Canada: The American Power Act: A Canadian Perspective

The guiding principle behind the Harper government's climate change policy is to ensure comparable (though not necessarily identical) efforts with the United States, based on the assessment that "doing more" than the US will cause Canada economic pain for negligible environmental gain, while "doing less" would be environmentally irresponsible and raise the spectre of new American (and European) trade barriers. Critics disagree, asserting that the level and pace of Canadian GHG reductions should be based on "science" without regard to economic consequences.

Consistent with the principle of "comparable efforts", Canada has already aligned its 2020 GHG reduction targets with the American Copenhagen commitment, harmonized vehicle fuel efficiency standards for cars and light trucks (with heavy trucks to follow), developed a compatible Renewable Fuel Standard, and commenced a bilateral "clean energy dialogue" with the US to develop common smart grid and carbon capture and storage technical standards.

Additional American climate change measures could take one of two forms – either (i) a combination of regional "cap and trade" schemes, Federal "Clean Energy" initiatives and EPA regulations that will require stationary emitters to install "best available technologies" (beginning with larger American emitters in the first half of 2011); or (ii) new "comprehensive" national legislation covering both clean energy and climate change matters that will supersede both the looming EPA regulations and the various regional regulatory initiatives.

On May 12, US Senators Kerry (Dem-Mass) and Lieberman (Ind-Ct) , unveiled comprehensive climate change and energy legislation – the American Power Act. Noticeably absent from the sponsorship was Senator Graham (Rep-SC), who withdrew his sponsorship following a dispute with the Democratic leadership over legislative priorities.

The American Power Act is a compromise proposal eight months in the making. Containing widespread concessions to a variety of key interest groups (oil companies, utilities, heavy industry, unions etc) it has been described as the "last, best shot for climate change legislation this year". Indeed, should it fail to generate support notwithstanding these concessions, the arrival of EPA regulations in 2011 suggest the American Power Act could be the last shot taken at American climate change legislation for many years to come.

The legislation sets a 2020 GHG reduction target of 17% less than 2005 levels, rising to 80% in 2050, thereby matching the conditional commitments of the Obama administration (and the Government of Canada) made in the act of associating with the Copenhagen Accord. The 17% target also matches the 2020 reduction target for developed countries that was recommended by the International Energy Agency in its recently released "450 Scenario". (It is also not widely appreciated that the current EU 2020 target of "20% less than 1990 levels" translates into an effective 2020 target of only "14% less than 2005 levels", due to the substantial emission reductions that occurred prior to the 1997 Kyoto Accord as a result of the collapse of the communist-era economies in East Germany and Eastern Europe.)

The American Power Act contemplates a custom-tailored approach to three key sectors that combine to generate approximately ¾ of all GHG emissions in both the United States and Canada: thermal power generation; the production and consumption of fossil fuels; and so-called "energy-intensive, trade-exposed" (EITE) industries, such as steel, cement, petrochemicals and metals. There is also a marked shift towards

In the thermal power generation sector, Senators Kerry and Lieberman propose to create a "cap and trade" carbon emissions regime that will produce a price for carbon, while at the same time controlling the market price signal by imposing a minimum and maximum collar price. The floor price would start at $12/t in 2013, with the ceiling at $25/t, both rising at an "inflation-plus" rate thereafter. With this relatively low price falling well below the cost of abatement in most industries, key to compliance will be the ability of emitters to access both domestic offsets and a substantial amount of foreign credits.

This "managed" carbon market will be complemented by more stringent product and building efficiency standards, as well as a Renewable Power Standard that expands the definition of "qualified" renewable power to include not only low-impact renewables (like wind and solar power), but also advanced coal-fired facilities utilizing capture and storage (CCS) technologies and nuclear power. (It appears that the standard will continue to differentiate between qualified "small and old" and unqualified "new and big" sources of hydro power , arguably a violation of American WTO and NAFTA obligations to provide non-discriminatory treatment to "like goods" from Canada.) In addition, substantial financial assistance will be made available to utilities to deploy CCS technologies and to construct up to 12 new nuclear power plants.

The second major source of GHG emissions covered in the legislation is the production and consumption of liquid fossil fuels. The American Power Act proposes a regulatory regime in the oil and gas sector that is effectively a wholesale carbon tax on each tonne of emissions generated (apparently) through the complete lifecycle (ie through the combustion) of fossil fuels. As such, the scheme will be tantamount to a buried low carbon fuel standard, with oil companies able to lower their "tax burden" by lowering the carbon intensity of their fuel supply through a greater use of bio-fuels, CCS technology etc. The emissions allowance "fee" will be payable by refiners and/or importers, with the allowance price to reflect the recent price of allowances in the thermal power plant emissions market (ie starting at a min. $12/t and max. $25/t in 2013, which translates into about a 6¢/litre tax on gasoline.

