WM – Page 18 – GHG Accounting

Canadian Provinces Forge Ahead on Cap-and-Trade System

Canada’s three largest provinces – Québec, Ontario and BC – are moving forward with a cap-and-trade system designed under the Western Climate Initiative (WCI) to reduce greenhouse gas (GHG) emissions. This decision comes after plans for a cap-and-trade system have been abandoned by the U.S. Senate.

The cap-and-trade system, scheduled to begin trading in January 2012, would cap emissions on large industrial facilities in Ontario, Québec and BC, as well as in California and New Mexico. The five jurisdictions forging ahead are part of the WCI (other group members, such as Utah and Arizona, have not committed to the system). On Tuesday July 27, 2010, the WCI released its comprehensive design strategy (for more information on the design document, please see our overview: link

The WCI’s commitment is to reduce industrial GHG emissions at the regional level from 15% below 2005 levels by 2020.

Each jurisdiction continues to weigh the pros and cons of moving ahead with the WCI system. In BC, any industrial operation emitting more than 25,000 tonnes of greenhouse gas per year will be subject to the system. This threshold will capture 40 operations in the province. While the regulatory framework for a cap-and-trade program has been put in place (under the Greenhouse Gas Reduction (Cap and Trade) Act and its associated Reporting Regulation), the details of the program as they will apply in BC have not yet been settled.

WCI Releases Comprehensive Strategy to Address Climate Change and Stimulate Clean Energy Economy

On July 27, 2010, the partner jurisdictions of the Western Climate Initiative (WCI) released a comprehensive strategy designed to reduce greenhouse gas (GHG) emissions, stimulate development of clean energy technologies, create green jobs, increase energy security and protect public health.

The Design for the WCI Regional Program (the Design Document) is the product of two years of work by seven U.S. states and four Canadian provinces (including Québec, Ontario, Manitoba and BC). The objective of the WCI is to reduce regional GHG emissions to 15% below 2005 levels by 2020. This regional goal will be achieved by:

• creating a market-based system that caps GHG emissions and uses tradable permits to incent the development of renewable and lower-polluting energy sources;

• encouraging GHG emission reductions in industries not covered by the emissions cap, thus reducing energy costs region-wide; and

• advancing policies that expand energy efficiency programs, reduce vehicle emissions, encourage energy innovation in high-emitting industries, and help individuals transition to new jobs in the clean-energy economy.

A recently updated economic analysis by the WCI indicates that this plan can achieve the regional GHG emissions reduction goal and realize a cost savings of approximately US$100 billion by 2020.

Overview of the Design Document

The primary policy recommendations in the Design Document address some of the following key issues:

WCI Cap-and-Trade Program: The central component of the WCI’s comprehensive strategy is a regional cap-and-trade program that will be composed of WCI member jurisdictions’ cap-and-trade programs implemented through state and provincial regulations. The WCI program design encompasses almost 90% of economy-wide emissions in WCI jurisdictions. Each member jurisdiction implementing a cap-and-trade program will issue “emission allowances” to meet its jurisdiction-specific emissions goal. The total number of available allowances serves as the “cap” on emissions. A regional allowance market is created by the member jurisdictions accepting one another’s allowances for compliance. The allowances can be sold between and among covered entities as well as by third parties. This “trading” of emission allowances keeps costs low because it provides flexibility in how and when reductions are made. For example, entities that reduce their emissions below the number of allowances they hold can sell their excess allowances or “bank” them for later use. Selling excess allowances allows entities to recoup some of their emissions reduction costs, while banking allowances will lessen future compliance costs.

The WCI program design also includes important features to ensure that the program achieves regional emissions in a cost-effective way. For instance, emission offsets from sources not covered by the program can be used in limited quantity along with emission allowances to comply with the program. Allowing entities to turn in allowances in three-year periods provides flexibility as to when emissions reductions are made. To address unforeseen circumstances that could lead to increased program costs, WCI member jurisdictions are considering a number of options including an allowance reserve in the event of high-price conditions, increased flexibility regarding compliance periods, and special purpose mechanisms to address specific local conditions.

Not all WCI member jurisdictions will be implementing the cap-and-trade program when it is scheduled to start trading in January 2012, however those expected to move ahead (including Québec, Ontario, BC, New Mexico and California) comprise approximately two-thirds of total emissions in the WCI. According to the WCI, this represents a critical mass and a robust market for achieving significant GHG emissions reductions.

