Elements of the Plan
Competitive and Sustainable Industries for the 21st
Century
This Plan is designed to spur innovation and technological
advancement, which is essential for the long-term transformation required
to maintain a sustainable and competitive economy in the 21st
century.
A sustainable economy produces goods and services that meet the demands of
the domestic and global marketplace while generating low levels of waste and
pollution. This Plan will help position Canada in the emerging world markets
by increasing energy efficiency and encouraging greater reliance on renewable
energy. At the same time, it will diversify our energy mix and bolster our
energy security.
While domestic investments will cut pollution at home and abroad through
exports of low-emitting technologies, Canada will work within the Kyoto Protocol
framework to promote export of Canadian technologies that support the sustainable
development aspirations of developing countries. Canada will do this because
it is in our economic interests, and, just as importantly, we will do this
because it is essential to achieving our domestic and global climate change
goals. Canada will at the same time meet global responsibilities and seize
global opportunities.
As noted earlier, a key element announced in Budget 2005 is the development
of a Sustainable Energy Science and Technology Strategy. Investments in traditional
and new sources of energy and innovative technologies resulting from this
strategy and the Plan more generally will provide long-term environmental
benefits, while maintaining a competitive and growing economy.
In addition, Budget 2005 made key tax policy changes that will improve productivity
while helping businesses make the right environmental decisions, in other
words, helping to make it more attractive to move now to make capital investments
that will save energy and gain efficiency in the longer run. These enhanced
tax incentives will contribute to reduced GHG emissions, better air quality
and a more diverse energy supply. Further discussion of these tax changes
is set out below in the section on Emerging Renewable Energy. In Budget 2005,
the Government also committed to consult on other opportunities to use the
tax system to further environmental objectives.
Large final emitter system
Canada's LFEs include companies in the mining and manufacturing, oil and
gas, and thermal electricity sectors. These sectors make an important contribution
to Canada's economic base, but they are also large contributors to our GHG
emissions — just under 50 percent of total Canadian GHG emissions. They
must play a significant role in meeting Canada's climate change goals.
The purpose of the LFE system is to secure emission reductions from Canada's
largest emitters through a system that is market-based and in line with our
policy regarding Smart Regulations. The LFE system will achieve significant
reductions in GHG emissions in a manner that supports the continued competitiveness
of our industry.
The LFE system will cover about 700 companies operating in Canada; 80-90
of these companies account for approximately 85 percent of the LFE GHG emissions.
The 2002 Climate Change Plan for Canada proposed an overall target
for the LFE system of a 55 Mt reduction from the Business-as-Usual (BAU) baseline
emissions projection for 2010 (i.e., the emissions that would occur in the
absence of climate change action). The 2002 Plan stated that the system would
include a number of adjustments, to address such issues as competitiveness,
early action and regional burden. The system was to be implemented through
the use of covenants (a system of contractual agreements between government
and industry) with a regulatory or financial backstop.
As development of this system took place in consultation with industry over
the last two years, it became clear that some sectors, particularly those
with fixed process emissions (emissions which are driven purely by underlying
chemical reactions and not by fuel combustion) faced competitiveness issues
in reducing emissions. It also became clear that the proposed system of covenants
backstopped by legislation added considerable complexity to the system.
Approach
The system that is being introduced respects all previous commitments that
have been made concerning the LFE system, including that the cost of compliance
to industry will not be more than $15 per tonne of carbon dioxide equivalent.
Appropriate mechanisms will be implemented to achieve that price cap commitment.
A summary of previous commitments and how they are being met is set out in
Annex 2.
The description of the LFE system that follows addresses the broad parameters
of the system only; elaboration of the system will be undertaken in the coming
months in partnership with industry, provinces and territories, Aboriginal
peoples and environmental groups, building on the work conducted over the
past two years.
Target
In light of experience gained through consultations, the Government has decided
to take a streamlined approach to the LFE system. The overall target for the
LFE system has been reduced to 45 Mt and will be implemented in an administratively
simple manner — there will be no downward adjustments through covenants.
As such, the target is firmer.
The 45 Mt target is based on a BAU baseline to which methodological improvements
have been made to the electricity component. This 45 Mt target is equivalent
to a 39 Mt target using the baseline from the 2002 Plan. Sectoral targets,
to be developed by activity on an emissions intensity basis, will be implemented
as described below.
In order to establish LFE targets, it is important to take into account two
types of emissions: fixed process emissions and all other types of emissions.
However, there is a fundamental distinction between these two categories,
owing to the fact that the levels of fixed process emissions cannot be controlled
by industry, other than by lowering production entirely. By contrast, available
technologies do permit industry to reduce other types of emissions without
lowering overall production levels. The LFE targets in this Plan address this
important distinction.
Total emissions are taken into account in setting the sectoral targets. Fixed
process emissions receive a zero percent target during the 2008-2012 period.
All other emissions receive a 15 percent target. However, the targeted reductions
from these other emissions as a percentage of total emissions cannot exceed
12 percent of total emissions.
Targets for new facilities and facilities undergoing major transformations
will be based on BATEA performance standards. This approach will assist in
promoting technological advances and innovation.
LFE companies will have a number of options for compliance:
-
Investment in in-house reductions. This is likely to be the first priority
of LFE companies, since it allows them to invest in their own facilities
and profit from increased productivity and reduced waste associated with
such investments in emission reductions and modernization.
-
The purchase of emission reductions from other LFE companies that have
done better than their target.
-
Investment in domestic offset credits (credits attesting that a real
emission reduction or carbon sequestration has been generated outside the
LFE system — these credits may be purchased by LFE companies and used
for compliance with their obligations).
