On April 27, 2007, the federal government released its Regulatory Framework for Air Emissions which is intended to significantly reduce greenhouse gases and other air pollutants (together “air emissions”) in Canada. The Framework focuses primarily on reducing air emissions from major industrial emitters, but also aims to reduce emissions from transportation sources, and consumer and commercial products, and improve indoor air quality. While many of the regulatory details have yet to be finalized, the Framework provides a comprehensive roadmap and overview of the government’s goals with respect to air emissions and the means by which it intends to achieve those goals. The release of the Framework marks the beginning of the first comprehensive regulatory regime by the federal government for greenhouse gases and air pollutants emitted by industry in Canada.
The government’s goal is to reduce Canada’s total emissions of greenhouse gases from industrial and other sources to 20 per cent below 2006 emission levels by 2020 and to significantly reduce industrial air pollutant emissions by 2015. To achieve this goal, facilities in the following industrial sectors will be subject to mandatory and enforceable regulations limiting air emissions: electricity generation from combustion, oil and gas, forest products, smelting and refining, iron and steel, mining and cement, lime and chemical production. The Framework introduces a variety of compliance mechanisms intended to provide industry with the flexibility needed to meet the air emissions targets. The Framework’s primary focus on reducing industrial emissions necessitates an understanding of the new regulatory landscape by Canadian industry and obliges industrial emitters to consider the steps required to ensure compliance with the air emissions targets.
The government will introduce emission-intensity targets1 to reduce industrial greenhouse gas emissions by 26 per cent of 2006 levels2 by 2015. This reduction is based on an emission-intensity improvement for existing facilities of 6 per cent each year from 2007 to 2010 and a 2 per cent improvement in each year from 2011 to 2015. New facilities3 will be given a three-year grace period before they have to meet emission-intensity standards. Emission-intensity targets will be determined on a sector-by-sector basis and will only apply to combustion and non-fixed process emissions.4 The government plans to work with industry and other stakeholders in the coming months to determine sectoral targets, with the goal of having mandatory and enforceable emissions-intensity targets in place for 2010.
To provide industry with the flexibility necessary to meet its regulatory obligations, the Framework introduces a range of compliance mechanisms for companies that may find it difficult to make in-house reductions. These alternative compliance mechanisms include:
- Making contributions to a Technology Fund that will be used to develop and introduce clean technologies.
- Participating in an emissions trading system that will permit companies whose emissions are below their target to receive tradable credits which can be carried forward to future compliance years or sold to companies which find it difficult to meet their targets in-house. In addition, offset credits will be available to firms for verified reduction activities outside the regulated trading system. The government also intends to allow Canadian firms limited access to the Kyoto Protocol’s Clean Development Mechanism.
- Using a one-time credit for companies that took verifiable emission reduction actions to reduce greenhouse gas emissions between 1992 and 2006. The credit will be applicable to their regulatory obligations or may be traded.
The government will introduce national emission caps for each air pollutant of concern with the intent of having mandatory and enforceable regulations in place between 2012 and 2015. Emission caps will be set for each air pollutant, specifying the allowable annual emissions from a given industrial sector. While the actual emission caps for each air pollutant have yet to be determined, the caps represent the following percentage reductions from 2006 levels: 40 per cent for nitrogen oxides, 55 per cent for sulphur oxides, 45 per cent for volatile organic compounds, and 20 per cent for particulate matter.
The Framework also contemplates setting emission caps for benzene from natural gas production and processing, refineries, and iron and steel, and for mercury from electricity generation and base metal smelting. The government intends to work with industry and other stakeholders in the coming months to determine sectoral emissions caps.
Compliance with the air pollution reduction targets will be facilitated by the introduction of a domestic cap-and-trade emission trading system for nitrogen oxides and sulphur oxides only. The specifics of such a system have yet to be finalized. For the other air pollutants, compliance will be achieved by in-house reductions.
OTHER ASPECTS OF THE FRAMEWORK
In addition to targeting industrial air emissions, the government is taking action on emissions from transportation sources (the motor vehicle, engine, rail, marine and aviation sectors). In particular, the government intends to introduce a mandatory fuel-efficiency standard for 2011 model year motor vehicles. The government also intends to improve indoor air quality by developing a priority list of indoor contaminants that require regulatory action. Finally, the government will address volatile organic compound emissions by reducing the amount of solvents in certain products and will introduce new energy efficiency standards for consumer and commercial products such as dishwashers, refrigerators, air conditioners, and commercial boilers.
In the coming months, the government will be consulting on the details of the Framework. Companies should immediately start examining the obligations set out in the Framework as well as the nature of regulations that will soon follow, to ensure that they will be able to meet their air emissions obligations when the time comes.
The federal government’s new plan is a sweeping and unprecedented effort to regulate industrial air pollution in Canada, an area which has traditionally been regulated by provincial governments.