Between now and the planned program start date of January 2012, WCI member jurisdictions will address remaining program design issues and take the steps necessary to make regional trading operational. In addition, they will expand their efforts to develop and implement other core policies and programs to increase energy efficiency and fuel diversification in order to reduce GHG emissions.

Relying on High-Quality Emissions Data from Rigorous Reporting: The WCI understands that accurate, timely and consistent GHG emissions data is essential for effective GHG reductions. As a result, WCI member jurisdictions have developed a reporting program that specifies quantification methods that are rigorous, technically feasible, cost-effective and sufficiently accurate to support the cap-and-trade program. To minimize the reporting burden in the U.S., reporting requirements have been harmonized with U.S. EPA Mandatory Reporting Rule for GHG emissions.

For further information on the EPA’s GHG reporting requirements, please see Link

This way a facility will be able to submit a single report satisfying both WCI and EPA requirements. WCI member jurisdictions in Canada (including Québec, Ontario and BC) have developed their own reporting requirements, which will likely be set up as a one-window GHG emissions reporting interface with Environment Canada. This one-window reporting would meet the requirements of both the federal and provincial governments, thus eliminating the need for duplicate reporting.

Designing for High Quality Offsets: The proposed WCI cap-and-trade system includes offsets to reduce compliance costs by introducing a broader range of emission reduction opportunities. A particular emphasis has been placed on assuring the quality of offsets. The WCI recommend the following for the definition of an offset and criteria to evaluate an offset project:

• Definition: A GHG offset is a reduction or removal of GHG emissions as a result of a project or activity that occurs outside the sectors regulated by the cap-and-trade program. An offset certificate issued by a WCI Partner jurisdiction represents a reduction or removal of one metric ton of CO2e. To be issued an offset certificate by a WCI Partner jurisdiction, each reduction or removal must meet all recommended offset criteria, have clearly identified ownership, follow an accepted protocol, and result from a project located in Canada, the U.S., or Mexico.

• Criteria: Offset projects approved by WCI Partner jurisdictions will meet the criteria described in the Offset System Essential Elements Final Recommendations (June 2010). The criteria recommended by WCI Partner jurisdictions are consistent with the leading offset systems in use worldwide, and will allow the adoption of protocols that produce consistent offsets across the WCI region. The other North American emissions trading systems – RGGI and the Midwestern Greenhouse Gas Reduction Accord – share the goal of ensuring the quality of offsets. The three regional programs released a paper on offset quality (Ensuring Offset Quality: Design and implementation Criteria for a High Quality Offset Program, May 2010) that is consistent with the offset criteria recommended by the WCI Partner jurisdictions.

The Design Document indicates that WCI member jurisdictions will leverage existing protocols to align with the essential criteria and will continue to establish key protocol components for each priority project type. The process of offset project approval through certificate issuance contains important features to ensure offset quality. These processes, which continue to be finalized, will include specific requirements for registration, validation, monitoring, quantification, reporting, verification, certification and issuance of offsets.

Other policy recommendations addressed in the Design Document include:

• setting program emissions limits;

• enhancing compliance flexibility and program adaptability to manage compliance costs;

• maintaining competitiveness and preventing emissions leakage;

• electricity sector;

• designing a fair and transparent auction;

• ensuring a well-functioning market;

• linking programs; and

• coordinating program administration.

To access the complete Design Document, please refer to the WCI Link on this site.

U.S. EPA Issues Greenhouse Gas Reporting Requirements for Four Additional Emissions Sources

The U.S. EPA has added underground coal mines and industrial wastewater plants to the list of facilities that must track their greenhouse gas emissions and report them. In addition, magnesium production plants and industrial waste landfills will be required to submit annual reports on emissions, although no regulations to control emissions have been implemented yet.

The final rule for Mandatory Reporting of Greenhouse Gases from Magnesium Production, Underground Coal Mines, Industrial Wastewater Treatment, and Industrial Waste Landfills (40 CFR Part 98) was issued on June 28, 2010. This action amends the Greenhouse Gas Reporting Program (GHG Reporting Program) requirements. In addition, this action states the EPA’s final decision not to include ethanol production and food processing as distinct subparts in the GHG Reporting Program, as well as the final decision not to include suppliers of coal at this time. With this final rule, the EPA has taken action on all outstanding source categories and subparts from the April 2009 proposal for the GHG Reporting Program.

These new source categories will begin collecting emissions data on January 1, 2011, with the first annual reports to be submitted to the EPA by March 31, 2012.