-
The purchase of international credits provided that these represent
verified emission reductions — i.e., only "green" international
credits will be recognized for Canadian compliance purposes. Investment
in international credits may be linked to sales of Canadian technology and
provides LFEs with experience in an international trading market that is
likely to be of increased importance over time.
All of these options will either reduce Canada's own emissions or provide
us with qualifying international Kyoto credits that represent verified emission
reductions and GHG reductions elsewhere in the world.
It is important to note that the ability of companies to sell surplus emission
reductions to other companies (or potentially to the Climate Fund, to be discussed
later) provides an incentive for companies to go beyond their target. This
is a key reason why early implementation of the LFE system is important, since
without it there is much less financial incentive for companies to seek out
opportunities to reduce emissions from their operations.
In addition to these options, LFEs would be able to invest in technology
developments and count those investments for purposes of compliance. Legislation
has been introduced in the House of Commons to establish a Greenhouse Gas
Technology Investment Fund. The Fund would support the developments and deployment
of innovative domestic technologies that can reduce GHG emissions. For the
most part, investments in the Fund would not generate emission reductions
until after the Kyoto period of 2008-2012. However, it is important to provide
this additional compliance option to LFE companies so as to promote investment
in Canadian technology and facilitate Canada's long-term transformational
change.
Access to investments in technology development as a compliance option for
LFEs would be limited to 9 Mt, meaning that the balance of the LFE target
would be met through domestic in-house reductions, domestic offsets and Kyoto
credits. Since investments in the Fund are not expected to generate emission
reductions within the Kyoto 2008-2012 timeframe, these 9 Mts have not been
included in the Plan accounting. Should LFEs invest less than 9 Mt in the
Fund or should the Fund's technology investments lead to emission reductions
in the Kyoto period, there would be additional emission reductions that are
not counted in this Plan.
The proposed legislation establishing the Technology Investment Fund would
cap the contribution rate at $15 per tonne for the 2008-2012 period.
Rigorous monitoring and reporting requirements will be put in place to support
compliance and public accountability, while protecting the confidentiality
of industry competitive practices.
Targets for the period beyond 2012 will be determined in partnership with
provinces and territories, Aboriginal peoples, industry, environmental non-governmental
organizations, and other stakeholders. Possible criteria that could be used
to determine specific longer term targets include:
-
consistency with global and Canadian long-term climate change objectives;
-
alignment with the proposed National Energy Science and Technology Strategy;
-
the aim to make Canadian industry best-in-class;
-
Canada's international obligations; and
-
recognition of sectoral capabilities and relative compliance costs.
Implementation
The broad parameters of the LFE system are set out above with detailed implementation
of the LFE system to be carried out in partnership with provinces and territories,
Aboriginal peoples, industry and environmental groups. Our approach builds
on extensive discussion with various industry groups, and incorporates a specific
proposal developed by the oil and gas industry on implementation of the LFE
system. The development of the LFE regulation, beginning in spring 2005, will
be the partnership vehicle for further cooperation.
The Government has committed to a regulatory approach to LFE emissions for
a number of reasons. The significance of LFE emissions as a percentage of
Canada's total emissions makes it critical to Canada's climate change effort
that there be certainty about the emission reductions that will result from
the LFE system. It makes sense for Canada to build experience with regulatory
approaches as partners such as the countries of the European Union are doing.
It is through a regulatory approach that LFEs will have access to domestic
and international trading and the Greenhouse Gas Technology Investment Fund
flexibility mechanisms that will be critical to Canada's innovation and economic
competitiveness going forward.
The Government's preferred option for implementing the LFE system is the
Canadian Environmental Protection Act, 1999 (CEPA 1999). Using CEPA
1999 makes sense for a number of reasons. Using existing environmental protection
legislation is the most supportive of the Government's policy on Smart Regulations
rather than the creation of new legislation. In addition, since CEPA 1999
is already used to control other releases from many of these same sectors,
it is administratively more feasible for both government and industry to use
it also to regulate GHG emissions.
A key aspect of CEPA 1999 is its ability to facilitate equivalency agreements
with provinces, territories and Aboriginal governments. The Government may
conclude equivalency agreements with interested provinces and territories
whose legislation and regulation achieves an equivalent environmental outcome.
In such cases, there could be an equivalency agreement to the effect that
provincial jurisdiction will achieve the same result. An equivalency agreement
would have to deliver the performance of the national LFE regulation. It is
the Government's intent to make maximum possible use of equivalency agreements
in implementing the LFE system.
The Government's working assumption is that CEPA 1999 will be chosen as the
legislative vehicle for implementing the LFE system. The Government would
regulate under Parts 5 and 11 of CEPA 1999. In order to do so, GHGs must first
be added to the list of substances in Schedule 1 to the Act, using the criteria
set out in Section 64. International science clearly demonstrates that GHGs
meet the second criterion for listing, namely that they constitute a danger
to the environment on which life depends.
Some industry groups and provinces have expressed concern over the use of
the term "toxic substance" in Section 64 of CEPA 1999. This is a
broad-based concern that goes beyond the issue of GHGs. To address this concern
and to focus attention on the criteria set out in Section 64, the Government
has indicated its support for removing the term "toxic" in Section
64 and related sections of the Act. This ammendment would not alter the manner
in which CEPA 1999 is currently administered and is not legally necessary
in order to implement the LFE system under the Act.
