Alberta's oilsands and not research and technology and the Clean Energy Dialogue. However, the Minister confirmed that the oilsands came up only "tangentially" in his discussions with the American legislators, including with Henry Waxman, the new chairman of the house energy and commerce committee and an ardent environmentalist.

Canada is the largest supplier of energy to the United States. Emissions from the oilsands, which are the subject of some "high minded hypocrisy" this month, are 50-70 times less than the aggregate of the emissions from coal plants in the United States.

America's challenge is clean coal; Canada's may be clean oil. But given that the oilsands were not, by the Minister's account, the focus of his discussions with legislators in Washington, perhaps both Canada and the U.S. recognize that neither country is going to gain any ground by pointing fingers. The right approach is to meet these challenges by looking forward and finding solutions in research and the development of new clean technologies. Isn't that what the Clean Energy Dialogue is for?

CCME invites comments on extended producer responsibility discussion paper

The Canadian Council of the Ministers of the Environment's Extended Producer Responsibility Task Group (the "CCME Task Group") recently released a discussion paper regarding the design of Canada-wide extended producer responsibility ("EPR") regimes (the "Discussion Paper"). The release of the Discussion Paper is another milestone in CCME's initiative to produce a Canada-wide Action Plan ("CAP"), which would require that EPR regulations be implemented across the country. Such regulations would have a material impact on many suppliers and would hopefully produce meaningful reductions in waste and associated greenhouse gas emissions.

EPR described an environmental policy approach in which a producer's responsibility for a product is extended to the post-consumer stage of a product's life cycle. Ontario residents will be familiar with the Beer Store's bottle return program. With a 95% recovery rate for the industry standard beer bottle, this is an example of a very successful EPR program. EPR programs are intended to shift responsibility for managing waste upstream towards the producers of products and to encourage those producers to change their product designs accordingly.

EPR programs can significantly reduce greenhouse gas ("GHG") emissions, both by diverting waste from landfills (where it would rot and release methane) and by changing the way in which products are designed (for example by reducing packaging and the emissions associated with producing it). As mentioned below, the CCME Task Group have acknowledged that EPR programs can affect climate change by including GHG reductions as a potential key performance indicator.

The Discussion Paper describes a plan in two phases. Phase 1 would establish EPR programs for the following products and materials within six years of the adoption of the CAP:

• Packaging;
• Printed materials;
• Compact fluorescents and other lamps containing mercury;
• Electronics and electrical products;
• Household hazardous and special wastes; and
• Automotive products.

Phase 2 would establish programs for the following products and materials within 8 years of the adoption of the CAP:

• Construction and Demolition materials;
• Furniture;
• Textiles and carpet; and
• Appliances, including ozone-depleting substances.

The Discussion Paper also proposes several key performance indicators that could be used to measure and report on the effectiveness of the EPR programs, including the following:

• Kilograms/capita captured or recovered;
• Dollars/Kilogram captured or recovered;
• Per cent captured;
• Per cent recovered; and
• Avoided GHG emissions.

As indicated above, the CCME Task Group recognizes that its EPR vision will not be implemented for years. However, it continues to forge ahead in developing the CAP. To that end, the CCME Task Group invites the public to comment on the discussion paper up to May 29, 2009 using an online form.

The US Green Power Play

The writer "attended" a live web-cast the other day organized by John Podesta, who is one of two members of President Obama's transition team. The forum, "Building the New Economy: National Clean Energy Project" included an impressive list of speakers, including former President Bill Clinton, former Vice-President Al Gore, Nobel prize winner and Energy Secretary, Steven Chu, House Speaker Nancy Pelosi, John Podesta, Republican and Democrat senators and many others. In addition to political types, the forum involved representatives of consumer groups, including Wal-Mart, representatives from the oil and gas industry, environmental organizations, labour entities and academics.

The forum focused on the environment and climate change as the means to building the new economy. Despite that such different interests were represented, a few common themes emerged:

1. Reduce dependence on foreign oil and "dirty" coal fired plants. What constitutes foreign oil seems to exclude Canadian resources for the most part;

2. Invest in renewable energy projects;

3. "Connect America" - there was a great deal of discussion and emphasis on developing a national system for the electricity grid, which includes standardizing the approvals process at the federal level.

4. Embrace a global climate change accord, which includes China and India. China has recently surpassed the US in terms of emissions. India is not far behind. To effectively deal with climate change, these countries will have to be involved.

So what?

Behind all of this, is the one main driving force - power. All of the above proposals will require the U.S. federal government's heavy involvement. Private industry cannot do it alone nor can these initiatives be undertaken solely at the state level. The amount of money that it's going to take to implement these ideas means federal government leadership and funding is compulsory. President Obama and his team will be the impetus, the funding body and the reaper of praise and credit when it works.

Once they've tackled climate change in the name of the economic stimulus and national security, will other legacy programs, such as universal health care, be far behind?

President Obama in Canada: What Just Happened and What Does it Mean

Wow! What is must have been like to have been in Ottawa today when Prime Minister Stephen Harper and President Obama had their much anticipated meeting. How lucky those people happened to be in the Market when the President stopped by for a Beavertail or who cheered on as the he waved to the crowds gathered on Parliament Hill and Wellington Street. What a cool day to be in the capital.

Although the leaders' agenda touched many matters, economy, climate change & the environment and national security (I see a theme here...) were at the centre of comments made by both the President and the Prime Minister after their meeting.

Prime Minister Harper said that the two countries have begun a "Clean-Energy Dialogue", which will see senior officials from both sides of the border working together on the development of clean energy, science and technologies. If you've been paying attention to the comments from our Environment Minister, this will come as no surprise. Although the President confirmed that the U.S. must firm up its own environmental policies before entering into binding agreements with Canada, he said that the "dialogue will move us in the right direction".

Why? Because Economy = Environment/Climate Change = National Security and both the U.S. and Canada recognize that. The goal of the Clean-Energy Dialogue will be to position the U.S. and Canada at the forefront of global leadership on "clean energy" and climate change.

How? By focusing on:

1. Technology
2. Innovation
3. Energy research
4. Carbon capture and storage
5. Renewable Energy

The governments of both countries will have to collaborate to pursue technology and innovation to fight climate change, stimulate the economy and preserve national security. The Clean-Energy Dialogue will bring private enterprise and science together with government funds to develop new technologies to combat global warming and lead the world from economic crisis.

Seems to me that huge dollars will be involved and government intervention on both sides of the border will be required in order to put the Clean-Energy Dialogue partners on the road to the Green Economy. Right now, that road is leading to Copenhagen.

Environment Commissioner Misses the Point

The writer sits in awe of the speed of the top down policy on Climate Change developing in the U.S.. Meanwhile, back in Canada…

Britain was once described as a "nation of shop keepers"; Canada continues to earn its proud reputation as a "nation of accountants". In our slow moving, bottom-up world, the Office of the Auditor General tabled the Report of the Commissioner of the Environment and Sustainable Development in the House of Commons on Thursday (February 5, 2009).

Chapter 1 of the Report, "Managing Air Emissions" examined the federal government's toolbox of approaches to managing and controlling air emissions and whether the government has achieved "real, measurable and verifiable results". The remaining 42 pages of the chapter (yes, I read them all... I wonder how many trees died to produce that treatise) lambaste the government for a variety of what some think are insightful and stunning findings on Canada's failure to measure results from funding.

Rubbish. It has been said "an accountant is someone who knows the cost of everything and the value of nothing". Clearly not concerned with bringing value, the Environment Commissioner has reviewed documents, crunched some numbers and then questioned "where did the money go"?.

