Post on 30-Dec-2015
Doing Their Bit:Ensuring Large Industrial Emitters Contribute Adequately to Canada’s
Implementation of the Kyoto Protocol
Matthew Bramley / Robert HornungPembina Institute, Ottawa
May 2, 2003
Covenants/ET system• Targets (mostly emissions intensity)
• Four ways to meet targets:– Internal reductions– Buy domestic credits (“offsets”)– Buy international units– Buy domestic permits
• Price cap $15/tonne CO2e
• Backstop = default covenant w. default target
• Emissions reporting system
Is industry being asked to do enough? • Plan allocates 99 Mt out of 180 Mt to industry –
consistent with 53% of Canada’s GHG emissions accounted for by industry
• Industry must pay for the 55 Mt from covenants, cost sharing OK for the rest
• If Kyoto gap increases, 55 Mt must increase• Backstop must add up to more than 55 Mt• Need tough compliance penalties• There should be at least a small percentage of permits
auctioned
Emissions intensity targets
• Environmental performance at risk
• Government should pursue absolute emissions targets
• Compromise: make intensity targets adjustable within some limits
Offsets
• Double counting risk
• Offsets only for activities going clearly beyond what is in the Plan
• Offsets don’t provide strong incentives: $10/tonne = < 1 cent/kWh
• Need strict rules, especially for additionality
Other measures for large industry
• At least 42 Mt
• Must be additional to the 55 Mt:– Adjust BAU downwards to include the 42 Mt– The 15% target for oil and gas must be relative
to a BAU defined in this way
• If the programs supposed to deliver the42 Mt aren’t up to it… upgrade them!
Electricity• 45 Mt CO2e available at a marginal cost of less
than $10 per tonne (Jaccard)
• Emission reductions from output reductions (renewables, DSM) must be fully additional to emission intensity reductions from covenants
• Plan lacks any industrial DSM (need to work with provinces)
• Covenants need to be tweaked to ensure no disincentive to industrial cogen
Allocation• Define sectors broadly: maximize incentives to fuel switch,
restructure– Same logic: treat old facilities same as new to encourage capital stock
turnover
• Allocation among sectors must consider:– Sectoral emissions intensity– Rate of emissions growth since 1990– Financial effort to reduce emissions– Sector’s competitive position (risk of leakage)– Availability of low-cost reductions
• 15% intensity reduction for O&Gdoesn’t meet these criteria
“Small” industry
• Includes some pretty big facilities! (automakers etc.)
• Plan only seeks 3 Mt – should be upgraded
• Fugitives – Plan seeks 4 Mt – need regulation or a threat of it (provinces)
Purchases of international units
• Long-standing ENGO concerns:– Co-benefits– Hot air / bogus CDM credits– Emissions per capita inequity
• Need to hold feds to the commitment to close half the Kyoto gap domestically
• Need to hold companies to account for the quality of their purchases
Timing (1)
• Advantages of starting in 2005 (less demanding targets initially):– Deadline for covenant negotiations– Companies forced to prepare– Likely to result in more domestic reductions– Iron out the bugs
• It’s what the EU’s doing
Timing (2)
• Covenants extending post-2012:– Why should taxpayers accept the liability? –
Emissions trading market provides enough timing flexibility for companies
– Why allocate 2nd CP emission rights now when we don’t know how many Canada will have?
– NO WAY!