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Evaluation - Canada July 1997 Louise Comeau 1. What is the national target for greenhouse gas emissions, if any, in 2000, 2005, 2010 and 2020? What is the political and legal status of the target? Specify by GHG. Official national target: Stabilize net greenhouse gas emissions at 1990 levels by the year 2000. Federal Government: The Liberal government has abandoned its commitment to its political commitments to both stabilization at 1990 levels by the year 2000 and its first election platform commitment to work with stakeholders and the provinces to reduce carbon dioxide emissions 20 per cent from 1990 levels by 2005. Canada argued at the June 1997 Summit of the Eight in Denver, Colorado, and at the Special United Nations Assembly in New York that the Earth Summit commitments in June 1992 "were too visionary" and not "realistic". According to Canada, the solution is legally binding medium-term targets with interim milestones. The Canadian way we are told is to take a "practical step-by-step approach." This is code for Canada's real position on targets and timetables: a maximum target of stabilization by 2010 with no requirement that any of it be achieved domestically: joint implementation and trading all the way. Even better would be a target that allows Canada to INCREASE its emissions to 2010. It's a big, cold country you know. The failure to meet the original stabilization target is now being used as an excuse to further weaken the Convention and to ensure long-term climate change. Commitments to date have been political rather than legal. 2. a) Given current trends and policies that you consider very likely to be implemented within the next two years, what is your best assessment of likely emissions of carbon dioxide and other greenhouse gases (methane, nitrous oxide, HFCs, and PFCs) in 2000, 2005, 2010 and 2020? Based on this data, is the country likely to meet its stated targets (question 1)? If not, please explain. Greenhouse Gases CO2 equivalent basis Megatonnes
*Gap calculations based on 1990 emissions used by Natural Resources Canada for projections: 564 Mt. Latest data from Environment Canada for 1990 reported here: 567. Based on projections from Natural Resources Canada and Environment Canada. Canada will not meet its formal targets because it hasn't tried to meet our formal targets. A formal review of Canada's progress in meeting its commitment to stabilize emissions concluded in November 1996: "Emissions in 1995 were about 9.5 per cent above 1990 levels. Per capita emissions are up slightly (21 tonnes GHG/capita) , as are emissions per dollar of GDP (816 kg per $1,000 1994$; .9% above 1990). Methane emissions which contribute 12 per cent of total emissions, account for 22 per cent of the 1990-95 increase. The petroleum industry, which contributes about 16 per cent to total emissions, accounted for 31 per cent of the increase in emissions between 1990 and 1995. Heavy industry accounted for 18 per cent of the emissions increase, compared to its 13 per cent contribution to total emissions. "There has been a slowdown in the rate of improvement of the energy productivity of the economy, and the carbon dioxide intensity of Canadian energy has been fairly level for the last several years." The "National Action Program on Climate Change (NAPCC) represents a balancing of competing policy goals and therefore a political compromise to which all Canadian jurisdictions could agree. This compromise reflects the differences in Canadian society over both the goal that Canada should pursue and the means it should apply to reach this goal. As a result of these differences, NAPCC relies primarily on a voluntary rather than regulatory or incentives-based approach. This strategy stands in contrast to the Canadian experience in environmental policy which until now has relied heavily on "command and control" policies. "...In our view, however, the most important issue in reviewing NAPCC is not 'is the program consistent with its strategic directions?' or 'are activities taking place? but rather 'what impact is the program having?' Will the suite of senior government actions, municipal measures and private sector initiatives achieve NAPCC's immediate objective of stabilization and its long-term objective of laying the foundation for further reductions? Although Natural Resources Canada's latest forecast shows that NAPCC is having some impact, it also indicates that even with NAPCC that Canada will not meet its short term stabilization target and that emissions continue to grow steadily into the future. If it wishes to close the gap further, Canada therefore will have to examine further actions. "From a policy perspective, it is important to note that most of the increase in greenhouse gas emissions is attributable to few factors, the most significant being: the rise in oil and gas production (largely driven by exports to the United States); the continued expansion of transportation demand; and the increase in emissions