His boss, the Auditor General, released a number of reports concurrent with the Environment Commissioner's Report, including "A Study of Federal Transfers to Provinces and Territories". The Study explains that one way funds are transferred to provincial coffers is through the use of trusts. Funds are allocated to provinces for a targeted area of provincial responsibility. In order to become eligible to draw on these trust funds, provinces must confirm in writing their understanding of the purposes of the trust and name an authorized agent. From then on, it's up to each province how they want to spend the money. For the Environment Commissioner and the Auditor General, therein lies the problem.

We don't have a trust blog at Davis, but if we did, I'm sure that my colleagues who work in the area of trusts would agree - that's the point of a trust! As the person establishing the trust, you set up some rules in a trust agreement and then give away the money to beneficiaries.

More importantly, our Auditor General looked the wrong way. Instead of looking up, she should be looking down. The Study complains "…once the provinces and territories have established their eligibility to draw funds from the trust, they become accountable in principle to their own citizens, not to the federal government, for how they use the funds" [emphasis mine].

Oh no! Not accountable to their own citizens, surely! Please. Scott Vaughan and Ms. Fraser want to know where the money went. Well, the Provinces know where the money went. Ask them. Danny and Dalton weren't out shopping together. The Provinces spent the money in their own best interests and in accordance with the trust agreements under which the money was allocated.

What's this all got to do with climate change? Either of the two reports could have arrived at a real value proposition: the Canadian Government needs to establish sensible measurement tools and accords on Climate Change which can be used in all jurisdictions in Canada (provincial and federal), and which will also be a model internationally. Guess what? Jim Prentice already knows this... he's indicated that Canada and its southern neighbour are going to have to co-operate to bring about climate change. He wants to "engage the United States of America in pursuing a coordinated approach to the energy and environmental challenges that we both face" and to to help achieve an effective multilateral climate change agreement for the years ahead. At least someone is looking in the right direction.

Budget 2009 - Transformation to a Green Energy Economy

The Conservative Government's 2009 Budget promises billiions of dollars in government spending to help the country ride out the global economic downturn. With the recent U.S. announcements about climate change, did Canada give due consideration to climate change and the environment in the Budget?

The Budget allocates $1 billion dollars to support clean energy technologies. Spread over five years, this includes $150 for research and $850 million for the development and demonstration of promising technologies, including large scale carbon capture and storage (CCS) projects. According to the budget, this support is expected to generate a total investment in clean technologies of at least $2.5 billion over the next five years.

Federal allocations of money to carbon capture and storage are in addition to the Alberta government's $2 billion fund to kick start carbon capture and storage technologies. Between Federal and Alberta monies, funding for CCS could be nearly $3 billion.

In light of the potential of CCS as a means of reducing emissions, the Government has also announced plans to consult with stakeholders to identify specific assets used in CCS which may be eligble for accelerated capital cost allowance. This tax incentive will be used to actively promote investments in certain clean-energy generation techologies.

Another $1 billion dollars will go to the Green Infrastructure Fund over the next five years. This fund will be allocated based on merit to support green infrastructure projects on a cost-shared basis. The Budget states:

"Targeted investments in green infrastructure can improve the quality of the environment and will lead to a more sustainable economy over the longer term. Green infrastructure includes infrastructure that supports a focus on the creation of sustainable energy. Sustainable energy infrastructure, such as modern energy transmission lines, will contribute to improved air quality and lower carbon emissions."

Monies for CCS and the Green Infrastructure Fund are in addition to other funds in the Budget allocated in the area of climate change and Canada's environment, including:

• $1.3 billion over two years to support renovations and energy retrofits that will make Canada's social housing stock more energy efficient, to be split on a 50/50 cost-shared basis with the provinces;
• $300 million over two years to go to the ecoENERGY Retrofit program to support an additional 200,000 energy-saving home retrofits;
• $85 million over two years for key Arctic research stations, and $2 million over two years for a feasibility study for a world-class Arctic research station;
• $80.5 million over the next two years to manage and assess federal contaminated sites, which will facilitate remediation work totaling an estimated $165 million over the next two years and contribute to an improved environment as well as employment opportunities;
• $75 million for national parks; and
• $10 million in 2009-2010 to improve the government's annual reporting on key environmental indicators such as clean air, clean water and greenhouse gas emissions.

All of these initiatives demonstrate the Government's commitment to the environment - and these are Federal initiatives. Provincial budgets, including Alberta's, are coming soon and will include their own environmental and climate change initiatives. We will be keeping a close eye on them.

Canada's Commitment to Climate Change

On January 20, 2009 the Honourable Jim Prentice, Minister of the Environment for Canada, gave a speech in Toronto to the Canadian Council of Chief Executives. The speech focussed on Canada's climate change objectives and policy in 2009 and beyond. The Minister confirmed what many climate change insiders already suspected - that Canada would be evolving from an intensity based performance standard to a cap and trade regulatory regime.

The speech was timely. As Minister Prentice stood before his audience, President Obama's inauguration was taking place in Washington. Cap and Trade, the favoured method for regulating emissions by the new American President, places hard caps on emitters to keep their emissions below specified levels. Minister Prentice clearly recognizes that under the Obama administration, the US is "re-engaging on multilateral climate change negotiations, creating the opportunity for…a North American regulatory regime and a level playing field that will alleviate past concerns about Canadian competiveness”.

How will the Canadian government proceed? Minister Prentice outlined 3 ideas which are at the forefront of the Government's strategy to deal with climate change: (1) endeavour to "do no harm” and avoid measures which would cause Canadian firms to be "not just down by also out”; (2) seek to ensure that federal policies are co-ordinated - climate change regulation would work in tandem with, for example tax policy, tariff policy and technology policy; (3) seek coordination and harmonization between federal and provincial governments and policies.

Minister Prentice also stressed that it is developed nations, like Canada and the United States working together with other developed nations, who will lead the world to cut emissions, with developing nations following suit. Without securing meaningful participation from the Big Five of China, India, Brazil, South Africa and Mexico, efforts of the developed world will be "well-intentioned folly” in the realm of climate change.

To achieve leadership in this area and central to Minister Prentice's speech was his desire to see one shared target between Canada and the United States akin to the collective commitment of the European Union. When President Obama makes his first official state visit to Canada in the upcoming weeks, Minister Prentice hopes that "one of the many points of agreement for action will be commencing a co-operative, bilateral approach to the environment and to energy in ways that spur economic recovery and renewal”.

All roads will lead to the Copenhagen Climate Conference in December, 2009. It's an exciting time. With its natural resources and new technology initiatives in the realm of carbon capture and storage, energy conservation and efficiency and greening energy production, and with Minister Prentice's bright and forward thinking leadership, Canada is poised to be a force to be reckoned with on the world stage.

The full text of the speech is available here: Environment Canada - Media Room

States turn to courts to reform climate change rules

The US is often criticized for being an overly litigious society. However, that zeal can result in some creative uses for litigation. A prime example is a growing trend, led by the New York's Attorney General Andrew Cuomo, to use lawsuits to spur legal reform with respect to the issue of climate change. The outcome of these lawsuits may have a significant impact on the legal obligations of businesses at the smokestack and in the boardroom - both in the US and here in Canada.

Reuters reported on August 25 that New York and 11 other states commenced a lawsuit against the federal Environmental Protection Agency ("EPA"). The lawsuit alleges that the EPA violated the federal Clean Air Act when it refused to impose new source performance standards on oil refineries, which produce 15% of US carbon dioxide emissions according to the claim. The coalition of states will ask the court to order the EPA to impose such standards to control the emissions of greenhouse gases from the refineries.

