Greenhouse Gas Policies: Taking Centre Stage

June 2009

• The reduction of greenhouse gas emissions has become a key international issue with numerous regional, national and international initiatives underway.
• Two of the themes emerging from the various initiatives are: (1) the likely regime for encouraging compliance to emissions targets is a cap and trade system, and (2) effectively quantifying emissions and any associated reductions will be critical to complying with new protocols.

The impact of greenhouse gases on the environment is a key political issue for many governments. A number of international, national, and regional programs are now in place. As an energy consumer, it can be challenging to keep track of current efforts. Starting with international projects and ending with Ontario's provincial program, this article provides an overview of the major initiatives underway and the timelines for key milestones.

United Nations Framework Convention on Climate Change

The United Nations Framework Convention on Climate Change (UNFCCC) came into force as an international treaty in 1994. Designed to provide a framework for international negotiations for the purpose of stabilizing greenhouse gas emissions, the UNFCCC has 192 member countries.

The UNFCCC currently intends to outline an international response to climate change for the period after 2012, the first commitment period following the Kyoto Protocol.

Unlike the Kyoto Protocol, when the UNFCCC convenes in December 2009, it is expected to have the endorsement of the United States. While Canada signed the Kyoto Protocol in 1998 and ratified the protocol in 2002, Canada has not complied with the commitments contained in the protocol. Instead, in 2006 the Canadian Government proposed a "made-in-Canada" climate change plan. However, with the UNFCCC likely having the support of the United States, Canada's position may change.

Therefore, the next major milestone for the UNFCCC is the Copenhagen Conference in December 2009 at which participants are hoping to achieve an international climate change agreement.

The American Clean Energy and Security Act

On May 21, 2009, the United States Energy and Commerce Committee approved the American Clean Energy and Security Act. The Act contains a number of key initiatives including:

• the promotion of renewable energy sources, carbon capture and sequestration, clean electric vehicles and the development of a smart grid for electricity;
• energy efficiency initiatives across all sectors of the economy including the industrial sector, the transportation industry, and the imposition of energy standards on appliances; and
• limits on emissions for greenhouse gases with the Act proposing a decline in greenhouse gas emissions relative to 2005 benchmarks of 17% in 2020, 42% by 2030 and 83% by 2050.

The American Clean Energy and Security Act reflects the policy of the United States to establish binding agreements through forums, including the United Nations Framework Convention on Climate Change, that commit all major-emitting countries to contribute equitably to the reduction of greenhouse gases. The Act continues to be debated in the House of Representatives.

Western Climate Initiative

The Western Climate Initiative represents the collaborative efforts of seven American states and four Canadian provinces, including Ontario, to develop and implement a strategy for reducing greenhouse gas emissions.

The Western Climate Initiative strives to reduce greenhouse gas emissions by 15% below 2005 levels by 2020. A key feature of the Initiative, and a key theme that is occurring throughout many greenhouse gas initiatives, is the introduction of a cap and trade system. To begin in January 2012, the cap and trade system will provide emitters with allowances that permit the organization to emit up to a predetermined level of greenhouse gases. If an emitter is going to exceed this level, the organization will need to purchase additional allowances. Conversely, an organization with excess allowances will be able to sell them or bank them for future use.

The implementation will follow a phased approach consisting of two compliance periods, each three years in duration. The first compliance period is expected to begin on January 1, 2012 and will cover emissions from electricity including imports, industrial combustion, and some industrial process emissions. The second compliance period, beginning in 2015, will see the expansion of the program to include transportation, residential, commercial and industrial fuels resulting in full implementation of the program.

The Western Climate Initiative also recognizes the need for integration into national and/or international emissions reductions schemes. As a result, the member states and provinces are actively encouraging the adoption of cap and trade as the accepted method for compliance in other regions.

Canada's Offset System for Greenhouse Gases

Released in June 2009 as a draft for public comment, Canada's offset system for greenhouse gases emphasizes the Government of Canada's commitment to reduce the country's total greenhouse gas emissions by 20% relative to 2006 levels by 2020. The draft outlines a proposed process for the quantification of offset credits. In its current form, the draft does not outline a process for buying or selling emissions credits. However, the draft notes that developments in the United States will be monitored in the interest of establishing an emissions reduction program that is aligned with efforts in the United States. The next round of information regarding the Canadian offset system will occur in the fall of 2009 with the release of program rules and guidance documents setting out the process for quantifying and verifying emissions offsets.

Ontario's Green Energy and Economy Act

Ontario's Green Energy and Green Economy Act outlines the province's commitment to moving Ontario into a greener energy environment. To facilitate this transition, the Act introduces several key concepts including:

• the establishment of a feed-in tariff for renewable energy projects;
• the requirement for public agencies to develop plans to meet conservation and demand management targets; and
• the development of a smart grid.

The Act became law in May 2009 and the provincial government is currently developing the regulations required for implementation.

Emerging Themes

The reduction of greenhouse gas emissions has become a key international issue. With numerous regional, national and international initiatives underway, it can be somewhat perplexing to make sense of them all. However, several key themes are emerging.

• The United States will play a central role in the development of global emissions programs.
• A cap and trade system is emerging as a likely regime for encouraging compliance to emissions targets.
• Effectively quantifying emissions and any associated reductions will be critical to complying with new protocols.

The coming months will likely prove to be very active in the greenhouse gas regulatory environment as participating legislators and organizations strive to ensure their requirements are addressed in any new protocols.

Ontario's Green Energy Act: A Major Shift Read more »