from electricity generation in Alberta and Saskatchewan (also partly related to the growth in the oil and gas industry). "NAPCC appears to have been most effective in reducing emissions where governments have applied efficiency standards. This is particularly evident in the residential sector and, to a lesser extent, in the commercial sector. Voluntary approaches have also reduced energy intensity in several industrial sectors. "In this regard, it is significant that government spending on energy efficiency programs, one of NAPCC"s most important elements, is declining. Unless offset by the private sector, this decline is bound to have a negative impact on energy efficiency improvements although its magnitude is uncertain... "Based on the forecast by Natural Resources Canada and our analysis, we conclude that these measures will not achieve Canada's target of stabilizing emissions at 1990 levels by 2000. But they should help reduce the growth in greenhouse gas emissions after 2000 and lay the foundations for further action still." The effectiveness of Canada's Voluntary Challenge and Registry has been challenged by the Alberta-based Pembina Institute. The federal Government regularly brags that "619 companies and organizations registered with the Voluntary Challenge and Registry (VCR) as of December 1996 and that these registrants account for over half of the greenhouse gas emissions in Canada. Of those registered with the VCR, 319 have action plans that generally address energy efficiency, energy demand-side management, fuel substitution, process redesign, management practices, or carbon offsets." In its Independent Review of Corporate Action on Climate Change 1996, the Institute found only 73 submissions that were developed enough to analyse. The remainder were comprised of letters of intent or provided so few details that no assessment could be made. Of those action plans analysed, Pembina concludes: "..the continuing poor quality of the scores makes it clear that the VCR still has not demonstrated that voluntary action by corporations and other organizations can make a credible and effective contribution to Canada's climate change mitigation goals. Twelve of (73 reviewed) received a score of more than 50 per cent. The highest grade, 60 per cent was attained by three companies: E.B. Eddy Forest Products, TransCanada Pipelines, and TransAlta Corporation. Another 10 companies received grades of better than 40 per cent." It should be noted that Pembina graded companies on the quality of their reporting, not on whether the company stabilized its emissions. In fact, of the three companies receiving the highest marks, only TransAlta will post a decline in emissions by 2000 and that comes from significant reliance on offsets, particularly sequestration both in and out of Canada. b) Please provide national emissions for 1990 from the official inventory and data on the most recent year available (1995 if possible). Inventory Gases,CO2 equivalent,Kilotonnes
c) Does the government intend to use the "basket" approach (adding all greenhouse gases together using Global Warming Potentials) in meeting emission reduction targets? If so, what fraction of expected emission reductions come from gases other than carbon dioxide? The Canadian government is committed to using the basket approach for current and future commitments. It also is committed to the "comprehensive approach" which would allow it to deduct "sinks" from fossil fuel emissions. Canada has yet to inventory anthropogenic emissions from Canada's forests in its inventory. Natural Resources Canada has quantified the estimated impacts of its National Action Program on Climate Change. The primary component, the Voluntary Challenge and Registry, is being credited with reducing Canada's "gap" from the original projection of 13 per cent by the year 2000 to 8.2 per cent by the year 2000. The reduction in the "gap" of 27 Mt is attributed to reduced nitrous oxide emissions in nylon production (10Mt of the reduction) and reductions in fugitive methane emissions from the upstream oil and gas industry (9 Mt, accounting for 65 per cent of the total CO2-equivalent reductions for the oil and gas sector and almost one-third of the total reduction from all sectors in the same year. The gap in 2000 is expected to be 46 Mt or 8.2 per cent above 1990 levels. Of the 46 Mt, carbon dioxide emissions comprise 39 Mt. d) Does the government intend to use the "net" approach (subtracting sinks from emissions) in meeting emission reduction targets? If so, what fraction of expected emission reductions come from enhancing sinks? Canada's position negotiating the Framework Convention on Climate Change was that it supported the "net" approach. It has not yet indicated whether it supports the "net" approach for commitments negotiated under the Kyoto protocol. In fact, Canada has yet to quantify its anthropogenic emissions from Canadian forests and so are not included in current inventories. In addition, since the original position was developed, Canada's forests have moved from a net sink basis to a net source of carbon dioxide to the atmosphere. The increase in emissions is attributed to rising wild fires and pest outbreaks. The estimate of 57 Mt of carbon dioxide emissions has not been allocated between managed and unmanaged forests. An inventory of soil carbon in the agriculture sector reports these emissions:
The FCCC in-depth review concludes: "Forty-five per cent of Canada is covered by forest. While the contribution of this sector, especially with regard to anthropogenic influence, is still highly uncertain, it seems that it shifted from being a large net sink to becoming a lesser net source of emissions around 1990. Pests and forest fires are contributors to loss of carbon from this reservoir. Recognizing that most of the forest area is believed to be unaffected by human interference, the team still concluded that development of net anthropogenic emissions or sequestration from this sector could be significant inside a net approach. Thus, Canada's ongoing efforts to build an adequate inventory will be crucial to develop and monitor relevant mitigation and adaptation strategies." 3. What policies and measures have been adopted or are under serious consideration for reducing greenhouse gas emissions (especially CO2) emissions from the transport sector? In particular, describe policies and measures aimed at: a) Increasing the fuel efficiency of automobiles, including policies and measures aimed at developing and introducing advanced vehicles that would represent a dramatic departure from conventional internal combustion gasoline automobiles as well as policies and measures promoting the use of advanced automotive fuels, including natural gas, renewable biofuels, electricity and hydrogen. The recently elected federal Liberals committed in their most recent platform to: "advance a new national transportation strategy that addresses fuel economy standards, fleet procurement policies, an inspection and maintenance program, and urban demand-side management." It is not yet clear how the federal Government intends to deliver on this commitment. In 1994, the federal government announced a new program to encourage the development of biomass-derived ethanol production. The National Biomass Ethanol Program consists of a repayable line of credit of $70 million guaranteed by the federal government, which would be made available to a limited number of applicants from 1999 to 2005. Provincial governments, including Manitoba, Alberta, Ontario and British Columbia, provide tax exemptions for the ethanol portion of ethanol blends. Ethanol from eastern Canada is produced from corn; western Canada produces ethanol mostly from grains. Both sources produce questionable greenhouse gas benefits. Natural gas and propane fuels also benefit from provincial and federal tax exemptions. The federal Industry department has also made a small investment in the U.S. Partnership for a New Generation of Vehicles (PGNV) and is seeking ways to expand its participation in the venture. The PGNV program, which includes Ford, General Motors and Chrysler, is to produce a vehicle three times more energy efficient than current models by 2004. There is no requirement to sell the vehicle and there are rumours that a diesel engine may be used. Canada apparently has corresponded with the U.S. regarding the need for higher fuel economy standards for vehicles, but there is no evidence for this. Voluntary inspection and maintenance programs could soon be under way in Quebec and Ontario, and a regulated program is operating in Nova Scotia and British Columbia. b) Promoting the use of public transport in urban areas, in rural areas and on long-distance connections. Provincial governments have jurisdiction over municipal governments and, therefore, public transit. Deficit reduction in all jurisdictions has led to cutbacks in funding for public transit. Ontario, for example, has cut its support for capital projects as well as operating expenses. The federal Government has invested twice over the past four years in infrastructure improvements. Municipal and provincial governments as funding partners, opted to spend on road expansion and upgrades and sewage improvements. The federal Government did not require spending on public transit or rail. The federal Government, through Environment Canada, is supporting a small secretariat to support the efforts of municipalities committed to reducing their carbon dioxide emissions 20 per cent. These efforts do focus on education and tool kits focused on transportation. c) Controlling freight transport There is a continued shift in Canada from rail to road for transport. Cutbacks in federal funding to rail lines has led to a number of regional lines being shut down. Freight transport is up in response to the North American Free Trade Agreement. Natural Resources Canada also operates a small number of education programs aimed at the transportation sector, including freight transport. 