It is important that implementation of the LFE system be timely, effective
and efficient and be carried out in a transparent manner. The Government will
therefore consult Canadians on how CEPA 1999 could be used to implement the
LFE system. As a vehicle for consultation, in spring 2005, the Government
will release for public review and comment a draft Protocol setting out how
CEPA 1999 could be used to implement the LFE system.
It is expected that the draft LFE regulation will be published for public
review and comment in fall 2005.
Reductions
The overall target for the LFE system is a 45 Mt reduction from the revised
baseline.
Top
Automobile industry
The Government of Canada has been working with the automotive industry to
reduce GHG emissions from light-duty passenger cars and trucks. These vehicles
account for 12.5 percent of Canada's total GHG emissions and are a significant
source of smog and other pollutants that affect the health and quality of
life of Canadians.
The Government and the automotive industry have reached an agreement on emission
reductions. This agreement will result in actions on the part of the industry
to reduce GHG emissions through:
-
improvements in advanced vehicle emissions and diesel technology;
-
production of more alternative fuel and hybrid vehicles; and
-
development and application of high fuel efficiency technologies.
A voluntary approach to emissions reduction in the case of automobile emissions
was put forward in the Action Plan 2000; the proposal was given further elaboration
in the 2002 Climate Change Plan. A key consideration in choosing a
voluntary approach was that the emissions result from use of a product purchased
by Canadian consumers, not from a production process in a Canadian manufacturing
facility.
The Government will monitor progress and employ its legislative and regulatory
instruments as necessary to ensure achievement of the objectives of the agreement.
It recognizes that, from a climate change perspective, it is important to
reduce all GHG emissions related to vehicle operation, including tailpipe
emissions of carbon dioxide, methane and nitrous oxide, as well as HFC emissions
from air-conditioning systems. Rigorous monitoring will ensure that the target
is met and that it is met by actions taken by the automobile industry.
In addition to the agreement, the Government has also asked the NRTEE to
examine a possible vehicle "feebate," consult, and make recommendations
to the Government for the next federal budget. A feebate would provide a consumer
rebate for fuel-efficient vehicles and impose a fee on fuel-inefficient vehicles.
The program could be designed to be revenue neutral for the Government.
Reductions
The automobile industry has agreed to reduce GHG emissions in 2010 by 5.3 Mt.
Top
Emerging renewable energy
Emerging renewable energy (e.g., wind, solar, tidal power) can make an important
contribution in Canada's fight against climate change, moving Canada's electric
power generating sector towards lower emissions intensity in the long term,
diversifying Canada's energy mix and promoting sustainable economic growth.
The Government proposes to use a variety of mechanisms to promote renewable
energy, including production and tax incentives.
Budget 2005 provided greatly expanded incentives for renewable energy. The
WPPI first introduced in Budget 2001, was quadrupled in Budget 2005 which
allocated $200 million over five years to this popular program. This increases
the target for new wind generating capacity to 4000 megawatts (MW), or the
amount of power needed annually by approximately 1 million average Canadian
homes. There will be no provincial caps or limits on project size, but there
will be provisions to assure minimum access to the program for each province.
The expanded WPPI establishes the critical elements for Canada to realize
the full potential economic benefits of a growing wind power industry. In
addition to the environmental benefits, this initiative will support rural
economic development, build a new economic sector and position Canada to be
a leader in a vibrant wind energy industry in North America and internationally.
In addition to wind resources, many other forms of renewable energy are available
in Canada. The competitiveness of renewable energy technology has improved
in recent years as a result of technological developments and the increasing
cost of more conventional technologies. There is an increasing need for these
sources of power to meet growing electricity demand, while reducing impacts
on the environment.
Therefore, in Budget 2005, the Government introduced the RPPI, with an investment
of $97 million over five years, to support other renewable energy sources
including small hydro, biomass, and tidal power. RPPI builds on the successful
WPPI program and is targeted to lead to 1500 megawatts (MW) of capacity. The
incentive will result in more investment in renewable energy projects in all
regions of Canada and will help to diversify Canada's energy mix. Projects
that receive WPPI or RPPI may also be eligible for the offset system.
Budget 2005 also built on existing tax measures to encourage Canadian businesses
to invest more in energy efficiency and renewable energy generation. It increased
capital cost allowance from the already very favourable 30 percent to 50 percent
for highly- efficient cogeneration equipment and the full range of renewable
energy generation equipment currently included in Class 43.1 of the Income
Tax Act (including wind turbines, small hydro facilities, active solar
heating equipment, photovoltaics and geothermal energy equipment).
Allowing tax deductions for capital cost to be taken more rapidly will improve
the after-tax return on these investments. The resulting financial benefit
will support additional investments in technologies that contribute to a reduction
in GHG and other harmful emissions and a more diversified energy supply. This
enhanced treatment will be in addition to support available under WPPI and
RPPI.
One important opportunity for deployment of cogeneration is in district or
community energy systems, where heat or steam is produced in a central generating
plant and distributed through a system of pipes to a district of nearby buildings.
Budget 2005 extends Class 43.1 to include distribution assets of district
energy systems such as pipelines, pumps and meters where the heat energy has
been produced using cogeneration equipment that qualifies for Class 43.1 treatment.
These initiatives support private investment in district energy systems and
complement the New Deal for Cities and Communities. Complementary support
for cogeneration through the Climate Fund would make the Budget 2005 provisions
all the more effective.
Accelerated capital cost allowance will also be extended to include certain
equipment used to produce biogas (largely methane) from anaerobic digestion
of farm manure, where the biogas is used to generate electricity. The use
of biogas — a renewable energy source — to produce energy helps
to reduce fossil fuel use, harmful emissions and agricultural pollution, as
well as provide a new source of fertilizer.