BC Announces $25 million for Public Sector Energy Retrofits

On June 8, 2010, Minister of State for Climate Action, John Yap, announced that BC schools, universities, colleges, hospitals and Crown corporations will receive $25 million for energy retrofits in a move to create jobs and cut carbon pollution.

In 2007, the province created the Public Sector Energy Conservation Agreement in partnership with BC Hydro (more information on the agreement is available at Link

The province’s 2008 budget committed $75 million over three years to help public sector organisations (PSOs).

This $25 million investment will be allocated among four categories:

$6 million in K-12 schools throughout the province for heating, ventilation and air-conditioning (HVAC) retrofits;

$2 million for solar thermal projects to fund solar hot water and air systems, also supporting the 100,000 solar roof initiative;

$12 million for district energy systems; and

$5 million for an open call for proposals to all provincial PSOs, similar to those in the first two years of the program.

Minister Yap also announced that Terasen Gas will be a new partner in public sector energy conservation. This partnership will leverage Terasen’s Energy Efficiency and Conservation program, help build energy efficiency capacity across the public sector and provide additional dollars to help PSOs invest in their building portfolios.

For more information, please refer to the Ministry of Environment’s press release: Link

BC’s Clean Energy Act Passed into Law

BC’s Clean Energy Act (the Act) received royal assent on June 3, 2010

BC’s Clean Energy Act (the Act) received royal assent on June 3, 2010. As previously reported in our Green News, the Act provides a foundation for the province to meet its stated goals of electricity self-sufficiency by 2016, job creation and reduced greenhouse gas emissions. The details of the various initiatives, including a feed-in tariff program, under the Act will be developed through regulations and it is anticipated that these regulations could be ready by as early as fall 2010.

U.S. EPA Issues Final Rule for GHG Emissions from Large Emitters

On May 13, 2010, the U.S. Environmental Protection Agency (EPA) issued a final rule for addressing greenhouse gas (GHG) emissions from stationary sources under permitting programs of the Clean Air Act (CAA). This rule follows the EPA finding in late 2009 that GHG emissions endanger human health, which allows the EPA to regulate GHGs under the CAA. The final rule sets thresholds for GHG emissions that define when permits under the New Source Review Prevention of Significant Deterioration (PSD) and title V Operating Permit programs are required for new and existing industrial facilities. In particular, regulated facilities would be required to obtain permits showing they are using the best available technology to cut emissions when building new plants or modifying existing ones. The final rule is also referred to as the “tailoring rule” because it tailors the requirements of CAA permitting programs to limit which facilities will be required to obtain PSD and title V Operating Permits.

Starting in January 2011, facilities responsible for almost 70% of U.S. GHG emissions from stationary sources will be subject to permitting requirements. These facilities will include power plants, refineries, factories and cement production facilities that emit 75,000 metric tonnes or more of carbon dioxide equivalent, but will exclude small emitters such as farms, restaurants, hospitals and schools. Without the tailoring, small emitters would also be caught by the rule.

Waste landfills and factories that are not already covered by the CAA that emit at least 100,000 metric tonnes of GHGs per year would get a 6 month extension and would not be regulated until July 2011. Sources that pollute less than 50,000 metric tonnes per year would not be regulated until 2016, if ever, according to the EPA.

The final rule is aimed at giving momentum to the climate bill that was introduced by Senators John Kerry and Joseph Lieberman on May 12, 2010. A number of industry lawsuits have been launched which call into question the EPA’s authority to regulate GHG emissions, however it is President Obama’s hope that the final rule will push lawmakers in states heavily dependent on fossil fuels to support the Kerry-Lieberman bill. As currently drafted, the Kerry-Lieberman bill pre-empts automatic EPA regulations; in the event the Kerry-Lieberman bill is not passed by the Senate, the final rule sets up future regulations for large emitters.

For more information, please refer to the Fact Sheet (Final Rule: Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule) issued by the EPA: link

BC introduces Clean Energy Act into Legislature for First Reading

The BC government introduced Bill 17, the Clean Energy Act, into the legislature on April 28, 2010. Bill 17 provides a basis for the province to meet its goals of electricity self-sufficiency by 2016, job creation and reduced greenhouse gas emissions.