4. What policies and measures have been adopted or are under serious consideration for increasing end-use efficiency in e.g. appliances, buildings and industry, such as voluntary programs, efficiency targets, economic incentives, labelling and mandatory efficiency standards? Provincial and federal Governments, and industry under the Voluntary Challenge and Registry have reported a total of 475 actions aimed at reducing greenhouse gas emissions. The total includes a large number of actions under way before 1990 - before Canada made its climate commitments, and a "sizable number" which represent statements of commitment or indications of possible future action. Of the actions reported, 97 (20%) are completed, 245 (52%) are current and 133 (28%) represent future or possible actions. Over a quarter of NAPCC actions reported by jurisdictions are aimed at internal government operations; almost half the actions (information and voluntary measures) are designed to create the conditions for actions by others; and only 14 per cent can be described as potentially coercive (i.e., involving standards or regulations). According to the Second National Communications the following represent identified quantifiable initiatives: Initiatives
Suasion incentive Challenge a: Canadian Industry Program on Energy Conservation commitment of 1% energy efficiency was reflected b: Canadian Association of Petroleum Producers, and Oil Sands Operation proposed GHG emissions were used c: Canadian Electrical Association submission d: Dupont Chemical's commitment to reduce nitrous oxide emissions from adipic acid process. The following conclusions from the review of Canada's Action Program on Climate Change must also be considered: 1. A clear majority of actions are voluntary. Measuring the effectiveness of voluntary measures is inherently difficult because (i) more assumptions have to be made about rates of uptake than is the case with regulatory or market-based instruments; and (ii) these measures may be indistinguishable from changes in behaviour that would have occurred on their own. 2. Most actions tend to be modest, with a narrow focus and limited resources. Their individual impact therefore is likely to be small. NAPCC clearly relies for its impact on the accumulated weight of these small actions rather than on a few "big" measures (e.g., a carbon tax). 3. Many actions were initiated prior to the official start of NAPCC and were originally conceived to meet other objectives, some of which are only incidentally related to the control of GHG emissions. 4. It is very difficult to disaggregate the impact of most individual measures aimed at the consumer. In the case of GHG emissions, consumer behaviour responds to a host of factors, (e.g., energy prices), not all of which are measures specific to NAPCC. Even where a link can be made between NAPCC and a change in behaviour, the large number of programs aimed at the consumer makes the establishment of cause and effect relationships problematic. 5. Notwithstanding the fact that many of NAPCC's measures have been introduced some time ago, the program itself is still less than two years old. Changes in consumer behaviour take time to manifest themselves and it is reasonable to assume that the program's full impact may not yet have been felt." "As a consequence of all these factors and the absence of consistent and detailed reporting (see below), the picture of Canada's program that emerges is very blurred. It is impossible to calculate precisely what resources are allocated to the program, establish with confidence its incremental impact or even list all the activities carried out under its umbrella. Under such conditions, one is inevitably forced to rely on guesswork, interpretation, and judgment in assessing the program's overall impact." In addition to the Voluntary Challenge and Registry, other initiatives, include: 1. Energy Efficiency Acts: Minimum energy efficiency regulations for new equipment in Ontario, Quebec, New Brunswick, Nova Scotia, British Columbia and Canada. 2. National Code for Buildings and Houses: negotiated by consensus with provinces and builders; provinces free to adopt voluntarily. It is not clear if any provinces or territories will adopt the new Codes. 3. Finance Minister, Paul Martin, opened the door slightly to renewables in the 1996 budget, but also supported Oil Sands development. Investment in the renewable energy sector could increase as a result of the introduction of a Canadian Renewable and Conservation Expense (CRCE) in the 1996 budget. CRCE allows expenses related to project development to be deducted and flowed through to investors. Currently, between 5 - 10 per cent of capital costs are deductible at 100 per cent. The fossil fuel industry can deduct up to 50 per cent of capital costs (at 100 per cent). The Minister also relaxed the Specified Energy Property Rule which formerly restricted access to the flow-through tax benefits of accelerated capital cost writeoffs to companies in the energy business. This meant that renewable energy projects had to rely on fossil fuel companies or utilities to invest in the project. Now mining and manufacturing companies also can invest and gain access to the flow-through tax benefits that the small renewable company cannot claim for itself. 