The Government will also make qualifying start-up expenses of projects using
these additional technologies eligible for treatment as Canadian Renewable
and Conservation Expenses.
The Government will continue to review other investments for inclusion under
Class 43.1 to ensure that appropriate incentives are provided for investment
in efficient and renewable energy generation equipment.
Budget 2005 also undertook to actively consider other opportunities to use
the tax system to support environmental objectives, in areas where it would
be an appropriate instrument. It set out a framework and general criteria
that may guide this assessment. Emission reductions from this exercise are
not counted in this Plan.
Reductions
It is estimated that the combination of federal support through WPPI, RPPI,
Budget 2005 tax incentives and other initiatives, as well as supportive provincial
actions through measures such as renewable portfolio standards, could lead
to renewable energy contributing about 15 Mt of reductions annually in the
2008-2012 period.
Top
Harnessing Market Forces
Market mechanisms will be used to tap GHG emission reduction potential across
the economy.
The Climate Fund established in Budget 2005 is a market-based, results-oriented
mechanism to encourage emission reduction initiatives. Creation of this transformative
institution is the single most important distinguishing feature between this
Plan and the Government's past approaches to climate change. This Government
believes that market-based approaches are critical to integrating climate
change considerations into the day-to-day decisions of Canada's citizens and
businesses and unleashing the power of innovation so as to move Canada towards
a low-emissions trajectory.
Climate Fund
The purpose of the Climate Fund is to create a permanent institution for
the purchase of emissions reduction and removal credits on behalf of the Government
of Canada, which will be one of the primary tools for Canada's approach to
climate change.
By tapping the potential of the market, Canada will:
-
stimulate innovation;
-
enable Canadians to take action;
-
encourage energy efficiency;
-
deliver cost-effective reductions and sequestration;
-
drive the adoption of best available technologies; and
-
stimulate the development of a domestic emissions trading system.
The Climate Fund will be results-based, with a focus on real and verifiable
emission reductions.
Approach
Announced in Budget 2005, the Climate Fund will purchase domestic emission
reductions and, in those cases that are demonstrably in the national interest,
international reductions that are recognized under the Kyoto Protocol. It
will make its purchases through a competitive process.
In a timely fashion, the Government will consult with Canadians on the specifics
of how the Climate Fund may best achieve its mandate.
Top
Domestic reductions
As a first step, individuals and organizations planning to substantially
reduce or sequester emissions will apply to an offsets body under the authority
of the Minister of the Environment to have their projects recognized as eligible
for domestic offset credits. Once the emission reductions have occurred, this
separate body will award credits for reductions. Opportunities for reduction
and sequestration will be available across the economy. Potential examples
include:
-
farmers who adopt low till or zero till practices;
-
forestry companies that engage in state-of-the-art forest management
practices;
-
property developers that include district heating and renewable energy
elements in their plans for new sub divisions;
-
businesses that develop innovative ways to reduce emissions through
recycling and energy efficiency;
-
companies and municipalities that invest in their communities by encouraging
alternative transportation modes;
-
municipalities that capture landfill gas and use it to generate electricity;
-
large emitters that do better than their regulated emission targets;
-
new electricity generation projects that lead to incremental GHG emissions
displacement;
-
remote communities that convert electricity generation from diesel to
renewable resources; and
-
companies and their employees that pool collective emission reductions
from activities such as tele-commuting.
The Fund will contribute to Canada's sustainable competitiveness by encouraging
Canadians to seize cost reducing opportunities across the entire economy.
As a second step, credits that have been issued for qualifying projects will
be purchased by the Fund pursuant to a competitive process and retired on
behalf of Canada's commitment to Kyoto.
There will be a minimum project size for qualifying emission reductions or
carbon sequestration, so as to ensure that administrative costs do not outweigh
the value of the environmental benefit.
The Fund will also engage in advance purchase of emission reductions from
large strategic projects in partnership with the private sector. For example,
projects that have the potential of generating significant GHG emissions in
which the cost per tonne is initially high but is expected to fall over time
could be considered if the project would contribute to the structural change
necessary to move Canada to lower carbon intensity over the longer term. Conditions
around advance purchases will be set so as to require repayment to the Fund
should the associated GHG emission reductions not be realized.
Projects that receive funding from the Climate Fund may also be of interest
to the Partnership Fund (see page 25) and the Greenhouse Gas Technology Investment
Fund, allowing synergies to be realized between the different mechanisms.
A monitoring program will be implemented to ensure that there is no double-counting
of tonnes.
Legislation has been introduced in the House of Commons to establish the
Fund. Aspects of the Fund's mandate, such as how to ensure benefits to Canada
from investment in international emission reductions, will be put forward
for public review and comment in spring 2005. At the same time, the proposed
criteria to be used in reviewing projects will be published. Project reviews,
and the registration of eligible projects could begin as early as fall 2005,
the same timeline that applies to the selection and initial signing of contracts
for projects generating Kyoto credits. Initially, priority could be given
to project types where quantification methodology is well advanced, such as
afforestation, agricultural sinks and landfill gas capture projects.
Top
International investments
The Climate Fund's primary mandate is to promote domestic GHG emission reductions,
with a view to positioning Canada to compete in the 21st
century carbon-constrained global economy. The Fund will also invest in internationally
recognized Kyoto emission reductions through the Clean Development Mechanism
and Joint Implementation, as well as through procedures for "greening"
other international credits. Only "green" credits — i.e.,
credits that represent real and verified emission reductions — will
be recognized; there will be no purchases of so-called "hot air."