The bill also introduces incentives for heavy truckers to move from diesel fuel to natural gas, financial support for "clean car" technology development; and measures to encourage offshore drilling for additional American oil. The these concessions to the oil industry are likely to prove controversial in light of BP's Gulf of Mexico oil spill, a proposed opt-out provision giving states an effective veto over drilling within 75 miles of their shore could blunt much of the criticism.

To offset higher prices for gasoline and heating fuel, the legislation proposes to return approximately ¾ of the allowance proceeds to (lower and middle income) consumers - essentially, the "cap and dividend" idea championed by Senator Cantwell et al.

In the Energy-intensive, trade-exposed sectors such as steel, petrochemicals, cement, and metals, the American Power Act proposes to:

  • delay regulating the EITE industries until 2016, while protecting firms from rising input fuel and power costs in the years prior;
  • encourage and support the installation of clean technologies;
  • introduce community and/or industrial adjustment policies; and
  • put in place border adjustment measures to take effect in 2019 in the event nations fail to negotiate an "equitable" new multilateral climate change arrangement, so that exporting nations have not taken on similar emission reduction burdens.

The world will soon know if the American Power Act has a fighting chance to run the American legislative and political gauntlet in 2010, or if the legislation is effectively "dead on arrival". While many observers are pessimistic, and Senate Majority Leader Reid has already indicated that a "Clean Energy-only" bill stripped of the "Climate Change" sections may be a more palatable option prior to the mid-term elections in late 2010, passage of the American Power Act this year (likely with even more compromises) remains a very real possibility. The oil and power industries prefer the Kerry-Lieberman scheme to the looming EPA regulations. Influential unions like the idea of delaying regulations in the EITE industries until 2016, and support the border (and industrial) adjustment concepts. At the same time, many environmental organizations have made the political calculation that the Kerry- Lieberman legislation is "better than nothing". In short, this could be a prime example that "Politics makes strange bedfellows".

From a Canadian political perspective, matching the Kerry-Lieberman effort should be a relatively easy task for the Harper government. Indeed, the legislation represents a move toward the longstanding Canadian emphasis on investment in clean energy supply. Ironically, a strong case can be made that of all the proposals made during the last decade, the regulatory system that best balanced political/economic viability and environmental effectiveness was the "Baseline and Credit" regime proposed by Environment Canada (under both Liberal and Conservative governments) that sought reductions in carbon intensity based on the use of best available technologies.

In the thermal power plant sector, Environment Minister Prentice is now poised to surpass the American effort through the imposition of a globally unprecedented "Clean or Close" regime. Canada intends to require existing thermal power plants to either meet a new low carbon power standard through the installation of CCS technology, or close at the end of their economic life. Some form of intensity-based carbon tax is the preference of many in the oil & gas industry, while regulating both upstream and downstream fossil fuel emissions would increase the effectiveness of the system and promote regional fairness. "Special" (ie deferred) treatment for EITE industries (most located in Ontario and Quebec) should blunt criticism from these provincial governments about special treatment for the oil industry. Meanwhile, implementing "comparable efforts" will alleviate concerns among Canadian e xporters about new American protectionism.

For Canada, the devil will lie in the details of the American Power Act, particularly the as-yet undrafted regulations dealing with issues like the measurement of carbon content in various transportation fuels. Hopefully, the ongoing "Clean Energy Dialogue" and other channels of communication will ensure that Canadian views on specific issues are taken into account.

Canada is a land of hockey players and curlers. Environment Minister Jim Prentice has been "ragging the puck" in a manner worthy of the son of Doc Prentice and nephew of Dean. Prime Minister Harper has been "holding the hammer", determined to keep last rock advantage. With the American situation likely to clarify over the next few months, they have put themselves in a position to introduce a Canadian "Climate Action Plan" this fall that could leave the Conservatives well-positioned for the next federal election.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
29 Nov 2017, Seminar, London, UK

Join us at 4 More London for this breakfast seminar on Wednesday, 29 November 2017 to gain a greater understanding on this debate. Coffee and breakfast will be from 08:30 with the discussion commencing at 09:00. We will finish and have you on your way by 10:00.

7 Dec 2017, Seminar, London, UK

Would you like the opportunity to hear more about the potential disruptive effect that blockchain is going to have in the energy sector? If so, please join us on 7 December where Jo-Jo Hubbard, a leading light in this area, will explain all.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.