4. An Memorandum of Understanding between Natural Resources Canada and the Canadian Motor Vehicle Manufacturers Association commits vehicle manufacturers to providing fuel consumption labels on vehicles. It is not clear whether this commitment is to new, easily identifiable, and prominent labels or is a commitment to the current system which includes fuel consumption data on a sales detail label. 5. Natural Resources Canada also is working with a pilot to test a Home Energy Rating System. 5 a) What policies and measures have been adopted or are under serious consideration for reducing greenhouse gas emissions from the electric power sector, especially production and distribution? Electricity deregulation is either under consideration or proceeding in New Brunswick, Quebec, Ontario, Alberta and British Columbia, with no jurisdiction clearly indicating that it will require demand-side management or renewable energy as part of the electricity mix. The Canadian Electrical Association has indicated it is interested in pursuing analysis of a trading regime for carbon. The opening up of the electricity market to cross-border trade in electricity with the U.S. also could open up opportunities for cross border trading in carbon credits. It's no surprise then that with Canada's high rate of electricity generation from water resources (60%) that early analysis has found that Canada's electricity offsets six times more carbon in the U.S. than is generated in its manufacture and transportation from Canada. b) Is the concept of Integrated Resource Planning/Demand Side Management reflected in your national power policy? Are potential investments in electricity supply, distribution, combined heat and power, and end-use efficiency considered on an equal basis? Electricity is a provincial responsibility. The National Energy Board rubber stamps energy and electricity exports. The natural gas market in Ontario operates under integrated resource planning principles, and the B.C. Utilities Board does use an integrated resource planning framework for planning purposes. Hydro Quebec has promised to use IRP in its planning but has not done so. 6. a) What policies and measures have been adopted or are under serious consideration for promoting research, development, demonstration and commercial application of renewable energy technologies and for shifting away from research, development, demonstration and commercial application of fossil-fuel and nuclear energy sources? Federal R&D funding of energy, excluding Atomic Energy Canada Limited, declined from approximately $93 million in 1990 to $59 million in 1997. Approximately 30 per cent of funding goes to energy efficiency, 12 per cent to renewables, 28 per cent to hydrocarbons, eight per cent to fusion and 21 per cent to alternative and energy/environment research. Industry Canada also operates the Technology Partnerships Canada, a $250-million investment fund announced in March 1996. The fund encourages partnership and risk sharing with the private sector. The fund is supposed to encourage investments in climate and environment friendly technologies. In November 1996, the federal Government announced a $30-million investment in the Ballard PEM (proton exchange membrane) Fuel Cell Power Plant project. The investment, fully repayable by way of royalty, will leverage additional investments of approximately $60 million over the next three years. The federal Government also announced in April 1997 that it will provide funding of $ 8 million to Ballard for the development of fuel cell engines. The funding will offset costs associated with the research and development of the hydrogen fuel cell engine. Ballard plans to work with Ford Motor Company to integrate the fuel cells into a car that Ford calls its P2000 advanced lightweight prototype vehicle, according to a government press release. The nuclear industry continues to receive significant government support. For 1996/97 direct support to Atomic Energy Canada Limited was $132-million. The subsidy will fall to $100 million in 1997/98. Hidden loans and subsidies have been calculated at $2.5 billion when one considers the $1.5 billion loan guarantee Canada has provided China for the sale of two CANDU reactors. b) Is there a target for the % of energy provided by renewables? No. 7. What policies and measures have been adopted or are under serious consideration for establishing cross-sectoral economic incentives to reduce greenhouse gas emissions, such as ecological tax reform (specifically CO2/energy tax), subsidy reform (including reduction of direct and indirect subsidies to fossil fuels and nuclear energy) and cap-and-trade systems? There is no consideration of a CO2/energy tax in Canada. The Liberal Government is willing to explore trading (although there is resistance