Investment in international emission reductions will be undertaken in a manner
that advances Canada's broader sustainability interests. Specifically, investment
in international emission reduction projects would have at least one of the
following characteristics:
-
apply Canadian technology;
-
improve Canada's international competitiveness;
-
expand Canada's trade or otherwise advance our national interest (e.g.,
deliver environmental benefits by reducing the mercury that reaches our
borders); and
-
advance Canada's international development objectives.
In the initial years, Fund purchases will primarily be directed to domestic
projects. During this period, participation in the international market will
take the form of purchases from emission reduction projects in developing
countries and some purchases of options for future investment in "greened"
credits. It is expected that the Fund's participation in the international
carbon market will evolve over time, as we gain experience and our domestic
climate change regime develops.
To facilitate the process of international purchases, the Government may
develop MoUs with countries of interest. The "greening" of any international
credit purchases would be governed by a bilateral agreement between the government
of Canada and the seller country in which Canada would want to ensure both
environmental benefits and trade benefits for Canadian companies. Such agreements
would ensure environmental benefits by stipulating that 100 percent of the
proceeds from the purchase must be reinvested in projects and activities that
contribute to GHG emission reductions in the seller country.
Reductions
Budget 2005 provided minimum funding of $1 billion. It is estimated that
the Climate Fund could yield in the order of 75-115 Mt of reductions annually
in the 2008-2012 period, with funding in the order of $4-5 billion.
It is not possible to predict how many of these reductions will occur domestically.
The Climate Fund will give a priority to domestic emission reductions. However,
the amount of domestic emission reductions that will be realized depends on
many factors, including: the entrepreneurial spirit of Canadians and their
interest in finding innovative means of reducing emissions; the success of
the Climate Fund in tapping into that spirit of entrepreneurship and innovation;
how "market friendly" are the rules for domestic offset creation;
and the economic and fiscal circumstances at that time. The Government has
great confidence in the innovative spirit of Canadians; a great deal of interest
is already being expressed with respect to the Climate Fund.
The Climate Fund will also invest internationally. However, just as it is
not possible to predict the scale of domestic emission reductions, it is not
possible to say at this point how many international reductions Canada may
seek to purchase.
Top
A Partnership among Canada's Governments
Recognizing the necessity of cooperative action, this Plan will leverage
investments across all orders of government to realize success in our fight
against climate change.
Climate change is a challenge that affects all jurisdictions, and so our
response must be a national one that reflects our federal structure. This
means a joint effort, with all orders of government — federal, provincial,
territorial and municipal — working together within their own areas
of responsibility to make a contribution and deliver a harmonized approach.
Partnership Fund
Canada's provinces and territories play a fundamental role in achieving climate
change goals. The 2002 Climate Change Plan for Canada made a good start
in developing effective federal-provincial-territorial partnerships. Pursuant
to the 2002 Plan, Budget 2003 provided $160 million for an Opportunities Envelope
to fund emission reduction projects of interest to federal, provincial and
territorial partners. We have also initiated MoUs with interested provinces
and territories.
However, much more is needed to maximize the potential of partnerships with
provinces and territories and with Canada's industry. Enhancing these efforts
is critical to Canada's success in transforming our economy, fighting climate
change and protecting our environment. The Partnership Fund will be the key
vehicle to do that.
Approach
The Government of Canada will strengthen its partnerships with provinces
and territories.
MoUs will be developed where none currently exist and MoUs that are already
in place will be enhanced. These agreements will focus on achieving Canada's
climate change goals in the short and long term, as well as bringing about
the transformational changes necessary for ensuring the competitiveness of
the Canadian economy in the 21st century. They will
identify goals and strategies for key sectors of the economy in each province
and territory and areas of synergy and collaboration among provinces, territories
and with the federal government. Examples of such synergies include the setting
of building codes by provinces and appliance standards by the federal government.
Newly created in Budget 2005, the Partnership Fund will support these government-to-government
agreements through cost-sharing. Through the Partnership Fund, the Government
will invest in technologies and infrastructure development that are important
to both orders of government, such as clean coal technology. Nearly 70 percent
of Canada's coal-fired power plants are due to retire by 2020. Clean coal
technology offers the potential to reduce a plant's emissions significantly
over its 40-year lifetime. To ensure that we can achieve these reductions
in the future, it is critical that investments in clean coal technology are
made today. Other strategic investments could include a carbon dioxide capture
and storage pipeline, cellulosic ethanol plants, east- west electricity transmission
grids and other options related to the phase-out of coal-fired power plants.
The Fund will also explore options for more efficient integration of intermodal
freight transportation.
These investments in major projects are expected to contribute significant
emission reductions in the Kyoto period. Some projects are likely to deliver
the greater part of their emission reductions after 2012. Priority in investments
under the Partnership Fund will also be given to projects that will deliver
reductions in the 2008-2012 period.
It is expected that, under the Partnership Fund, investment will also be
made in smaller projects of a local nature, including, for example, the cost-sharing
of climate change centres in each province and territory along the lines of
Alberta's Climate Change Central. It could also support national strategies
in areas such as demand-side management, conservation and combined heat and
power (cogeneration).
To ensure that emission reductions are incremental, the Partnership Fund
will be coordinated with existing complementary federal climate change measures,
such as the Climate Fund and the Green Municipal Funds, and with other federal
investments expected to contribute to climate change, such as the New Deal
for Cities and Communities. An important thrust of the Fund will be enhanced
synergies among provinces and territories in fighting climate change. The
Partnership Fund would subsume and expand the current Opportunities Envelope.
