Manitoba – GHG Accounting

Manitoba Releases Draft Framework for Output-based Carbon Pricing System for Large Industrial Emitters

In October 2017, the Manitoba government released its Made-in-Manitoba Climate and Green Plan (the Plan) and announced that it would be introducing a flat carbon tax of $25 per tonne of carbon dioxide equivalent (CO₂e). One of the commitments set out by the Manitoba government in the Plan was the development an output-based pricing system (OBPS) for large industrial emitters. In July 2018, Manitoba fulfilled this commitment by releasing its Draft Regulatory Framework for a Made-in-Manitoba Output-based Pricing System (the Draft Framework) for public consultation.

The release of the Draft Framework follows the introduction of Bill 16 into the provincial legislature in March 2018. Bill 16, also known as The Climate and Green Plan Implementation Act – is expected to come into law in November 2018. Bill 16 provides the legislative authority for the Manitoba government to implement the Plan, along with the fiscal tools needed to introduce a carbon price in the province. Bill 16 also establishes the Industrial Greenhouse Gas Emissions Control and Reporting Act, which provides the government with the authority to develop an OBPS for industrial facilities competing in emissions intensive, trade exposed (EITE) sectors of the economy. Manitoba’s proposed OBPS is described in further detail below.

Overview of Manitoba’s Proposed OBPS

The Draft Framework describes the key elements to be considered in the design and implementation of the OBPS. Manitoba’s proposed OBPS is separate from the proposed federal OBPS. Manitoba’s OBPS will apply to large industrial emitters in the province, specifically those facilities with emissions of 50,000 tonnes or more of CO₂e. At the moment, there are six large industrial emitters in Manitoba (representing approximately 6% of the province’s total emissions): Koch Fertilizer Canada, TransCanada Pipelines, Graymont, Canadian Kraft Papers, Husky Oil and Vale.

Manitoba plans to establish emission limits for covered facilities in the form of emissions intensity performance standards, or EIPS, which are expressed in tonnes of carbon dioxide equivalent (tCO2e). Covered facilities with emissions above their established limit will be required to pay the $25 per tCO2e emitted beyond their limit or meet their compliance obligations through another approved compliance option (e.g. emission offset credits). Covered facilities which emit less than their established emissions limit will be able to bank or sell emissions to other covered facilities up to their limit at a compliance price of $25 per tCO2e.

Manitoba’s OBPS will cover emissions from the following on-site sources: stationary combustion, on-site transportation, industrial processes and product use, waste and wastewater, flaring, and some venting and fugitive sources.

The Manitoba government is considering three options for setting EIPS:

Facility-specific Standards – an EIPS is set at the individual facility level based on a facility’s historical GHG performance.
Sector-level Standards – an EIPS is set at a designated percentage below the production-weighted average emissions intensity of similar facilities within the same sector.
Best-in-class Standards – an EIPS is set at the emissions intensity of the best-performing facility within a sector, globally, nationally, regionally, or provincially.

The Draft Framework notes that there are industrial facilities in the province with multiple product/activity lines that may warrant establishing multiple emissions-intensity performance standards (one for each product/activity). The emissions limit for these facilities will be based on the sum of the limits for each product/activity. A covered facility’s compliance obligation will be based on the following formula:

Compliance Obligation (tCO2e) = Facility’s Total Emissions – Facility’s Emissions Limit

In order to facilitate continuous improvement in GHG performance, the stringency of EIPS will increase over time. It is proposed that each EIPS be subject to an annual 2% declining cap factor. The declining cap factor would apply to all emissions included in the emissions intensity standard, with the exception of industrial process emissions.

Covered industrial facilities will receive an OBPS registration certificate that enables them to purchase carbon tax-free natural gas and solid fuels and receive a full rebate on the carbon tax paid throughout the calendar year on all other fuel types. The first compliance period would begin in January 2019 and reporting would be required as of January 1, 2019. However, performance standards would not be set until June 2019 given the time constraints for implementation.

For compliance purposes, covered facilities must compensate for excess emissions by: (a) remitting an emissions performance credit at a rate of one credit for each tonne of greenhouse gas emissions in excess of the limit; (b) paying a levy at a rate of $25 for each tonne of greenhouse gas emissions in excess of the limit; or (c) a combination of both (a) and (b). The Manitoba government will issue performance credits to facilities for each tCO₂e below their emissions limit. Under the OBPS, the following types of emission credits will be available:

Performance Credits – issued to an industrial operation whose emissions in a compliance period are below the limit that applies in that period.
Manitoba Offset Credits – under the regulations, an emissions offset credit system may be established for projects in Manitoba that reduce emissions or remove emissions from the atmosphere.
Agreements with Other Jurisdictions – the minister may enter an agreement respecting recognition of credits issued by the other jurisdiction.