to even discussing a "cap" for Canada by Natural Resources officials). Its election platform committed a future Liberal government to: "design options for an emissions trading program for greenhouse gases that work within a Canadian context, while respecting the international framework. Direct federal grants to fossil fuel megaproject construction and operation peaked at $576 million in 1994. Direct grants in 1995 were $264 million; 1996: $67 million and 1997: $28 million. Reductions in grants and subsidies have occurred within the framework of deficit reduction, not climate protection. The issue of subsidies has been intensely debated and analysed in Canada. While there remain tax biases with respect to exploration and development expenses for the fossil fuel sector, there are also tax breaks for ethanol, natural gas and propane for vehicle fuels and incentives for the renewable energy sector, albeit far less than the fossil fuel industry receives. Up to 50 per cent of capital costs related to fossil fuel exploration are 100 per cent deductible, while the renewable energy sector can deduct between 5 - 10 per cent of its capital costs. Rather than focus on subsidies, the real issue for Canada is energy pricing which clearly does not include externality costs related to environmental damage and health. With respect to the tax system, analysis by Natural Resources Canada found that the tax system is biased against investments in energy efficiency. In response, the Finance Minister allocated $60 million over three years to investments in advanced technologies in commercial buildings. It is not yet clear how this money will be used. 8 a) Does your country have any policies to influence international lending and financial mechanisms so that their policies are more consistent with climate protection? Canada has promoted principles of sustainable development in IDA replenishment (particularly IDA 10) and has asked the Subsidiary Body on Implementation to formerly "operationalize" the following decision of the First Conference of the Parties: "Consistency should be sought and maintained between activities (including those related to funding) relevant to climate change undertaken outside the framework of the financial mechanism and the policies, programme priorities and eligibility criteria for activities as relevant, established by the Conference of the Parties. Towards this end and in the context of Article 11.5 of the Convention, the secretariat should collect information from multilateral and regional financing institutions on activities undertaken in implementation of Article 4.1 and Article 12 of the Convention; this should not introduce new forms of conditionalities." b) What does your country contribute to the GEF for climate activities and what to the Climate Convention secretariat? Canada contributed $111.11 million Canadian to the Global Environment Facility for the replenishment period 1994 - 97. Promisory notes for the full amount are with the GEF. Canada's contribution to the UNFCCC in 1996 was $230,000 Canadian. Canada has also contributed to development of national communications and participation in the UNFCCC process for development countries. Contributions are falling with 1996 showing support only for a workshop and $25,000 Canadian for national communications, compared to $125,000 in 1995. 9. What policies and measures have been adopted or are under serious consideration for reducing emissions of gases other than carbon dioxide (methane, nitrous oxide, HFCs, and PFCs). Canada has no regulations to control these gases. The upstream oil and gas sector has moved to capture fugitive methane emissions which are being credited with reducing emissions by 9Mt C02-equivalent by the year 2000. Changes to nylon production by Dupont is being credited with reducing emissions 10Mt CO2 equivalent. 10. Are there any particularly effective or innovative policies and measures that have been adopted or are under serious consideration that could be replicated in other countries (e.g., on public awareness building)? In 1996, British Columbia Transit order three Ballard fuel-cell powered transit buses. Sierra Club of Canada, with funding from Environment Canada, three municipal governments, the Toronto Atmospheric Fund and three outdoor advertisting companies will launch a national billboard and transit shelter campaign this fall making the link between fossil fuel combustion and a changing climate. The program will distribute fact sheets to callers to a toll-free number. Radio public service announcements are also planned. Environment Canada is supporting development of a feasibility study that could lead to the establishment of a National Green Communities Initiative that would support community-based non-profit groups deliver home energy audits and retrofits, waste management and water conservation. Canada also is performing well in bringing together an assessment of the potential impacts of climate change in Canada. The Canada Country Study will be released in the fall. |