The lawsuit follows a decision by the US Supreme Court that the EPA has the power to regulated greenhouse gases. It is one of several state-launched suits against the EPA. Others are intended to force the EPA to regulate greenhouse gas emissions from power plants and automobiles.

If successful, the suits could force the EPA to impose significant restrictions on the greenhouse gas emissions of refineries, power plants, automobiles and potentially other sources. Even if the suits are not successul in the courts, they may prove to be an effective public relations tool for spurring change. Certainly they send a strong signal that many states want to see the EPA and other federal agencies take a more active role in addressing the climate change problem.

The changes prompted by this type of litigation will have an immediate impact on businesses operating in the US. They may also have a knock-on effect in Canada if regulators in the provinces and in Ottawa seek to harmonize Canadian requirements with those of our neighbours to the south.

New York Attorney General Cuomo is also using litigation to force companies to disclose the financial risk that climate change poses to their businesses. Back in September 2007, the Attorney General sent letters and subpeonas to Xcel Energy, AES Corporation, Dominion Resources, Dynegy Inc., and Peabody Energy (all energy companies) demanding information about the companies' analysis of the risk posed by climate change and the disclosure of that risk to investors. The Attorney General was acting pursuant to powers granted under the Martin Act, a somewhat obscure piece of legislation that has been used in recent years to chase Wall Street fraudsters. As reported by the New York Times, New York announced on August 27, 2008 that it had reached an agreement with Xcel Energy. Under the agreement, Xcel will disclose the financial risks of lawsuits and of federal or state court decisions that would affect its business. The company must also analyze and disclose the “material financial risks” associated with global warming. New York continues to negotiate with the other 4 companies.

By using the Martin Act, Attorney General Cuomo was able to take action that the Securities and Exchange Commission ("SEC") has yet to take. The SEC is under pressure both from other levels of government and from the private sector to release guidelines regarding the required disclosure of material environmental risks. (Recall from a previous posting that the Ontario Securities Commission has already started clarifying its expectations with respect to contingent environmental liabilities.)

Companies, both in the US and in Canada, can expect that they wil be under increasing regulatory pressure to consider and disclose the risks posed by climate change. If the litigation trend continues, it may be shareholders who turn to the courts to demand this type of disclosure.

50% reduction by 2050 Climate Change Goal - 'Emerging Nations' Not on Board

At a working session in Toyako, Japan on July 8, 2008, the G-8 leaders met with the leaders from 8 fast-growing, pollution-emitting nations to talk on the topic of global warming. Even though the "Statement on Climate Change" released July 8, and the “Declaration of Leaders Meeting of Major Economies on Energy Security and Climate Change”, released July 9, are full of ambitious and ‘cooperation is key” language, no consensus was reached on the G-8’s climate change goal of reducing emissions 50% by 2050.

China, India, Brazil, Mexico and South Africa, representing 42% of the world’s population, rejected the notion that all should share in the 50% reduction in GHG emissions by 2050 target, on the basis that it is the wealthier countries that have created most of the environmental problem up until now. In a statement, these ‘emerging nations’ commented, "it is essential that developed countries take the lead in achieving ambitious and absolute greenhouse gas emissions reductions.” President Hu Jintao of China is quoted as adding that “developed countries should make explicit commitments to continue to take the lead in emissions reduction.”

This stance on climate change is problematic, in that some developed countries, including Canada, have been taking the opposite approach, saying that major action cannot be taken without these emerging nations on board. This ultimately creates a cycle of “we won’t act unless you are on board, yet you won’t get on board unless we act”. Meanwhile, critics of this cycle point out that this inaction is likely to lead to increased warming of the planet, increased costs in climate change mitigation, and an increase in environmental consequences.

Hopefully the spirit of cooperation will prevail, and, as the Declaration suggests, "launch a comprehensive process to enable the full, effective, and sustained implementation of the Convention through long-term cooperative action, now, up to, and beyond 2012, in order to reach an agreed outcome in December 2009 (Copenhagen Climate Change Conference)."

California releases draft climate change plan

On June 26, the California Air Resources Board ("CARB") released the discussion draft of its Climate Change Draft Scoping Plan (the "Draft Scoping Plan"), enacted pursuant to Assembly Bill 32, the California Global Warming Solutions Act of 2006 ("AB 32"). The Draft Scoping Plan sets out California's roadmap for achieving greenhouse gas emissions reductions. Given that California has a history of leading environmental change, and that some of its initiatives are not confined within the state's borders, regulators and businesses operating in Canada, the U.S. and Mexico should pay careful attention to developments in the Golden State.

CARB's goal is to reduce emissions to 1990 levels by 2020, which amounts to approximately a 10% reduction from today's levels. The goal is ambitious, but should still be understood in perspective. Had the United States ratified the Kyoto Protocol, it would have been under an obligation to reduce its emissions to 7% below 1990 levels by 2012. California's long term goal is significantly more ambitious: the Draft Scoping Plan requires an 80% reduction of greenhouse gases from 1990 levels by 2050.

The following are the key elements of CARB's recommendations for achieving those goals:

• Expansion and strengthening of existing energy efficiency programs and building and appliance standards;
• Expansion of the Renewables Portfolio Standard to 33 percent;
• Development of a California cap-and-trade program that links with other WCI Partner programs to create a regional market system;
• Implementation of existing State laws and policies, including California’s clean car standards, goods movement measures, and the Low Carbon Fuel Standard;
• Targeted fees to fund the State’s long-term commitment to AB 32 administration.

CARB has emphasized the need to take a comprehensive and integrated approach to fighting climate change. Its recommendations therefore combine market mechanisms, regulations, voluntary measures, fees, and other policies and programs to reduce greenhouse gas emissions. While CARB will lead the implementation of the plan, every agency, department and division of the state government will be mobilized to put the plan into action. California will also continue to call on businesses and corporations to make climate change part of their fiscal and strategic planning.

While California is once again taking an environmental leadership role, it does not intend to tackle the problem of climate change alone. The state is already cooperating with six other states and B.C., Manitoba and Quebec in the Western Climate Initiative ("WCI") to design a regional greenhouse gas emission reduction program that includes a cap-and-trade approach. CARB intends to design a state-level cap-and-trade system that will integrate with the WCI.

The Scoping Plan is currently just a draft. CARB expects to release a Proposed Scoping Plan in October 2008 that will incorporate feedback about the Draft Scoping Plan. CARB intends to adopt the Proposed Scoping Plan in November after a 45-day comment period. Once the Scoping Plan has been adopted, it will still have to be implemented through regular lawmaking processes.

Liberals propose “Green Shift” through carbon tax

Submitted by Grant Boyle

The federal Liberal Party tabled its Green Shift plan today. Under the plan, the Liberals would tax the carbon content of fossil fuels across the country at the wholesale level, including coal, propane, natural gas, oil and diesel. The tax, like the recently enacted BC carbon tax, would be levied at $10 per tonne of carbon dioxide emissions in the first year. Unlike the BC tax, which rises by $5 per year to reach $30 per tonne in 2012, the federal Liberal tax would rise by $10 per year to reach $40 per tonne in four years. The proposal says that heavy industry and power generation facilities would account for most of the $15 billion that the federal government expects to raise over the first four years of the tax.

The plan says the tax would be revenue neutral to the government and would be accompanied by equivalent tax reductions. Proposed tax reductions include reducing the lowest income tax rate to 13.5% from 15% and reducing middle income tax rates from 22% to 21% and from 26% to 25%. The plan also contemplates a series of credits for child care, low income earners, and rural and northern residents as well as a 1% reduction in the corporate and small business corporate tax rates. There would also be an accelerated capital cost allowance for green investment.

