Canada: Torys on Climate Change - May 2010

United States

Senators Kerry and Lieberman release energy and climate bill

On May 12, 2010, Senators John Kerry (D-MA) and Joe Lieberman (I-CT) released a draft of their long-awaited energy and climate change bill, the American Power Act. Senator Lindsey Graham (R-SC), who had helped develop a substantial portion of the bill, recently withdrew his support.

Although the bill faces a challenging road ahead through the Senate, its key provisions are currently as follows:


The bill requires a 17% reduction in total U.S. greenhouse gas (GHG) emissions by 2020 and an 80% reduction by 2050, relative to 2005 levels. The 2020 target is the same as that in the climate change legislation sponsored by Senators Waxman and Markey, which the House of Representatives passed in June. It also matches the 2020 target that the governments of Canada and the United States submitted under the Copenhagen Protocol.

Cap-and-trade provisions

The Kerry-Lieberman bill does not institute an economy-wide cap-and-trade system for GHGs. Rather, the bill caps emissions from certain electric power utilities, beginning in 2013, and certain industrial facilities, beginning in 2016, allowing these firms to trade emission allowances to achieve their compliance obligations. Emissions from transport fuel providers, including oil producers and refiners, would not be capped; however, beginning in 2013, these firms would be required to purchase emission allowances at a predetermined, but as yet unspecified, price linked to the price of allowances – essentially acting as a tax on their emissions. Sources in these sectors emitting over 25,000 megatonnes of carbon dioxide equivalent (CO2e) per year would be covered.

Notably, the bill would preempt all state cap-and-trade systems, including the Regional Greenhouse Gas Initiative of the northeastern U.S. states and the proposed state involvement in the Western Climate Initiative.

Allowance allocation and prices

For those firms covered by the cap-and-trade system, allowances would initially be allocated to them for free, with auctions for those allowances phased in over time, at least for the power sector. Covered firms would be allowed to bank emission allowances for use in future compliance periods. The bill also allows them to borrow an unlimited number of allowances from one year for use in the future.

A "collar" would be established for the price of allowances, which would initially keep the price between $12 and $25 per tonne of CO2e, with these values rising over time. Even with this price collar, the bill permits allowance prices to exceed the price cap of $15/tonne that the Canadian federal government would have effectively set through its previous proposals to allow contributions to a technology fund at that rate in lieu of emissions abatement or allowance purchases.

International emissions allowances

To facilitate potential linkages with other cap-and-trade systems, the bill allows entities covered by the cap-and-trade system to use foreign allowances for compliance purposes, with some limitations, provided that they represent emission reductions of comparable stringency as the U.S. allowances.

Emissions offsets

The bill provides for the use of a potentially large pool of domestic and international emission offset credits. Potential domestic offset project types would include coal mine methane; land fill gas; oil and gas distribution; agricultural, grassland and rangeland sequestration; and other land use and forestry sequestration. These projects would have to follow preapproved methodologies, developed specifically for the U.S. program, for the development, monitoring and verification of their emission reductions. Offsets would also be required to meet certain environmental criteria.

The international offset program would allow covered entities to use offset credits generated by certain emission reductions in developing countries, including (i) sectoral emission reductions in foreign countries; (ii) offset credits issued by an international body (potentially including the United Nations' Clean Development Mechanism, which awards credits to abatement activities in developing countries); and (iii) offset credits resulting from reduced deforestation projects (potentially including REDD, or Reducing Emissions from Deforestation and Forest Degradation projects). Again, all allowable international offset credits would have to meet certain environmental criteria.

Border tax adjustments

If an international climate change agreement has not entered into force by January 1, 2020, the bill would require the President to establish a system of border tariff adjustments if it were in the United States' best interest to do so. This system would require imports into the United States from countries without comparable emission-reduction regulations in place to purchase an amount of emission allowances at the border, provided that the imported products competed with similar products from certain trade-exposed sectors in the United States.

Regulation of Emissions Trading Markets

The Kerry-Lieberman bill delegates authority to the Commodity Futures Trading Commission to regulate the U.S. emission trading market and prohibits off-exchange trading of GHG futures. The Commission would be required to establish position limits to deter excess speculation.

Low Emissions and Energy Technology

The bill also contains a number of provisions designed to force technological change, including various incentives for carbon capture-and-storage, nuclear generation and renewable energy. New coal-fired power plants permitted in 2009 or later would be required to meet higher performance standards.

