Regulating Carbon Emissions in Canada – Options

GLOBE-Net, May 6, 2013 – The International Institute for Sustainable Development (IISD) has issued a report analyzing three policy proposals currently in play to mitigate greenhouse gas (GHG) emissions in Canada, and recommends alternatives to what is being contemplated by governments and the oil and gas industry.

The oil and gas industry are under pressure to ramp up policies to achieve Canada’s 2020 GHG intensity-based emissions target of 17 per cent below 2005 levels. IISD’s analysis aims to bring coherence to the three proposals, as the outcome of the negotiations between the three parties is likely to become the basis for federal regulations and be rolled out across Canada.

[stextbox id=”custom” float=”true” width=”200″ bcolor=”add3d5″ bgcolor=”add3d5″ image=”null”]The on-going controversy over the Keystone XL pipeline project has added a significant element of urgency to the need for all three parties to come to an agreement on a strategy to achieve Canada’s desired emission reduction goals.[/stextbox]

IISD states Alberta is at the leading edge of provincial policy, and Alberta policy choices could establish a template for other provinces. As a result, ongoing negotiations could very well establish the basis for federal regulations that will be applied nationally.

The Numbers that Matter

All of the proposals pair an emission-intensity improvement target with a price ceiling per tonne of CO2e (e.g., 20 per cent/$20). See Table 1.


Together, these parameters interact to set the compliance obligation, the marginal incentive to reduce emissions and the cost of the proposal to emitters.

The first key element in the proposals is the required emission-intensity improvement. This number defines the total compliance obligation that regulated firms will face. It does not in and of itself set the emission reductions that can be expected, but instead interacts with the price ceiling and compliance mechanisms to determine GHGs reduced. Proposals on the table are purported to seek an intensity improvement between 20 and 40 per cent.

The scenarios range from a 20 percent intensity reduction in 2020 and a price ceiling of $20 per tonne (Scenario 1), to a 30 percent intensity reduction in 2020 and price ceilings of $30/$60 per tonne (Scenario 2), to a 40 percent intensity reduction in 2020 and price ceilings of $30/$60 per tonne (Scenario 3).

In each case it is a balancing act – settling a price on carbon that leads to emissions reduction, but not so high a price that the industry becomes non-viable.

Table 1

According to the report “The policy objective of the intensity target is to reduce emissions per barrel of oil produced or units of natural gas by a certain percentage in 2020 relative to a historical base year. The choice of fixed base year matters since the emission intensity of the sector is falling in time as new, more energy-efficient capital stock is deployed.”

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