BC's carbon tax comes into effect July 1. The province anticipates $1.849 billion in revenue from 2008/2009 through 2010/11 from the tax and proposes reductions of the same amount - $255 million in tax reductions to small business and corporate income tax, $415 million in income tax reductions, $395 million in low income tax credits, and $784 million in personal tax reductions. Under the BC carbon tax law, the government is obligated each year to publish a plan on how it will allocate revenue from the tax to ensure the tax’s revenue neutrality.

Directors and officers take note: the weather risk market is growing

Mark Twain is credited with saying, "Climate is what we expect, weather is what we get." The difference between what is expected and what actually occurs is the basis for the burgeoning market of weather risk management. Environmental Finance reports that the weather risk market climbed 76% in value last year to a notional value of $32 billion. Some companies have therefore already realized the value of managing weather risk. Prudent directors and officers should be aware that they may be subject to increasing legal obligations to disclose and potentially address such risk.

Weather risk affects businesses in a variety of industries from construction to farming, transportation to power production, clothing retail to outdoor recreation. Businesses that are exposed to weather risk can suffer adverse financial consequences when the weather deviates from expected or historical norms. Weather risk management involves entering into contracts or trading financial instruments that are tied to weather as a way of hedging against the financial effects of unexpected weather.

A simple example, borrowed from the Weather Risk Management Association, is that of a school that must pay for heat during the winter. Assume the school has budgeted for heating based on a historical average winter temperature and has set aside a small reserve for contingencies. If the average temperature in a given winter falls markedly below the historical average, the school could face an unaffordable increase in heating costs. To hedge this risk, the school could pay to enter into a contract whereby the counterparty agrees to pay a certain amount for every degree that the average temperature falls below a set threshold. If the average temperature never falls below that threshold, the counterparty pays nothing and keeps the initial payment made by the school. This strategy may be an affordable way for the school to ready itself for a particularly cold winter. Much more sophisticated weather risk products existing, for example products that bundle weather risk with other related risks and financial instruments that are tied to published weather indexes.

The types of weather risk products described above may seem overly exotic to some directors and officers. However, that does not absolve directors and officers of addressing the issue of weather risk. As discussed in a previous posting, the Ontario Securities Commission is beginning to take a serious look at the way reporting issuers address environmental risks, including weather risk, in their ongoing disclosure documentation. Recall also that one of Canada's most famous disclosure cases, Kerr v. Danier Leather Inc., concerned the disclosure of the unexpected effect of an unusually warm winter on the forecasted sales of leather goods. As the risk posed by weather increases and tools for managing that risk become increasingly available, it is possible that shareholders will hold directors and officers to account not only for disclosing weather risk, but for taking steps to mitigate it.

Lieberman-Warner Bill Blocked by Senate Republicans

Posted by Daniel Jarvis and Grant Boyle

The U.S. bill, put forward by Senators Joe Lieberman and John Warner (amended by Senator Barbara Boxer) to bring into force the now titled “Lieberman-Warner Climate Security Act of 2008”, aimed to cut greenhouse gas emissions from 86% of U.S. sources by 71% by 2050 from 2005 baseline levels through a cap and trade scheme. The scheme would have auctioned a considerable number of the allowances allocated in the scheme - about 20% in 2012 and about 70% by 2050. At the same time, the scheme would have directed $5.8 trillion to consumers and utilities in the form of free allowances and revenue from auctions to offset higher energy costs and help polluting industries shift to low-carbon technologies.

In a 48-36 vote, the legislation fell 12 votes shy of the 60 required for continued consideration. Senators Barack Obama and John McCain did not vote, but sponsors said they and other Senators submitted statements to the Senate indicating they would have voted to move the bill forward if they were present.

Even though the bill is now stalled, it has set the stage for future emissions legislation proposals and negotiations. “We have convinced a majority in the Senate to support mandatory, comprehensive, market-based legislation to curb global warming and enhance US energy security," said Senator Joe Lieberman on his website.

Lieberman and Warner introduced the bipartisan bill in October 2007. On December 5, 2007, the Senate Environment and Public Works Committee voted to report the bill favorably to the full Senate, marking the first time that a Congressional committee had reported comprehensive climate legislation in either the Senate or the House of Representatives.

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.

Is climate change "material"? OSC calls on public companies to quantify their environmental risks

Posted by Andrew Lord

Reporting issuers must improve their disclosure of known and contingent environmental liabilities in continuous disclosure documents. That is the message of the Ontario Securities Commission’s Staff Notice 51-716 on Environmental Reporting (the “Staff Notice”), released February 27, 2008. It is a message that could become relevant not just to companies operating in environmentally sensitive areas, but to any company that faces risk from climate change.

The Staff Notice is discussed in detail in our Davis LLP online bulletin. Most generally, it calls on reporting issuers to provide more detailed discussion and quantitative analysis of their known and contingent environmental liabilities. Improved disclosure of material environmental liabilities must be made in annual financial statements, management discussion and analysis (MD&A), and annual information forms (AIF), as applicable.

The call for improved environmental disclosure has obvious implications for companies with direct involvement in environmentally sensitive industries. However, the Staff Notice is broad enough that any company whose business may be materially affected by climate change, or climate change legislation, may also be required to improve its disclosure. The Staff Notice specifically comments that companies must address material environmental risks generally. Climate change is an environmental risk that can materially affect the performance of a wide variety of industries. It can do so by, for example, altering the production and use of resources that depend on the weather (e.g., grain farming and skiing), leading consumers to choose different types of products (e.g., T-shirts instead of parkas), and creating new markets (e.g., voluntary carbon offsets). The Staff Notice also notes that companies must identify and discuss the financial and operational impact of environmental laws. As discussed elsewhere in this blog, laws designed to mitigate the effects of climate change are evolving rapidly. The imposition of carbon taxes and the implementation of mandatory cap-and-trade greenhouse gas trading systems are legislative changes that could have a profoundly material impact on the financial performance of companies. Both the risks of climate change and the effect of relevant laws may have to be addressed to meet the requirements described in the Staff Notice.

The challenge for reporting issuers is that many of the relevant environmental liabilities, including those posed by climate change, are contingent. Even though the financial impact of such risks may be difficult to predict, the Staff Notice sets a clear expectation that reporting issuers will apply business judgment to quantitative information that is reasonably available to provide detailed discussions and quantified estimates of these risks.

Intensity of greenhouse gas debate continues to increase

Submitted by Andrew Lord

The federal government released the details of its plan to reduce industrial greenhouse gases last week. The plan has already drawn a lot of fire from various groups. Much of the criticism focuses on the fact that the Conservative government does not plan to regulate aggregate emissions, but has instead chosen to regulate emissions intensity.

Aggregate emissions are the total emissions of greenhouse gases for a particular industry, sector or country over a given period. Aggregate emissions drive climate change and are the subject of instruments like the Kyoto Protocol. Emissions intensity, by contrast, refers to the quantity of greenhouse gases that may be emitted for a given unit of industrial production. The problem with an emissions intensity based regulation is that aggregate emissions can rise if industrial production rises. Intensity-based targets may therefore not actually mitigate climate change.