The Partnership Fund will also support partnerships between governments and
Canadian industry on major emission reduction projects. It may also work together
with the Climate Fund and Technology Investment Fund in supporting certain
projects.
Reductions
Budget 2005 provided funding for the Partnership Fund of at least $50 million
per year for the next five years, with amounts to be augmented as projects
are identified and developed. It indicated that funding could grow to $2-3
billion over the next decade.
The amount of emission reductions that may be generated through the Partnership
Fund will depend on the level of federal funding, the willingness of provincial
and territorial governments and the private sector to enter into partnerships,
and the availability of innovative projects. It is estimated that with federal
funding in the order of $2-3 billion and with the leverage it could create
with other sources of funds, the Partnership Fund could yield GHG emission
reductions of 55-85 Mt annually in the 2008-2012 period.
Top
Greening Government
In order for the federal government to be a true partner with other orders
of government, and indeed with Canada's citizens, it must demonstrate leadership
in climate change action. Major steps have already been taken. The Government
builds all its new facilities to be 25 percent more energy efficient than
the existing Model National Energy Code for Buildings. Government has committed
to retrofitting a further 20 percent of its commercial buildings by 2010 to
improve energy efficiency, financed through energy cost savings.
To date, 7,000 federal buildings — about 30 percent of the federal
building stock — have undergone energy audits under the Federal Buildings
Initiative. The follow-up work undertaken has resulted in a total savings
of $27 million a year on energy bills and a reduction in GHG emissions of
20 percent on average. Important steps have also been taken to reduce GHG
emissions from federal vehicles and to engage employees in reducing emissions
in their everyday actions.
Approach
The Government of Canada will build on its achievements to date by ensuring
that its internal operations are among the "greenest" in the world.
The federal government spends over $13 billion per year on goods and services
and will use this purchasing power to demonstrate leadership in climate change
action. The Government will implement a new Green Procurement Policy to govern
its purchases by 2006.
Green Procurement, including life cycle costing, will be a priority and will
include purchases of energy, in particular electricity; purchases of other
goods and services, such as automobiles; and investments in new fixed assets,
such as buildings.
The federal government will seek innovative means of modernizing its central
heating and cooling plants with increased involvement of the private sector.
This modernization is key to further reducing the GHG emissions of its office-building
inventory. The Government will also explore partnerships with the private
sector and other stakeholders to access innovative technology for this project
and leverage its investment to benefit the broader community, including possible
participation in community energy system projects.
To lead by example and encourage a focus on sustainability in the Canadian
marketplace for real property, the Government will ensure that as of 2005,
the construction of new government office buildings will be funded to meet
the Leadership in Energy and Environmental Design Gold standard. Buildings
meeting this standard use, on average, slightly over one-half of the energy
required by the average equivalent office building currently in the Government's
inventory. This standard will also be sought in the case of new long-term
leases.
The Government will also take a series of measures to ensure that its fleet
of vehicles is among the greenest in the country, including:
-
replacing its vehicles more quickly and choosing more efficient models;
-
significantly increasing its purchase of hybrid vehicles and vehicles
that operate on E85 and other alternative fuels; and
-
adopting more stringent user practices such as anti-idling and vehicle
sharing.
Provincial, territorial and municipal governments also have similar initiatives
to reduce GHG emissions from their operations. All governments of our federation
will learn from each others' experience in this area. To the extent that GHG
emission reductions will occur as the result of actions from provincial, territorial
and municipal governments, they are not counted in this Plan.
Reductions
Total federal emissions are about 3 Mt annually. The Government is setting
a target to reduce these emissions by 1 Mt annually over the 2008-2012 period,
to be funded primarily through internal reallocation.
Top
Engaged Citizens
A sustainable environment is important to Canadians, and this Plan will provide
citizens with the tools they need to take action.
Together, individual Canadians are responsible for 28 percent of Canada's
GHG emissions. On average, each Canadian produces 5 tonnes of GHGs annually.
Therefore, their buy-in and active involvement are critical if we are to achieve
our climate change and sustainability goals.
Canadians need to take action themselves and can play an important role in
driving sustainability improvements in communities and industry. In the longer
term, increasing the awareness of Canadians will help to create a generation
that understands and embraces sustainability.
One-Tonne Challenge
To date, initial steps have been taken to engage Canadians in the One-Tonne
Challenge, a public education program launched to challenge Canadians to reduce
the 5 tonnes of GHGs each citizen produces annually to 4 tonnes. These steps
are focused on:
Information Products & Tools: An on-line GHG calculator helps
Canadians determine their current emissions and build 1-tonne reduction plans.
National Awareness: A major national advertising campaign on television,
print and radio encourages Canadians to get a copy of the Guide so that they
can take part in the Challenge.
Communities: More than 40 communities are rolling out Community Challenges
involving more than 200 organizations and local governments. They are engaging
individuals in reducing GHG emissions and making local investments to create
healthier, more sustainable communities for all their citizens.
Youth: A network of youth organizations has created a youth version
of the One-Tonne Challenge and is working with youth across the country on
local emissions reduction or education projects.
Educators: Expert teachers from across the country are helping to
create lesson plans and other web based resources on climate change that will
be accessible to all educators.
Private Sector: Retailers are linking the marketing of energy-efficient
products to the One-Tonne Challenge goal. Many employers are creating Challenges
targeted to their employees.
Consumers: The "Guide to the One-Tonne Challenge"
provides more than 20 pages of tips to consumers for saving money (and reducing
GHG emissions). This includes an EnerGuide for Houses audit, which can lead
to savings of 20-35 percent on heating bills. In addition, tips are provided
for reducing costs at the gas pump by driving more efficiently, selecting
a fuel- efficient vehicle or keeping vehicles tuned. Through a searchable
database on the One-Tonne Challenge web site, consumers can find out about
the current rebates and incentives available to them from all orders of government
to reduce GHG emissions.