For further information on the Kerry-Lieberman bill, please see the bill's summary.

EPA revises greenhouse gas reporting rule

The U.S. Environmental Protection Agency (EPA) recently proposed amendments to its Mandatory Reporting of Greenhouse Gases Rule. This rule currently requires large U.S. suppliers of fossil fuels or industrial GHGs, manufacturers of vehicles and engines, and facilities that emit 25,000 tonnes or more of GHGs per year to submit annual reports to EPA. The proposed amendments, among other things, would expand the applicability of the existing requirements to cover petroleum and natural gas systems, as well as facilities that inject and store carbon dioxide underground for geologic sequestration or enhanced oil and gas recovery. The EPA would require the newly covered sources to begin collecting emissions data on January 1, 2011, with their first annual report due by March 31, 2012.

The EPA is accepting comments on the proposed rules until June 11, 2010. For further information, please see the EPA's website.


Voluntary offset program to develop protocols for projects in Canada

The Climate Action Reserve (CAR) is a U.S.-based organization that establishes standards (called Offset Protocols) for developing, quantifying and verifying voluntary emission-reduction projects and issues offset credits (called Climate Reserve Tonnes, or CRTs) to these projects. It has indicated that it will be developing Offset Protocols for projects that voluntarily reduce greenhouse gases (GHGs) from livestock, forestry and landfills in Canada. CAR also plans to adapt for the Canadian market existing U.S. protocols for coal mine methane, organic waste digestion, N2O destruction and urban forestry projects. By adhering to the CAR Protocols, these projects could earn CRTs, which they could then sell into the voluntary carbon markets or, potentially, into a future compliance system. In fact, the Western Climate Initiative (WCI), a group of several Canadian provinces and U.S. states aiming to establish a regional cap-and-trade system by 2012, would allow covered entities to use offset credits to meet up to 5% of their compliance obligation. The WCI recently indicated that most existing carbon offset programs do not meet its criteria for environmental quality, a deficiency that CAR seeks to rectify.

For further information, please see CAR's website.

B.C. moves forward on climate change agenda

On April 6, 2010, Canada's Environment Minister, Jim Prentice, and B.C.'s Minister of State for Climate Action, John Yap, signed an Agreement in Principle on efforts to deal with climate change. According to Environment Canada, the agreement is the first step toward signing a formal equivalency agreement with B.C., which would allow certain B.C. standards on GHG mitigation to stand in place of federal ones, provided the B.C. standards were at least as stringent as the federal ones.

Subsequent to this agreement, the B.C. government introduced Bill 17, the Clean Energy Act. This bill would, among other things,

  • empower the provincial generation and transmission utility, BC Hydro, to secure long-term export contracts with renewable power producers;
  • integrate BC Hydro and BC Transmission Corporation (BCTC) into a single organization;
  • exempt certain "strategic projects" from the requirement to obtain B.C. Utilities Commission (BCUC) approval;
  • introduce a feed-in tariff program to provide a premium fixed contract price for new renewable power generation;
  • direct BC Hydro to meet 66% of the province's incremental electricity needs through conservation by 2020; and
  • strengthen the provincial environmental assessment process to require an assessment of potential cumulative environmental effects.

For further information, please see Environment Canada's website and B.C.'s news release.

Canada's greenhouse gas emissions decrease in 2008

According to Environment Canada data, Canada's total GHG emissions decreased from approximately 750 megatonnes (Mt) of carbon dioxide equivalent (CO2e) in 2007 to 734 Mt of CO2e in 2008. The reductions are largely the result of decreased emissions in the manufacturing, electricity and heatgeneration industries – reductions driven largely by the recent economic downturn. The country's 2008 emissions represent a 24% increase from 1990 levels.

For further information, please see Environment Canada's website.

North America Proposal to reduce use of HFCs

In April 2010, representatives of Canada, Mexico and the United States retabled their proposal under the Montreal Protocol for a gradual reduction of global production and consumption of hydrofluorocarbons (HFCs), chemicals commonly used in refrigeration equipment. In general, the proposal calls for a new protocol that would establish an average 2004–2006 baseline of annual hydrochlorofluorocarbon (HCFC) and HFC production and consumption; permit countries seeking to phase out HCFCs to use HFCs in some sectors; establish phase-down schedules; and restrict certain imports and exports.

For further information, please see Environment Canada's website.

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.

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
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 you may opt out by clicking here

    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.

    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.

    By clicking Register you state you have read and agree to our Terms and Conditions