The Manitoba government plans to establish an emissions registry to track the issuance, trading, and use of emissions performance credits. Each registered facility will be required to create an account with the registry once it becomes available.

In addition, registered facilities will be required to quantify emissions using a prescribed methodology. Consideration is being given to requiring third-party review of facility reports verified by a certified third-party accredited to ISO 14065 by the Standards Council of Canada or the American National Standards Institute.

The Manitoba government is also considering an opt-in provision for industrial facilities that do not meet the 50,000 tCO₂e eligibility threshold, but may experience competitiveness pressures due to the carbon tax. Facilities that meet both of the following criteria would be eligible to opt-in:

Have annual emissions between 10,000 and 50,000 tCO₂
Compete in an EITE sector/sub-sector of the economy.

The Manitoba government will hold workshop and information sessions for stakeholders throughout fall 2018, and will issue registration certificates to covered facilities in December 2018. The OBPS would be implemented in January 2019, followed by the establishment of EIPS in June 2019. The opt-in for qualified entities would commence in January 2020.

The Manitoba government has invited interested parties to provide written comments/feedback on the proposed regulatory framework to Manitoba Sustainable Development by September 30, 2018. Comments may be submitted in writing to the following address or email:

Sustainable Development Climate Change and Energy Branch

12-155 Carlton St., Winnipeg, MB, R3C 5R9

Email: ccinfo@gov.mb.ca

Manitoba Introduces “Made in Manitoba” Carbon Price and Climate Change Plan

On 27 October, the Manitoba government released its proposed climate change strategy, A Made-in-Manitoba Climate and Green Plan (the Plan). The Plan, which is currently open to public input, is based on four strategic pillars – climate, jobs, water and nature – and includes 16 keystones for priority action. These keystones are associated with each pillar and include clean energy, carbon pricing, green infrastructure, agricultural and land use, water quality, forests and conservation, among others. The Plan also sets out a made-in-Manitoba approach to carbon pricing with a price of $25 per tonne beginning during 2018 – this amount will not increase over time and is half the amount mandated by the federal government (under the Pan-Canadian Framework on Clean Growth and Climate Change, the federal government established a carbon price benchmark of $10 per tonne of carbon dioxide equivalent starting in 2018, which will increase by $10 per tonne annually until it reaches $50 per tonne in 2022).

It should be noted that the Manitoba has erroneously stated that the federal government’s carbon pricing plan “lets Ottawa decide where to spend new carbon price revenue in Manitoba”. However, as committed by the federal government in its October 3, 2016 document Pan-Canadian Approach to Pricing Carbon Pollution, carbon price revenues will remain in the jurisdiction of origin and each jurisdiction can use carbon pricing revenues according to their needs (including to address impacts on vulnerable populations and sectors, and to support climate change and clean growth goals).

The provincial government posits that a Made-in-Manitoba plan with a lower carbon price is justified because historically, Manitoba has invested billions of dollars in clean, renewable hydroelectricity. The Plan credits early investments in Manitoba Hydro that have kept the province’s GHG emissions low. The Plan states specifically that the “federal backstop is wrong for Manitoba” and it “does not respect Manitoba’s green record”. Also, the provincial government argues that the Plan will produce more emission reductions than the federal carbon levy over the next five years. In particular, the Plan states that the federal $50 per tonne carbon pricing plan would actually result in 80,000 tonnes fewer emissions reduced by 2022, compared to the Made-in-Manitoba carbon pricing plan. Manitoba will be relying on sector-specific reductions to achieve what it considers to be greater results. Specifically, the provincial government anticipates that the sector emissions reductions (based on output-based pricing for large emitters) set out in the Plan will generate over 1 million more tonnes of cumulative carbon emissions reductions over the next five years, compared to the federal carbon tax. The provincial government expects that together, these initiatives will reduce carbon emissions by 2,460 kilotonnes, more than twice as much as the federal carbon tax. A full review of Manitoba’s carbon pricing plan will take place in 2022. An independent expert advisory commission of Manitobans will also be established to help develop five-year Carbon Savings Accounts to achieve meaningful emission reductions across sectors of the economy.

The Plan confirms exemptions for agricultural emissions. The carbon levy will also not be applied to marked fuels used by farmers for their farming operations. Agricultural operations will also be able to contribute to carbon sequestration and offset trading systems to be established in Manitoba and other provinces. The Plan also sets out a range of new initiatives to protect wetlands and watersheds, water quality, and wild species and habitats. In addition, the provincial government looks to support the creation of low carbon economy jobs through green infrastructure, clean technology, innovation financing, and skills and training.