While a good start has been made, more needs to be done.
Approach
The One-Tonne Challenge will build on work to date to increase awareness,
knowledge, commitment and action by Canadians. In particular, we will work
with partners in communities, youth groups, private sector and educators to
provide real opportunities for Canadians to make lifestyle changes and informed
purchases to reduce individual emissions by at least 20 percent. National
promotion will focus on improving access for Canadians to programs and services
from all orders of government that provide them with consumer information,
technical advice and incentives for action.
Canadians need better information to allow them to make informed decisions
about products they are considering. Product marks such as ENERGY STAR®,
EcoLogoM and EnerGuide will be a focus of point-of-sale
and other promotions to help Canadians in their search for greener products.
Government, through partnerships with retailers and utilities, will also build
consumer confidence in green products and green power.
The One-Tonne Challenge program will actively promote opportunities presented
by the Climate Fund.
Vehicle fuel efficiency improvements provide a significant opportunity for
partnerships with vehicle manufacturers and dealers. The One-Tonne Challenge
will work with these groups to ensure that Canadians have the information
and tools they need to make informed purchases and operate their vehicles
in the most efficient way.
Partnerships with provinces and territories, including new investments in
regional climate change centres, shared delivery of Community Challenges,
co-promotions to help increase transit ridership, and joint efforts to increase
the capacity and provide support to environmental groups to help deliver GHG
emission reductions, will bring programs and services closer to the individuals
who need them. Climate change centres for example, will provide emission reduction
expertise, technical advice and service to individuals, local business and
communities.
Climate change centres will also provide regional capacity for the Federation
of Canadian Municipalities' Partners for Climate Protection Program. The Federation
of Canadian Municipalities will still need to play an important role at the
national level in recruitment, coordination and recognition and will receive
support to do so for at least the next five years.
When it comes to small and medium-sized enterprises, the Government of Canada
will build on a successful model developed by Environment Canada in Quebec.
The model is Enviroclub, which helps company managers in small and medium-sized
enterprises to better understand the profitability advantages of environmental
management and provides hands-on experience by taking on a pollution prevention
project within each of their plants.
The 41 community challenges under way will continue to be supported over
time to allow them to make substantive gains in GHG emission reduction and
to learn collectively the most effective interventions when it comes to engaging
consumers in the challenge.
At least 20 additional community challenges will be supported, and longer
term investments will be made in those already under way.
We will engage Aboriginal and northern communities in climate change activities
and undertake specific initiatives to address GHG emission reductions.
In sum, what is being launched is a strengthened and more focused public
engagement effort that will help move Canadians from concern to action.
Reductions
The challenge to Canadians will be to collectively generate 5 Mt in incremental
reductions annually over the 2008-2012 period. Additional funding of $120
million would be provided to bring this about.
Top
Programs
Climate change programs have an important role to play in generating emission
reductions, promoting early action, improving our understanding of climate
change and laying the groundwork for long-term behavioural, technological
and economic change.
Since 1998, the Government has made incremental investments in climate change
though successive budgets. These investments, touching all sectors of the
economy, were aimed at the "low hanging fruit" — those measures
that put us on the path to emission reductions at the lowest cost. Of the
$3.7 billion set aside in previous budgets for climate change, approximately
$700 million remains unallocated, while a further $1.1 billion of the funds
allocated is intended for use in the coming fiscal years.
Approach
In moving forward, the Government will learn from past investments.
As indicated in Budget 2005, the Government will undertake a comprehensive
review of existing programs to determine which programs should be maintained
or expanded, which programs should be modified and which programs have been
performing below expectations or have outlived their usefulness and so should
be terminated. Savings in terms of funds previously allocated will be redirected.
A key criterion for a program to continue will be its ability to deliver cost-effective
emission reductions over the short and long term.
Some programs have already been identified as clearly successful and will
continue or be expanded. For example, Budget 2005 invested $225 million over
five years to quadruple the number of homes retrofitted under the successful
EnerGuide for Houses Retrofit Incentive, from 125,000 to 500,000. This program
is designed to help homeowners reduce their energy consumption by offering
grants for people who improve the energy rating of their houses.
In the transportation sector, we have a range of programs aimed at encouraging
private motorists to develop energy-efficient purchase, use and maintenance
practices. Key components include the EnerGuide fuel consumption label and
the annual Fuel Consumption Guide, which provides fuel consumption data for
new light-duty vehicles, as well as the Idle- Free Campaign, which seeks to
curb vehicle idling. These initiatives help individual Canadians understand
how their automobile purchase decisions and driving habits affect climate
change and the environment.
Another program that has clearly demonstrated its value is the Green Municipal
Funds, which directs funding to municipalities for innovative sustainability
projects. Thus far, the Green Municipal Funds have been effective in stimulating
community-based feasibility work and green infrastructure investments, contributing
to more than 340 projects across the country. Budget 2005 allocated $300 million
for the Green Municipal Funds ($150 million of which will be used to help
communities remediate and redevelop brownfields, which are abandoned sites
where environmental contamination exists).
New programs will be introduced where a clear rationale exists, including
a demonstration that the objective can be best accomplished through a program
rather than a market mechanism such as the Climate Fund.
Reductions
Budget 2005 provided $2 billion for existing climate change programs. It
is estimated that continued funding of these programs through 2012 could yield
up to 40 Mt of GHG emission reductions annually in the 2008-2012 period. There
is no overlap between the emission reductions expected to be generated from
these programs and our LFE target.