The BC government introduced Bill 17, the Clean Energy Act, into the legislature on April 28, 2010. Bill 17 provides a basis for the province to meet its goals of electricity self-sufficiency by 2016, job creation and reduced greenhouse gas emissions. Bill 17 builds on the work of the Green Energy Advisory Task Force, which was appointed in November 2009 to provide recommendations for a clean energy strategy in BC (the complete recommendations from the task force group have been compiled into a final report, which is available online at:

Link

Bill 17 is aimed at addressing three priority areas:

ensuring electricity self-sufficiency at low rates;
harnessing B.C.’s clean power potential to create jobs in all regions of the province; and
strengthening environmental stewardship and reducing greenhouse gas (GHG) emissions.

Bill 17 provides a new regulatory framework for long-term electricity planning, commitments to renewable electricity generation, streamlined approval processes, and measures to promote electricity efficiency and conservation. By streamlining regulations around renewable power projects, the provincial government has signaled its intent to attract renewable energy projects to the province. With this proposed legislation, the government appears to be enabling a greater role for independent power producers in BC’s clean energy future.

Among the key provisions of Bill 17:

Energy Objectives. Bill 17 sets out 16 specific energy objectives including expediting clean energy investments, protecting BC ratepayers, ensuring competitive rates, encouraging conservation, strengthening environmental protection and aggressively promoting regional job creation and First Nations’ involvement in clean electricity development opportunities.
Export of Electricity. The export of electricity is included as an objective, thus enabling independent power producers to work with BC Hydro to seek opportunities to sell clean electricity to other provinces and U.S. states. New calls for clean power will be issued when export opportunities are secured.
Exemption from BCUC Approval. Certain energy projects will be exempted from BC Utilities Commission (BCUC) approval requirements under the Utilities Commission Act. In particular, Bill 17 exempts the following projects and programs from having to obtain separate approval from the BCUC: (i) Northwest Transmission Line; (ii) Mica units 5 and 6; (iii) Revelstoke unit 6; (iv) Site C; (v) Bioenergy Phase 2 Call for Power; (vi) BC Hydro’s Integrated Power Offer; (vii) Clean Power Call (issued on June 11, 2008); (viii) Standing Offer Program; (ix) Feed-in Tariff; and (x) BC Hydro’s Smart Metering and Smart Grid program. Future projects designed for the purposes of supplying export markets will also be exempt from BCUC review. BCUC will continue to regulate BC Hydro’s domestic supply and rates.
Integration of BC Hydro and the BC Transmission Corporation (BCTC). Bill 17 provides for the consolidation of BC Hydro and BCTC into a single entity with one board of directors and executive. Furthermore, Bill 17 provides for the transfer all BCTC assets, liabilities and employees to BC Hydro. The consolidation of BC Hydro and BCTC is meant to increase alignment of policy objectives and to save costs.
Standing Offer Program and Feed-in Tariff. Bill 17 contains provisions to create greater flexibility around the Standing Offer Program, which is currently in place for projects up to 10MW in capacity. In particular, Bill 17 enables re-pricing to reflect the results of recent clean power calls, includes an option to increase the maximum project size above 10 MW, and allows for technologies to be specified. In addition, Bill 17 enables the implementation of a feed-in tariff program to support the development of renewable energy technologies. The specifics of the program will be established through regulation.
Energy Efficiency and Greenhouse Gas Reductions. To promote electricity efficiency and conservation, Bill 17 provides for the installation of smart meters by 2012 and enables initiatives and programs by public utilities to encourage the reduction of GHGs.
First Nations Clean Energy Business Fund. Bill 17 establishes the First Nations Clean Energy Business Fund, which aims to facilitate further First Nations participation in renewable energy projects and provides a basis for revenue sharing.

For further information, please refer to the BC government’s Clean Energy Act web site at:
Link

B.C. and Federal Government take first step towards an Equivalency Agreement on Climate Change

On April 6, 2010, the federal Environment Minister, Jim Prentice, and B.C.’s Minister of State for Climate Change, John Yap, signed an Agreement in Principle on efforts to address climate change. This is the first step towards establishing a formal Equivalency Agreement under the Canadian Environmental Protection Act, 1999 (CEPA 1999).

Section 10 of CEPA 1999 provides for Equivalency Agreements where provincial or territorial environmental legislation has provisions that are equivalent to provisions in CEPA 1999. The purpose of an Equivalency Agreement is to eliminate the duplication of environmental regulations. Equivalency is based on the following criteria: (i) equivalent regulatory standards; and (ii) similar provisions for citizens to request investigations. This will mean that B.C.-based businesses will not have to deal with competing regulatory requirements, such as for greenhouse gas emissions reporting, when it comes to climate change regulation.

