Carbon Prices: Not Just for Big Energy Anymore

GLOBE-Net, June 21, 2013 – The federal government is advancing sector-by-sector greenhouse gas (GHG) regulations – albeit fairly slowly and “behind closed doors” since the finalization of coal-fired electricity generation and transportation regulations.

However, within this context of a pending topdown regulatory system many provinces are highly motivated to release regulations of their own. Provincial governments hope to build made-at-home solutions which consider the unique challenges of their domestic industries and interests.

Ontario and Saskatchewan have publicly signalled their intent to release provincial regulations by the end of 2013, and both provinces intend to advance equivalency agreements for these domestic arrangements in lieu of accepting the final suite of federal regulations.

[stextbox id=”custom” float=”true” width=”200″ bcolor=”add3d5″ bgcolor=”add3d5″ image=”null”]Alberta is also working closely with Environment Canada in an effort to ensure changes to its carbon pricing program complement federal rules.[/stextbox]

While carbon regulations are vital to reducing GHG emissions, it is too early to tell whether they will result in a net positive impact in the Canadian economy. Much uncertainty remains.

Who will be regulated? And the underlying question, who will ultimately pay?

Environment Canada is currently engaging approximately 15 sectors to develop unique reduction regulations. Besides the visible oil and gas sector, the following major sectors continue to be highly involved with the federal government: chemical manufacturing; fertilizers; iron and steel; cement; and pulp and paper, among others.

For sectors and companies not directly taking part in these discussions, and for those currently outside of provincially-regulated sectors, we have observed relatively limited discussion and understanding of future GHG reduction regulations and the related risks that follow.

This is noteworthy because not only will significant portions of the Canadian economy be captured by the federal program, but the financial implications will be widespread as regulated
companies who have the ability to pass on carbon costs through their supply chain will do so.Carbon regulations have conventionally focused on large emitters and the energy sector.

These groups are common targets of GHG requirements in other jurisdictions and appreciate the direct financial risks that such requirements can create. However, there is a significant set
of Canadian industries which may be indirectly affected by such programs; industries whose input costs increase or smaller emitters not captured under the regulation.

As such, nontraditional sectors and smaller emitters may wish to follow these advancements to evaluate how these regulatory risks could create additional financial burdens or potential opportunities.

By Kaitlin Szacki and Cheryl Johnson

Reprinted with permisson from the Delphi Group Climate Change Policy & Sustainability Update, June 2013.

‘Carbon Pricing and the Changing Energy Landscape’ will be a major topic at GLOBE 2014, the next in the celebrated GLOBE Series Conferences on the business of the environment taking place in Vancouver Canada, March 26-28, 2014. Reserve your place now. Check here for more details.