Top
Sustainable Agriculture and Forest Sectors
This Plan recognizes our abundant forests and agricultural land as national
advantages that Canada has in our fight against climate change.
Sinks occur when GHG emissions are removed from the atmosphere and stored
elsewhere, such as in forests or agricultural soils. Sinks are an important
component of Canada's overall approach to climate change and also contribute
to biodiversity and conservation objectives. In the international negotiations
on Kyoto, Canada received recognition for the contribution its ongoing practices
make to biological carbon sequestration — this contibution is commonly
termed BAU sinks and is counted towards our Kyoto target.
Approach
By definition, BAU sinks are the result of the continuation of existing practices.
However, it is estimated that Canada's biological sinks can play a much greater
role in fighting climate change. Biological carbon sequestration beyond BAU
levels will be incented through the Climate Fund and through Government initiatives
aimed at protecting ecological lands. It is estimated that the potential for
beyond BAU agriculture and forest sinks is in the order of 15-20 Mt. How best
to measure and incent incremental carbon sinks will be determined in partnership
with the provinces, territories, Aboriginal peoples, farmers, forestry companies
and other stakeholders.
These measures will also allow us to gain significant co-benefits from carbon
sink enhancement, including conservation of natural habitat and preservation
of Canada's biodiversity.
Organizations such as the BIOCAP Canada Foundation, a national not-for-profit
research foundation, play a very important role in advancing our understanding
of the role of our natural resources in climate change.
Reductions
In agriculture, BAU practices are predicted to generate a carbon sink of
10 Mt in the Kyoto commitment period of 2008-2012. An incremental sink of
16 Mt or more beyond BAU levels may be possible through practices such as
reduced tillage, less summerfallow and increased use of forage which could
be incented through the Climate Fund. Incremental emission reductions from
agriculture could result from activities such as beef feeding strategies and
hog manure management.
With respect to forestry, the projection in the 2002 Climate Change Plan
for Canada was that existing forest practices would result in a BAU carbon
sink of 20 Mt. Federal and provincial governments are currently working towards
a revised estimate; that estimate could fall to zero as a result of the Mountain
Pine Beetle infestation and forest fires in British Columbia. An incremental
sink of 4 Mt beyond BAU levels may be possible through practices such as afforestation,
reforestation and avoided deforestation which could be incented through the
Climate Fund.
Top
Sustainable Cities and Communities
This Plan recognizes the synergies between the parallel efforts of fighting
climate change and greening our cities and communities.
A large portion of GHG emissions — as well as the opportunities to
reduce them — are directly or indirectly associated with urban regions.
As of 1990, municipalities directly controlled about 38 Mt of GHG emissions.
The Government of Canada's New Deal for Cities and Communities will
help advance climate change goals.
Approach
The New Deal includes a targeted gas tax transfer of $5 billion of federal
funds over five years to support environmentally sustainable infrastructure.
This will help to reduce Canada's GHG emissions and encourage more efficient
use of energy through investments in sustainable infrastructure such as landfill
gas capture, community energy systems, solid waste management, capacity building,
and especially public transit, which is a key focus of the New Deal where
investments will make gains in the areas of climate change, smog and congestion
in our urban centres.
The New Deal aims to transform how infrastructure investments are made in
our cities and communities, by providing an outcomes-driven vision for community
and city sustainability. The gas tax transfer will support capacity building
to enable municipalities to develop and implement long-term, integrated sustainable
plans, focused on the achievement of commonly-defined sustainability outcomes.
Budget 2005 committed to renew the Canada Strategic Infrastructure Fund,
the Municipal Rural Infrastructure Fund and the Border Infrastructure Fund.
The Government's infrastructure programs contribute towards environmental
sustainability, including reducing GHG emissions. For example, in total across
Canada, a minimum of 60 percent of funding under the Municipal Rural Infrastructure
Fund, with a minimum of 40 percent per jurisdiction, will target "green
infrastructure" that provides a better quality of life and promotes sustainable
development.
The Partners for Climate Protection program includes more than 120 municipalities
committed to GHG emission reductions. In addition, InfraGuide, a series of
infrastructure best practices funded by Infrastructure Canada, develops best
practice tools that can be used to help municipalities cut GHG emissions and
adapt to climate change.
Reductions
While the New Deal can be expected to generate important GHG reductions in
the Kyoto period, the magnitude of those reductions will depend on the conclusion
of agreements with provinces and territories. Consequently, this Plan does
not include those reductions.
|
What is an offset credit?
Projects that result in emissions reductions or sequestration could earn offset credits.
Individuals and organizations that reduce or sequester emissions will be able to apply to a body under the authority of the Minister of the Environment for offset credits. To qualify for credits, certain criteria established by the Minister would have to be met. For example, emission reductions would have to go beyond BAU practices, so that offset credits are not awarded for reductions that would occur in the absence of the offset system.
Verification of projects against the criteria will be carried out and credits will be issued for qualifying reductions. Aggregation and verification of these reductions will be provided by all manner of actors in the economy, from municipalities to industry associations to private sector brokers and auditors.
Individuals or organizations awarded offset credits have a few options. They can retire their credits, helping Canada respect its Kyoto commitment, or they can sell them. Buyers would include companies facing emission reduction targets under the LFE system, who could use the credits to comply with their targets. The Climate Fund will also purchase offset credits through a competitive process and retire them, helping Canada respect its Kyoto commitment.
The Government will be consulting Canadians on the proposed rules for offset credit creation in the coming months.