Throughout 2009, the federal government consulted with the provinces and territories on Canada’s climate change strategy. According to Minister Yap: “We are building a strong template for acting on climate change here in B.C. and it is great to have the ongoing support of the federal government as we move forward. Climate change is the challenge of our generation and we need strong partnerships like this one to devise solutions that help us meet our legislative commitments while creating new economic opportunities for British Columbians.”

For more information, please refer to Environment Canada’s news release: Link

BC Introduces Legislation Aimed at Zero Net Deforestation

BC’s Minister of Forests and Range introduced Bill 5, the Zero Net Deforestation Act (the Act), to enshrine the BC government’s commitment to zero net deforestation (ZND) in the province.

On March 22, 2010, BC’s Minister of Forests and Range introduced Bill 5, the Zero Net Deforestation Act (the Act), to enshrine the BC government’s commitment to zero net deforestation (ZND) in the province. In doing so, BC is one of the first jurisdictions in the world to introduce a goal of ZND into legislation. In particular, the Act meets the commitment made by the government in its 2008 throne speech to pursue the goal of ZND, which will be achieved when the area of newly created forest land in BC is equal to or greater than the area of deforestation. To that end, the Act encourages the planting of an equal area of trees to offset any forestry lands that are permanently cleared for another use. The government must achieve ZND within BC by December 31, 2015. Pat Bell, the Minister of Forests and Range, said in a statement that “British Columbia is committed to achieving zero net deforestation by 2015 to help reduce greenhouse gas emissions. Forests absorb and store carbon, which make them important allies in the fight against climate change.”

Deforestation is a major contributor to greenhouse emissions worldwide, and results in the loss of forests that absorb and store carbon and provide other ecosystem services. Approximately 6,200 hectares were deforested in BC in 2007. Approximately 2,000 hectares were afforested the same year. BC’s objective is to reduce deforestation and increase afforestation to close the gap by 2015 and beyond.

The Act defines key terms and sets out the government’s reporting requirements. In particular, the Act defines deforestation as the permanent loss of trees from an area and requires the Minister of Forests and Range to regularly report on progress towards ZND. Under the Act, regulations may be established with respect to methodologies for calculating deforestation and afforestation, as well as requirements for the timing, form and content of reports.

It should be noted that because timber harvesting in B.C. is considered to be sustainably managed, it is not considered to be deforestation. The Ministry of Forests and Range has indicated that it plans to partner with a number of other groups and agencies to help encourage projects that will mitigate deforestation. Also, the Province will engage in consultations over the next few months with stakeholders, communities and First Nations for their ideas on best approaches to implement the ZND policy.

U.S. EPA Proposes to Add More Sources to Mandatory GHG Reporting Program

In order to gain a better understanding of greenhouse gas (GHG) emission sources, the U.S. Environmental Protection Agency (EPA) is proposing to include additional emissions sources in its national mandatory greenhouse gas (GHG) reporting system.

In October 2009, the EPA finalized the Mandatory Reporting of Greenhouse Gases Rule, which requires 31 industry sectors (representing 85 percent of total U.S. GHG emissions) to track and report their emissions. This reporting rule requires suppliers of fossil fuels or industrial greenhouse gases, manufacturers of vehicles and engines, and facilities that emit 25,000 metric tons or more of GHG emissions per year to submit annual reports to the EPA.

On March 22, 2010, the EPA issued proposed rules targeted at expanding the scope of the reporting system to cover facilities emitting 25,000 metric tons or more of GHG emissions per year in the following sectors:

oil and natural gas industry (this will include vented and fugitive methane and CO2 emissions);
industries that emit fluorinated gases (source categories will include: electronics manufacturing, fluorinated gas production, manufacture and use of electric transmission and distribution equipment, and imports/exports of equipment pre-charged with fluorinated GHGs or containing fluorinated GHGs in closed-cell foams); and
facilities that inject and store CO2 underground for the purposes of geologic sequestration or enhanced oil and gas recovery.

Newly covered sources would be required to begin collecting emissions data on January 1, 2011, with the first annual reports submitted to the EPA on March 31, 2012. In addition, the EPA is proposing to require all facilities in the reporting system, including those proposed, to provide information on their corporate ownership.

These proposals will be open for public comment for 60 days after publication in the Federal Register. The EPA will also hold public hearings on these proposals in April 2010.

For more information on these proposals and the hearings, please go to
Link