The government's focus on emissions intensity is being attacked on at least three fronts: policy, economics and law. First, policy-focused NGOs have been quick to highlight the inherent flaw in the emissions intensity-based approach, pointing out that the plan will not achieve its stated objective of mitigating climate change. For example, Claire Demerse of the Pembina Institute noted that the plan is misleading where it states that the targets will "effectively require oil sands starting operations in 2012 to implement carbon capture and sequestration (CCS)" (as reported by Point Carbon) She notes that the plan actually requires no such thing, but only provides financial incentives for using the technology. Depending on the overall economics of the project, such incentives may be insufficient to prompt the desired mitigating action.

Economists have also criticized the approach as being out of step with the emerging global carbon market. Rik Parkhill, interim co-chief executive officer of the TSX Group said that an "intensity-based system in Canada, apart from being potentially incompatible with other, larger and more liquid markets, could be smaller and less efficient for intensity-based trading that for a system based on trading under a strict cap" (as reported by Reuters). A strict cap on aggregate emissions, such as that imposed under the EU Emissions Trading System, would create the scarcity that is required to establish a reliable and compelling price for carbon. A reliable and compelling price is necessary to create sufficient liquidity in the proposed carbon market. To ensure that Canada is included in a liquid international market, Parkhill anticipates that exchanges and other financial regulators will continue to "lobby hard to make sure that carbon trading systems are wrestled into some form of compatible form on both sides of the pond."

Finally, a decision released by the Federal Court last week turned on the efficacy of emissions intensity based targets. The case concerned a challenge by several NGOs of a joint Alberta-Federal panel's environmental assessment of the proposed Kearl oil sands project. The panel concluded that intensity-based mitigation measures and regulations would be sufficient to ensure that greenhouse gas emissions from the project would not result in significant adverse environmental impacts. The Federal Court took issue with the fact that the panel had not provided cogent reasons in support of that conclusion. The court held that "given the amount of greenhouse gases that will be emitted to the atmosphere and given the evidence presented that the intensity based targets will not address the problem of greenhouse gas emissions, it was incumbent upon the Panel to provide a justification for its recommendation on this particular issue." The court therefore ordered that the matter be remitted to the same panel with the direction to provide a rationale for its conclusion.

In light of all of the above criticism, perhaps the federal government will feel compelled to do the same.

Recent US developments: Baby steps, but steps nonetheless

Submitted by Andrew Lord

There have been several notable developments south of the border recently. Taken individually, the developments may appear small. However taken together, they are evidence of a trend in the US towards controlling greenhouse gas emissions in a meaningful way.

In a news conference in Paris on February 25, James Connaughton and Daniel Price, key environmental and economics advisers to President Bush, announced that the U.S. is ready to accept binding international obligations to reduce greenhouse gas emissions. However, they did not indicate when or by how much the US would be willing to cut its emissions. Also, the they remained emphatic that the US would participate in a global scheme only if nations like India and China also participated. These omissions and caveats have led some European leaders to dismiss the announcement as a repackaging of an old position. The BBC quoted one unnamed official as saying, "President Bush won't be in office to sign off the next climate agreement so we really no longer really care what he thinks." However, it is encouraging to see that the US remains engaged in the international effort to mitigate climate change.

Domestically, tax incentives are widely seen as being instrumental in promoting renewable energy investment in the US. It was therefore also encouraging to see the US House of Representatives passed the "Renewable Energy and Energy Conservation Tax Act of 2002" (Bill H.R. 5351) this week. The bill is particularly enticing because it funds tax breaks for green energy by repealing tax breaks for Big Oil. It extends tax credits currently available for various forms of investment in renewable generation and energy efficiency for several years. The bill also provides new tax credits for investment in renewable energy and energy conservation bonds, as well as for the production of plug-in hybrid vehicles, cellulosic biofuel, and electricity from renewable marine and hydrokinetic sources. Several other tweaks to the Internal Revenue Code are also included in the bill. Perhaps the most controversial aspect of the bill is that it attempts to achieve revenue neutrality by clawing back $18 billion in tax subsidies previously made available for the domestic production of oil, natural gas and related products. This provision is expected to be fatal to the bill when it crosses President Bush's desk. However, similar legislation is likely to fare better after the new Presidential election.

In other news from the House of Representatives, the House's energy committee, chaired by John Dingell, released a white paper this week that expressed concern that regional and state cap-and-trade initiatives could interfere with federal efforts to develop a national cap-and-trade system. The paper notes that the "country is now at the difficult and familiar stage of transitioning from multiple, often unconnected, State and local climate change programs to a comprehensive, national approach to addressing the global problem of climate change." The paper suggests that, if the states continue to develop their own programs, "more stringent State programs might unduly burden interstate commerce or increase the governmental or societal resources needed to achieve the necessary reductions," could shift carbon emissions to less stringent states, and could hamper the ability of the federal government to balance state interests. However, the paper acknowledges that states could be good laboratories for cap-and-trade schemes and may be well-poised to create systems suited to local circumstances. While the paper treats the tension between the states and Washington as a policy question, it is also a legal question of the constitutional division of powers. Whether viewed through the lens of policy or constitutional law, the discussion is evidence that governments at all levels in the US are getting serious about implementing laws to control greenhouse gas emissions.

One thing is clear: local initiatives are moving ahead much more quickly than federal initiatives. On February 14, the first publicly-announced compliance trade under the Regional Greenhouse Gas Initiative (RGGI) was completed. RGGI, which includes 10 northeast and mid-Atlantic states, will cap CO2 emissions in the region beginning January 1, 2009. Icap, the environmental brokerage that arranged the trade, confirmed that the trade was for options for delivery in 2009-2010 but did not disclose the number of units that were traded. Options for RGGI units, each corresponding to a short ton of CO2, reportedly traded for between $5-10 US. This is the very first concrete indication of the potential value of compliance trades in the emerging US cap-and-trade market. That RGGI is open for business proves that progress can be made even before the new President is elected.

However there can be no doubt that the future of the US carbon market is tightly tied to the presidential election. As an example, the election appears to have already had a measurable impact on the price of carbon in the US. The price of units on the Chicago Climate Exchange (CCX), a completely voluntary CO2 market, shot up right after Super Tuesday (February 5). The price when from about $2.75 to over $4.50. Given that John McCain, Barack Obama and Hillary Clinton all support a mandatory cap-and-trade approach, the jump in price may reflect the market's expectation that emissions credits will be worth much more after the election. Like all of the developments discussed above, the change is most meaningful not because of what it says about the state of affairs today, but because of what it suggests about the market of the future.

Recent Canadian climate change developments

Submitted by Andrew Lord.

Deloitte released a survey entitled "Managing greenhouse gas emissions: Mitigating risks and uncovering opportunities" (PDF) which considers how Canadian companies perceive and are reacting to the climate change issue in Canada. The report notes that climate change issues are "no longer just for the activists" and are "quickly becoming critical factors for corporate strategy and business competition." Shareholders, both individual and institutional, are increasingly pushing their boards to act on climate change issues. However, the survey found that greenhouse gas management continues to be treated by most corporations as an environmental compliance problem and not as a strategic business opportunity. Respondents cited regulatory uncertainty as the primary barrier to the development of integrated greenhouse gas management programs. The more quickly governments, both domestic and foreign, can eliminate that uncertainty, the more quickly corporate leaders will be able to make climate change a strategic priority rather than a regulatory headache.

