National Round Table on the Environment and the Economy
Canada
Contact Us
Help
Search
Canada Site

About Us

Media Room

Library

Home
Achieving a Balance
" " Energy &
Climate Change
" " Capital Markets
About
Documents
FAQs
Committee
Program Contact
   
" "Brownfields
Subscribe to NRTEE e-briefs
Email thisEmail this

 

© 2006

_
""
" "

Case Study on Fiscal Policy and Energy Efficiency
Baseline Study and Economic Study

Prepared by
M.K. Jaccard & Associates


Please note that this version of the case study is slightly modified from the version previously available. The modification relates to a paragraph in Section 3.5 of Appendix B dealing with aluminium electrolysis technologies
.

June 4, 2004

Next »

1 Introduction

The National Round Table on the Environment and the Economy (NRTEE) has launched a program to examine ecological fiscal reform (EFR) in Canada. EFR is the systematic alignment of fiscal policy with other policy tools for the achievement of simultaneous economic and environmental objectives. After an initial phase, the EFR program is examining how to develop and promote fiscal policy that consistently and systematically reduces energy-based carbon emissions, without increasing other pollutants, both in absolute terms and as a ratio of gross domestic product (GDP) in Canada.

The current study explores the role of fiscal policy in promoting the long-term energy efficiency of Canada’s industrial sector, with a view to accelerating energy efficiency energy in a way that leads to long-term reductions in energy-based carbon emissions. It is one of three parallel case studies, which seek to deliver pragmatic, policy-relevant recommendations on how fiscal policy can promote the development of renewables, hydrogen, and industrial energy efficiency, in a way that promotes the general program objective. The other objective of the studies is to test out approaches, processes, and methodologies that link issues of energy, climate change, technology development, and fiscal policy, with a view to generating lessons and findings in a way that informs policy development in this area.

This report encompasses the first component of the decarbonization case study, the Baseline Study. In this report we examine the nature of energy efficiency and trends in industrial carbon-based emissions. It culminates in the development of a baseline carbon emission scenario. A second report, the Economic Study, examines specific energy efficiency opportunities available to industry and challenges faced in their adoption. Alternative carbon emission scenarios are developed, economic implications assessed and policy recommendations developed.

1.1 Definitions and Concepts

Industry Scope

For the purposes of the case study, industry is defined as establishments engaged in manufacturing and mining activities. Mining activities are those related to extracting naturally occurring minerals. These can be solids, such as coal and ores; liquids, such as crude petroleum; and gases, such as natural gas. Manufacturing activities involve the physical or chemical transformation of materials or substances into new products. These products may be finished, in the sense that they are ready to be used or consumed, or semi-finished, in the sense of becoming a raw material for an establishment to use in further manufacturing.1

Industry in this case study does not include establishments involved in electrical generation, agriculture, or in providing services.2

Decarbonization

In this document and accompanying Economic Study, the term “decarbonization” refers to the reduction of energy-based carbon emissions, both in absolute terms and as a ratio of output, in Canada without an increase of other pollutants.3 Carbon emissions in the numerical analysis are encompassed by a broader measurement of greenhouse gas (GHG) emissions.

Distinction between Policy and Action

In designing policies and assessing their impact and costs, it is useful to firmly distinguish an action from policy. An action is a change in equipment acquisition, equipment use rate, lifestyle or resource management practice that changes net carbon emissions from what they otherwise would be. This study focuses on energy efficiency actions from changes in technology acquisition, but considers these actions in relation to other actions to decarbonize. We can estimate the cost of an action individually or as part of a package (portfolio) of actions. The cost is the incremental change in costs (positive or negative) from undertaking the action(s). A policy, or policy instrument, is defined here as an effort by public authorities to bring about an action. In the modelling component of this case study we are careful to distinguish between the two terms.

Direct, Indirect and Total GHG Emissions

In describing current and future carbon-based emissions for only one part of the economy (the industry sector) it is useful to use the concepts of direct and indirect emissions. The term direct emissions is used to describe emissions that are produced by a source controlled by an entity (in terms of this project, industry), while the term indirect emissions describes emissions that result from that entity’s activity, but are produced by a source external to the entity.

When considering the impact of actions, it is important to consider the combined impact on both indirect and direct emissions, since considering only direct emissions would actually show an increase in emissions for an action like cogeneration, while considering direct and indirect emissions together would tend to show lower total emissions (depending on the carbon-intensity of utility electricity generation).

1.2 Outline of this Report

This report is structured as follows. In a background section we 1) discuss basic concepts relating to energy efficiency, 2) review trends in Canadian industrial energy use and greenhouse gas emissions, and 3) provide an overview of current policy relating to industrial energy efficiency. We then go on to describe our method for developing the baseline forecast, discussing in some detail the energy-economy model CIMS, which is used both for this forecast and subsequent alternative forecasting and economic analyses described in the Economic Study. We conclude this report with a presentation of the baseline forecast, disaggregated by industry sub-sector.

Next »