While the Manitoba government’s commitment to take meaningful action on climate change is laudable and the Plan represents a step in the right direction, pitting the provincial carbon pricing plan against the federal carbon pricing backstop risks undermining efforts across the country to help Canada achieve its commitment under the Paris Agreement.

Ontario, Quebec and Manitoba Agree to Link Cap & Trade Systems

On December 7, 2015, Ontario, Quebec and Manitoba signed a memorandum of understanding at the Paris climate talks to formalize the intent of all three provinces to link their cap and trade systems. Under the Western Climate Initiative, the three provinces’ cap-and-trade systems would then link to California’s cap and trade program.
Quebec’s cap and trade system has operating since 2013 and is already linked with California’s cap and trade program. Ontario is in the process of finalizing the details of its cap and trade program, which is expected to come online in 2017. When it released province’s new climate change strategy on December 3, 2015 – Climate Change and Green Economy Action Plan – Manitoba confirmed its intent to introduce a cap and trade program for 20 large emitters. Speaking in Paris, Manitoba Premier Greg Selinger said he believes more states and sub-national governments can be convinced to join them in linking cap and trade system, who can learn from each other’s experiences.

Manitoba Releases Updated Climate Change Strategy and Confirms Implementation of Cap & Trade

On December 3, 2015, Manitoba released its Climate Change and Green Economy Action Plan (the Plan), which updates the province’s 2008 Climate Action Plan, Beyond Kyoto. The Plan sets out Manitoba’s medium and long-term GHG reduction targets:

By 2030, Manitoba will reduce its greenhouse gas emissions by one-third over 2005 levels.
By 2050, Manitoba will reduce its greenhouse gas emissions by one-half over 2005 levels.
By 2080, Manitoba will be carbon neutral.

The Plan also outlines projects that will be undertaken through Manitoba’s new five-year $5 million Climate Change Action Fund. Funds will be invested across sectors to continue driving innovation in the province’s transportation and agriculture sectors, assess local climate risks and develop solutions, expand climate change work on the ground by partnering with communities, and expand innovative energy projects in First Nation communities. Manitoba will also look at how carbon pricing can be used as a tool to drive innovation and boost economic growth while reducing GHG emissions. Manitoba, a member of the Western Climate Initiative, reiterated its commitment to implement a cap and trade program for 20 large emitters in the province and will look at other innovative measures, such as a made-in-Manitoba Carbon Stewardship model for sectors not covered by cap and trade. To that end, Manitoba will carry out public consultations on carbon pricing to explore a range of opportunities. Under the Plan, the Manitoba government will also reduce emissions from government operations through increased energy efficiency, a greener vehicle fleet and equipment, greener office spaces, and waste reduction. Manitoba will provide a complete inventory of its own GHG emissions and develop a comprehensive policy framework to enable it to become a carbon neutral government. The Plan also addresses key sectors such as buildings, transportation and agriculture. Manitoba has demonstrated its climate leadership with the development of new zero-emission battery electric transit buses and transformative research into new crops and natural bio-products.

Manitoba begins Consultation on Proposed GHG Legislation

The Manitoba government has launched a public consultation period to gather input on proposed cap-and-trade laws aimed at reducing greenhouse gas (GHG) emissions. The consultation is part of Manitoba’s commitment, announced in December 2009, to move forward on enabling legislation to create a cap-and-trade system.

In June 2007, Manitoba joined the Western Climate Initiative (WCI). It is expected that Manitoba’s system would integrate with the WCI, meaning that Manitoba will be able to participate in the WCI trading system with BC, Ontario, Québec, California as well as other several U.S. states. The WCI’s goal is to reduce GHG emissions in the region by 15% below 2005 levels by 2020.

In 2008, Manitboa’s GHG emissions was 21.9 megatonnes of carbon dioxide equivalent (CO2e) or approximately 3% of Canada’s total GHG emissions. Manitoba’s GHG emissions profile is unique among Canadian jurisdictions. Unlike other Canadian provinces whose GHG emissions come from a small number of large emitters, the majority of Manitoba’s GHG emissions come from many smaller emitters across a wide range of sectors.

Manitoba’s proposed cap-and-trade program would affect approximately 18 emitters that release more than 25,000 kilotonnes each of GHGs per year. Another group of about 36 emitters that each release 10,000 kilotonnes of CO2e per year or more (but less than 25,000 kiltonnes) would only be required to report their emissions.

According to data from Environment Canada, in 2008 the Koch Fertilizer plant in Brandon was the largest emitter in Manitoba, followed by Manitoba Hydro, Winnipeg’s Brady Road Landfill, TransCanada Pipelines and HudBay Minerals.

Comments on the proposed cap-and-trade program can be made online through the Manitoba Conservation Department website until March 15, 2011.