Canadian Environment Minister John Baird announced during the UN Climate Change Conference in Bali that Canadian companies must submit their 2006 greenhouse gas emissions data to Environment Canada by May 31, 2008. The data will be used to help implement the Conservatives' climate change plan which aims to reduce emissions by 20% by 2020. Establishing a reliable and complete greenhouse gas inventory is a necessary first step in tracking the effectiveness of Canada's climate change plan. However the plan, which Baird touted as "the toughest plan in Canadian history to clean up our air, tackle climate change, and protect our environment," has been heavily criticized by the opposition parties, NGOs and other world leaders. The 20% figure is measured against 2006 emissions levels, whereas the global standard benchmark is 1990 emissions. Canada's target is therefore much less than the 25-40% reduction that the IPCC recently identified as the minimum level of reductions needed to avoid global warming in excess of 2 degree Celsius. Furthermore, the government proposes to advance its goals in the near term by setting emissions intensity targets. Intensity targets, which cap the level of emissions permitted per unit of industrial production, will not necessarily reduce overall reductions if industrial production continues to growth.

Quebec Environment Minister Line Beauchamp announced that Quebec will adopt California's vehicle emissions standards. BC and Manitoba have also committed to adopt the stringent California standards, which are also being implemented by about 16 U.S. states. Harper and Bush both reject calls for their respective federal governments to follow suit.

Greenhouse gases are the new dolphins: trade wars brew over GHG regulations

Submitted by Andrew Lord

Reuters News reports that the European Commission is debating whether to implement a carbon tariff on imports from countries that have taken insufficient steps to tackle their greenhouse gas emissions. Reminiscent of GATT/WTO disputes over US environmental policies in the 1990s, a carbon tariff would almost certainly trigger trade disputes on the basis that the EU was attempting to impose extraterritorial environmental laws.

Europe continues to lead the world by unilaterally setting mandatory emissions reductions targets for its Members. While other countries like Canada dither on a way to price carbon, the EU's ETS cap-and-trade system rolls into its second phase this year. As discussed in an earlier posting, the EU has adjusted the allocations in Phase II to ensure that the market for EUAs is strong from 2008-2012. Assuming that EU Members will continue to pay a meaningful price for their emissions, a carbon tariff on imports would help level the playing field with companies in countries that have yet to put a price on carbon. The tariff could take the form of a requirement that importers buy EUAs.

Previous environmental disputes under the GATT and WTO trade regimes have demonstrated that countries do not respond kindly to such measures. The "tuna-dolphin" and "shrimp-turtle" cases in the 1990s concerned efforts by the United States to impose its environmental standards for catching tuna and shrimp on foreign fisherman by restricting imports of products caught in ways that killed dolphin and sea turtles. The exporting nations objected on the basis that the US's trade measures were a disguised extraterritorial application of domestic environmental law. The trade panel decided against the US in both cases (although those decisions were never formally adopted). It is therefore likely that a nation subjected to an EU carbon tariff could mount a case before the WTO.

An article in IDEAcarbon on January 4, 2008 (available by subscription only) points out that tariffs are not the only means of addressing the competitive distortion produced by asymmetrical international emissions regulations. In setting allocations for Phase II of the EU ETS, some nations are doling out more allowances to industries that must compete globally than to those that focus on the domestic market. For example, the UK caps for the cement and steel sectors will be close to business-as-usual, while the cap for domestic power producers will be over 30% below business-as-usual.

Japan accepts targets and establishes $10 billion fund

Japan will agree to numerical targets to cut its greenhouse gas emissions, changing the stance it took at the Bali conference in December 2007.

Japan will also establish a $10 billion "finance mechanism", over a period of five years, to provide low interest loans to assist developing countries to reduce greenhouse gas emissions.

Japan has selected 41 "priority countries" for assistance under the finance mechanism. The 41 countries, which include China and India, are mainly in Asia, Africa, and Central and South America. Countries were selected taking into account their funding needs, their own undertakings to combat global warming, their international influence, and the degree of their understanding of and cooperation with Japan's initiatives.

Eleven of the 41 countries have been designated as "early implementation" countries; these are: are: Kenya, Ethiopia, Gabon, Burkina Faso, Ghana and Madagascar; Indonesia and Malaysia; Guyana and Mexico; and Micronesia.

The Japanese Prime Minister, Yasuo Fukuda, is expected to announce these measures at the World Economic Forum in Davos, Switzerland in January 2008.

Sources:
http://uk.reuters.com/article/environmentNews/idUKT29671520071230
http://search.japantimes.co.jp/cgi-bin/nn20080106a5.html

Environmental infrastructure - it's broader than you think

It seems every time I pick up the paper or get an email there is an environmental infrastructure project waiting to be developed. 'Environmental infrastructure' is the label I use to refer to projects that are either aimed at improving or restoring the natural environment, or are at least looking to do business better than usual with respect to the environmental externalities of the industry.

Take for example oil and gas production. I know a number of people who would be confused, if not outright offended, by my use of the term 'environmental infrastructure' when referring to an oil and gas project. After all, doesn't the consumption of fossil fuels create greenhouse gases, which in turn contribute to global warming? How could the promotion of a oil and gas project be 'environmental infrastructure'?

Well, the Community Research and Development Centre in Nigeria held a conference entitled "Promoting Renewable Energy and Energy Efficiency in Nigeria" on November 21, 2007. One of the topics covered was oil and gas production, and specifically the flaring stats of the oil and gas producers in Nigeria.

For those of you who are unfamiliar with the oil and gas industry, flaring is the process of burning off 'waste gas', in this case in during the extraction of crude oil. Nigeria is currently the world's largest source of emissions from flaring, contributing more than 20% of the world's total emissions.

However, in some ways, flaring is better than letting the waste gases escape. By combusting the waste gas, it is turned from greenhouse gases with high CO2 equivalence into CO2. This helps reduce the total greenhouse gas impact of the project. A better solution however would be to capture and store the gas and to then use the gas as a source of energy. This would not only reduce the emissions (as is done by flaring) but it would allow for a fuel switch from energy sources that are less efficient (thereby generating more carbon credits by reducing the impact of a second industry). If done properly, it could also help address some of the major concerns around flaring in Nigeria.

Yes this is not a project that produces zero emission energy with no visual, social or other impacts, but it is a project that could improve the environmental impact of the oil and gas industry in Nigeria. For this reason, capture and storage of waste gases as an alternative to flaring falls within the scope of 'environmental infrastructure'. As such it is one of the many projects that people should be looking to invest in, not only for the benefits the project brings (improved rates of resource extraction and a secondary product for sale) but also for the fact that it minimizes environmental degradation. Thankfully, more and more environmental costs are beginning to be recognized in the market economy, and as a result, it is now possible to find partners who are willing to fund projects that minimize those impacts.

EU learns from cap-and-trade mistakes

Submitted by Andrew Lord.

The EU has been extensively criticized for doling out too many greenhouse gas emissions allowances during the first phase of the European Trading System (EU ETS). The EU Commission recently responded by announcing that it has adjusted the EU-wide cap for Phase II (2008-2012) to give Members an average of 10% fewer emissions allowances.

The 10% reduction was confirmed by Environment Commissioner Stavros Dimas on October 26, 2007. The remarks were included in the announcement that the EU Commission had finalized the Phase II allowances for Bulgaria, the last of the countries to have their national allocation plans approved.

Several countries received significantly fewer allowances than they had requested. Bulgaria's allowances, for example, fell 37% of expectations. According to one source, Hungary, Latvia, Malta and Lithuania, Poland and the Czech Republic all plan to challenge the decisions of the EU in court on the basis that their meager allotments will unduly harm their industries.

However, overall reaction to the tougher targets has been positive in the EU . Many members were eager to prevent a collapse in the price of carbon similar to that which occurred during the first phase. Assuming the new scarcity drives up the price of carbon in the EU, trading under the EU ETS may provide a more reliable source of funds and financing leverage in the next 5 years.

Insurers place a premium on climate change

Submitted by Andrew Lord.

With the risk of climate change threatening to swamp the global insurance industry, more and more insurers plan to stay afloat by developing new and innovative products.

Ceres, a coalition of investors and environmental groups, released a report on the insurance industry's response to climate change on October 18, 2007 (see "From Risk to Opportunity: Insurer Responses to Climate Change - 2007"). Authored by Dr. Evan Mills, scientist for the Intergovernmental Panel on Climate Change, the report finds that the insurance industry introduced hundreds of new products and services in 2007 to respond to the risks of climate change. Most of the innovation is occurring in Europe, with the U.S. lagging noticeably behind. While the pace of innovation increased sharply in 2007, only about 1 in 10 insurers are visibly developing climate change related products. Ceres is therefore calling on insurers, particularly in the U.S., to match the scale of their response to the scale of the problem.

The new products introduced in 2007 address the needs of both commercial and individual policy-owners. Around 19 insurers worldwide offer pay-as-you-drive car insurance which tends to reduce driving by 10-15 percent. AIG created a green homeowners property insurance policy. Swiss Re is selling weather-related insurance to small farmers in India. Several insurers are creating renewable energy products to allow policy-holders to participate in the fast-growing emissions credit market.

These innovative products are not the first sign that the insurance industry believes climate change is a real risk. In recent years, insurers have withdrawn policies from over one million U.S. coastal homeowners. However, the effects of climate change will not be restricted to coastal flooding. Some European insurers have even warned that climate change threatens the solvency of the insurance industry (which is the world's largest industry, generating $4 trillion in premium revenue in 2006). Insurers will therefore be forced to continue to innovate - and to put a price on the risk posed by climate change.

The Carbon Disclosure Project: Progress despite government inaction

Submitted by Andrew Lord

Businesses and investors want to do something about climate change, but they need the government to make the market for change.

On Wednesday, October 10, the Conference Board of Canada hosted the Toronto launch of this year's reports of the Carbon Disclosure Project (the "CDP"). The CDP is an annual voluntary survey of FT500 and Canada 200 companies conducted on behalf of 315 institutional investors who manage over USD $41 trillion in assets. Survey respondents not only disclose their greenhouse gas emissions, but also report on their perception of and response to the risks and opportunities presented by climate change. A copy of the CDP Report on the Global FT500 is available here (the Canada 200 Report was not available online at the time of posting).

Jeffrey Simpson of the Globe and Mail was the master of ceremonies for the Conference Board of Trade event. The launch reviewed some of the key findings of the CDP and provided an opportunity for several luminaries to share their thoughts on the issues of carbon emissions disclosure and climate change. Presenters included the following:

• Jeffery Rubin, Chief Economist, CIBC World Markets
• Lynn Patterson, President and Head of Global Markets Canada, Merrill Lynch
• David McCann, Vice-President, Head of Relationship Investments, CPP Investment Board
• Alan MacGibbon, Managing Partner and Chief Executive, Deloitte & Touche LLP
• Paul Dickinson, Chief Executive, Carbon Disclosure Project
• David Greenall, Principal Research Associate, The Conference Board of Canada
• Matthew Kiernan, CEO, Innovest Strategic Value Advisors
• Robert M. Griffin, President and CEO, CSA Group

Several related themes emerged over the course of the launch and are reflected in the CDP reports. First, business leaders and investors are increasingly concerned about the implications of climate change for business. This conclusion resonates with the declaration on October 1 by the Canadian Council of Chief Executives that "climate change represents the most pressing and daunting issue" that the world faces today. Second, putting a price on carbon is the key to addressing climate change in the global economy. As Jeffrey Rubin put it, "price must ration demand." Third, the most effective way to put a price on carbon is for the government to impose a cap on emissions. Once the cap is in place, the market will dictate the price at which the scarce commodity of carbon emissions trades. Finally, in the face of uncertain future regulations, some companies are voluntarily reducing emissions - but most are doing nothing. Mr. Rubin therefore concluded that "what we need is for governments to mandate absolute reductions in emissions now."

Assuming that governments will respond to this call to action, forward-thinking companies must understand where they will stand in a carbon constrained world. One of the most striking conclusions of the CDP Report on the Global FT500 is that there is a huge variation in climate change risk both within and across industrial sectors. Matthew Kiernan therefore characterized climate change not as a peripheral concern, but as a globally transformational issue of competitive advantage. He sees initiatives like the CDP, as well as mandatory disclosure regulations and cap-and-trade systems, as ways of revealing the latent risks and opportunities presented by climate change. As the true competitive landscape is illuminated, investors will reallocate their money accordingly. Prudent companies therefore need to consider the implications of participating in voluntary disclosure initiatives today and the opportunities of preparing for mandatory requirements in the future.

Will the US be the only one left?

The Kyoto Protocol has been signed and ratified by every developed country in the world, with the exceptions of the US and Australia. Australia signed the treaty in 1997. Ironically, although it was the only country that had a cap on emissions that was above the countries 1990 levels, Australia still has not ratified the Protocol, and is thus not bound to its obligations under the treaty.

The only other developed nation which has refused to sign or ratify the treaty, is the US. In both countries however there is a strong local support for capping and reducing greenhouse gas emissions. Numerous provincial/state governments have begun working on climate change policies, many of which include a cap and trade system. The big questions is when will the federal governments in those countries begin moving on similar committements.

Perhaps a change of government is required? The next US elections will be in November of 2008, likely too late for any change in the US position regarding the 2008-2012 Kyoto compliance period, but Australia will probably have elections before the year end. Indeed, it appears that, if the pro-Kyoto Labour Party is elected in late November, Australia may ratify the protocol before the next convention of the parties in Bali on December 3.

A New Attack on Canada’s Climate Change Plan

Submitted by Daniel Jarvis.

Can the Canadian Federal Court force the Minister of the Environment (“MOE”) to come up with a climate change plan that complies with the Kyoto Protocol (the “Protocol”)? This is the interesting question that arises from a Federal Court Application filed by the Friends of the Earth against the MOE on September 19, 2007.

The Application seeks judicial review of the failure of the MOE to prepare a climate change plan in compliance with the mandatory requirements set out in the Kyoto Protocol Implementation Act (“KPIA”), which received Royal Assent on June 22, 2007. Specifically, the Application seeks a declaration that the Minister has not complied with section 5 of the KPIA, that the Minister’s plan (released on August 21, 2007), A Climate Change Plan for the Purposes of the Kyoto Protocol Implementation Act 2007 (“MOE Plan”), does not meet the legal obligations under section 5, and an order of mandamus requiring the Minister to comply with section 5 by preparing a revised plan that ensures Canada meets its obligations under Article 3.1 of the Protocol.

Section 5(1)(a) of the KPIA provides as follows:

5. (1) Within 60 days after this Act comes into force and not later than May 31 of every year thereafter until 2013, the Minister shall prepare a Climate Change Plan that includes

(a) a description of the measures to be taken to ensure that Canada meets its obligations under Article 3, paragraph 1, of the Kyoto Protocol, including measures respecting

(i) regulated emission limits and performance standards,

(ii) market-based mechanisms such as emissions trading or offsets,

(iii) spending or fiscal measures or incentives,

(iii.1) a just transition for workers affected by greenhouse gas emission reductions, and

(iv) cooperative measures or agreements with provinces, territories or other governments;

The thrust of the legal challenge by the Friends of the Earth is that under the MOEs Plan, Canada’s projected emissions for the period of 2008 to 2012 are 3,779 Mt based on proposed measures, and as such, the MOE Plan does not describe measures taken to ‘ensure’ Canada meets obligations under Article 3.1 of the Protocol. Canada’s “assigned amount” under the Protocol is 6% below 1990 levels, which equates to 2,815 Mt for the period of 2008 to 2012.

The legal challenge is certain to be the focus of much debate, centering not only on Canada’s action on climate change, but also on issues pertaining to the division of executive, legislative and judicial powers.

Australia Gears Up for Carbon Trading

Posted by Daniel Jarvis.

As John Howard’s re-election campaign in Australia warms up, so too has his stance on climate change. Howard signalled yesterday that Australia will develop a carbon trading scheme and invest AU$627 million in new measures (CAD$571 million) to help tackle emissions of greenhouse gases and global warming. Missing from Howard’s speech, were any hard targets for the reduction of GHG emissions, but he has signalled that these would be coming after 2008, so that modeling of impacts could be carried out.

Details of the emissions trading scheme and new measures that have emerged include:

• credits will be issued and auctioned under a “cap and trade” scheme allowing firms to emit a certain level of greenhouse gases. Firms emitting more than their allotted amount will be required to purchase additional credits;
• the deadline for setting up the emissions trading scheme is 2011;
• the scheme will include a “safety valve” emissions fee limit, to ensure that businesses do not suffer unfairly in the transition process;
• firms that cut emissions in the lead-up to the scheme will be rewarded for these cuts;
• research into the potential of nuclear energy in Australia will be funded;
• AU$336 million (CAD$306 million) will be invested in green vouchers for schools to improve energy and water efficiency, with every school eligible for up to AU$50,000 (CAD$ 45,585) to install solar hot water systems and rain water tanks;

Critics are panning Howard’s plan as too little, and too late. They point to Australia’s track record as one of the world’s worst polluters per capita, and one of only two fully industrialized countries (the other being the U.S.) that refused to sign on to the Kyoto Protocol. Howard, however, states that action by his government since 1990, will prevent about 87 million tonnes of GHG’s a year from entering the atmosphere by 2010. In his speech, he also commented that, “Australia will more than play its part to address climate change, but we’ll do it in a practical and balanced way, in full knowledge of the economic consequences of our nation.”

A Carbon Exchange - Coming to an Emissions Trading Scheme Near You

Submitted by Daniel Jarvis

Where an emissions trading scheme is born, so an exchange follows. Carbon exchanges arise in response to mandatory or voluntary emissions trading schemes, platforms where unused greenhouse gas (GHG) emissions credits allocated or auctioned can be traded between participants, and investors can speculate for profitable returns. A comparison of sorts can be drawn to the Toronto Stock Exchange (TSX) which operates along with a framework of Securities rules and regulations for the trading of stocks and other securities.

The Chicago Climate Exchange (CCX) launched in 2003 as the world’s first and North America’s only legally binding GHG emissions trading system, along with an exchange trading platform. Fourteen founding organizations, including Manitoba Hydro, the City of Chicago and Ford Motor Company, voluntarily agreed to participate in the scheme and cut their GHG emissions by 4% within four years.

While the CCX led the way, it wasn’t long before the European Union’s Emissions Trading scheme (EU-ETS) joined the picture in 2005 as the world’s largest and only mandatory multi-country, multi-sector emissions trading scheme. To provide a platform for carbon credits generated through the EU-ETS (also called allowances, or EUAs), the CCX launched the European Climate Exchange (ECX), now the leading carbon exchange operating in Europe handling more than 82% of exchange-cleared trading under the EU-ETS. Other notable European exchanges include Scandinavian-based Nord Pool (11%), Powernext (6%) and the European Energy Exchange (1%).

Since 2006, both the CCX and the ECX have been owned by Climate Exchange Plc (Climate Exchange), a UK publicly listed company on the AIM of the London Stock Exchange. Now the Climate Exchange is seeking to expand its reach and is in talks with Chinese and Indian commodities exchanges to setup carbon exchanges in those countries. These exchanges would presumably be modeled on the CCX since they would operate in conjunction with voluntary emissions trading schemes, as neither country has an emissions trading scheme in place. The idea behind this, being pushed in part by interested corporations, is to get companies and organizations on board now voluntarily, making it easier to transition to a mandatory system down the road. Would Chinese or Indian companies voluntarily join? That remains to be seen, but in China it is thought that with the Olympics coming to Beijing in 2008, corporations will face increasing pressure to act in some way to curb their GHG emissions.

A similar development is also taking place in Dubai, where State-run Dubai Multi Commodities Centre (DMCC) said it plans to setup an exchange for trading credits with fellow AIM listed firm EcoSecurities servicing a middle east carbon trading market.

In Canada, where no voluntary or mandatory emissions trading scheme is (yet) in place, the Montreal Climate Exchange (MCeX) is thought to be the leading contender to become the main platform for trading, when such a scheme, or schemes are operational. The MCeX is owned by the Montreal Exchange (MX), and is a joint venture with the CCX.

Much of the trade worldwide in emissions credits is still carried out via brokers in ‘over the counter’ markets (particularly in London), but with new exchanges being introduced or developed and the volume and type of trade growing and maturing, carbon exchanges will play an increasingly important role. It is estimated that the global carbon market tripled in size to $30 billion in 2006, from $10 billion in 2005, according to a report from the World Bank (although some market participants believe it was 25% higher). The carbon market is dominated by the trading of EUAs through the EU-ETS, with more than 1.1 billion EUAs traded in 2006, worth almost $25 billion, compared with 321 million tonnes traded in 2005, worth just under $8 billion. One EUA is equivalent of one tonne of carbon dioxide.

The main questions looking forward, are: “Who’s Next?”, and “What’s Next?”. Although the who is uncertain, it is likely that as trade continues to grow, more and more exchanges will spring up to facilitate this trade. As for what’s next, as more voluntary schemes are developed, it is likely that an increasing number of companies and organizations will join these schemes over public and corporate pressure. Another likely development is a movement eventually away from voluntary schemes operated by exchanges, towards mandatory schemes setup by countries, regions, or blocs of countries or regions, such as proposed under the Western Regional Climate Action Initiative (WRCAI), which British Columbia has joined. These mandatory schemes, much like the EU-ETS, would lay down the framework for trading through legislation and regulation, and let the market and exchange platforms take over from there.

Utah joins climate change pact

The Western Regional Climate Action Initiative gained a new member on May 21, 2007, when Utah joined the pact. This membership to six States and one province. Utah is a welcome addition as they are a heavily coal-reliant economy whose inclusion demonstrates wide support for this initiative.

Wait For 2008

The 2007 BC Budget has just been introduced to the Legislative Assembly and the Throne Speech is acknowledged.  But if you were hoping for funds on climate change initiatives to appear in this document you will be disappointed.

In all $103 million was marked for environmental initiatives.  This funding will be for
extending the tax rebate on hybrid vehicles;purchasing 20 new hydrogen buses;exempting wind power from the school property tax;extending tax relief to all bio-diesel fuels;the creation of an environmental secretariat;establishing the new Green City Awards; andproviding $38 million over four years for LocalMotiongrants to encourage and reward green initiatives.
So where is the follow up to last week's Throne Speech?  In the 2008 Budget.  In particular, it was noted that "next year's budget will build on these improvements, and directly support theclimate change plans that will be developed in the coming year."  Hopefully it will be a busy year of consultation and policy development to focus the creative and entrepreneurial efforts of this Province on finding ways to reach the ambitious goals announced last week.  As promised, we here at Davis will be keeping you up to date on forthcoming changes, so stay tuned.