Canada: Federal Government Proposes New Regulations On Coal-Fired Electricity Generation


Last month the federal government published proposed regulations for coal-fired electricity generation units.1 This bulletin summarizes the proposed regulations, articulates the likely response from interested groups, and sets out some opportunities that could emerge as a result of the proposed changes.

The proposed regulations

The regulations will apply to units that produce electricity by means of thermal energy using coal (including petroleum coke and synthetic gas derived from coal), whether in conjunction with other fuels or not.

The heart of the proposed regulations limits each unit's emissions to 375 tonnes of carbon dioxide for each gigawatt-hour (GWh) of electricity produced from all fossil fuel sources in a calendar year. This limit was set with a view to including it in the gas-fired electricity generation regulations expected to be proposed over the coming years as part of the government's long-term strategy to reduce overall emissions from the electricity sector. However, these limits only apply to coal-fired units commissioned after July 1, 2015, and those that have reached the end of their useful lives. In most cases, a unit has reached the end of its useful life on the later of 45 years from its commissioning or 2020.

The calculation of the intensity limit allows for the exclusion of emissions that are captured, transported and stored, but does not allow for any exclusion of emissions derived from coal-derived synthetic gas (clean coal), natural gas, or any other fuel except biomass. The limit calculation is on a unit-by-unit basis, and not on an operation-wide basis.

Temporary exemptions (until 2024 for new units) are available if the units are designed, or can be retrofitted, to permit integration with a carbon capture and storage system. This exemption is available so long as the carbon capture system is economically and technically feasible and there is an implementation plan for capturing and storing carbon. Shorter temporary exemptions also exist for old units connected to existing units with carbon capture systems, and in emergencies. There are also provisions for certain existing units to be substituted for units that reach the end of their useful lives before 2020.

All coal-fired units must be registered with the minister. As well, an annual report must be filed for each new unit, old unit, substituted unit and unit tied to an old unit with a temporary exemption.

The regulations are open for comment until October 26, 2011. Final regulations are expected to be published in 2012 and come into effect on July 1, 2015.

Coal in Canada

According to the National Energy Board, in 2006 Canada generated just over 16,000 MW of electricity (13% of total generation) from the combustion of coal. Of this, 38% was generated in Alberta while 39% was generated in Ontario.2 The provinces with the greatest reliance on coal-fired generation are Alberta, Nova Scotia and Saskatchewan, where coal respectively accounts for 53%, 52% and 46% of electricity generation. Ontario has already committed to ending coal-fired generation by the end of 2014, while Alberta plans to retire 2,500 MW of coal-fired generation by 2023.

Reaction from industry

As expected, industry is concerned that the costs to change the electricity mix and develop and implement carbon capture and storage technologies will be passed on to consumers and businesses. The proposed regulations thus do not consider the true national or regional financial impact. Canadian businesses are also concerned about the lack of comparable regulations globally, especially in the United States; such disparity could reduce competitiveness of companies, especially those operating in Alberta and Saskatchewan—provinces without the luxury of hydroelectric or nuclear generation capabilities.

The inability for units to exclude clean coal from their calculation of the intensity limit will likely be an issue for companies involved in coal production and clean coal technology development and implementation. Clean coal, it is argued, is a cost-effective technology to reduce emissions that ought to be considered more seriously in Canada's future energy mix.

Further, the proposed regulations might induce certain provinces to rely more heavily on natural gas. The government has indicated that it intends for the intensity limits set forth in the proposed regulations to dovetail with those that will be introduced and applied to natural-gas-fired units; however, it is not clear when and exactly what intensity limits will be placed on gas-fired generation facilities. This creates uncertainty for companies and utilities attempting to make long-term electricity production plans, including those deciding if and how to move toward using natural gas. If the same intensity limit applies to future gas-fired generation regulations, industry is concerned it can only be met by the most efficient gas-fired units and will not be achievable at all for gas-fired units operating at high elevations, in colder temperatures, or intermittently to address off-peak energy requirements.

Lastly, the electricity generation industry wants the government to make the regulations more flexible by allowing generators to measure intensity limits on an operation-wide basis, instead of on a unit-by-unit basis. This change could help businesses in the energy sector make larger investments in better technology, rather than inefficiently spread those investment dollars out to retrofit existing units.

Reaction from environmental groups

Some environmental proponents have indicated that the proposed regulations do not go far enough. Because the regulations only apply to new and old coal-fired units, they will have no impact on reducing emissions from existing coal plants that are not at the end of their useful lives; this could mean two-thirds of operating coal plants will not fall under the regulations until 2020, and nine of Canada's 51 coal plants could continue to operate until 2030. The temporary exemptions and substitution provisions will only further delay the phasing-out of coal.

Further, by targeting only units commissioned after July 1, 2015, critics fear there will be a rush to commission coal plants prior to that date to avoid the regulations. In particular, a proposed 500 MW coal-fired generation plant in Alberta could go ahead without the need to comply with the regulations resulting in, some say, 1.5 million tonnes of emissions per year for 45 years. Critics argue the proposed regulations should come into effect when the regulations are published in 2012, and the commissioning trigger date should be well before 2015.

As well, critics cannot explain why the temporary exemption is available for plants that merely plan to implement carbon storage systems considering such technology is already available and the costs of such systems will not decrease by 2020.


Whether the government has found the perfect balance remains to be seen. If the regulations go ahead as planned, and if they have an effect on Canada's electricity generation industry, opportunities will emerge for businesses with the foresight and ability to capitalize on the forthcoming change. Opportunities that may emerge include:

  • Carbon Capture and Storage. If governments and electricity generators want to continue to use coal under the proposed regulations, they may have to adopt new technologies to bring existing coal plants into compliance. This will likely mean new government spending and private-public partnerships to develop, plan and implement carbon capture and storage systems. This could create new opportunities for industry to access public money to develop and perfect carbon capture technologies and expertise in Canada that could then be deployed globally, especially in nations heavily reliant on coal-fired generation, particularly China.
  • Biomass. The proposed regulations do not apply to biomass, which could create opportunities to establish biomass-fired units, or repower retired or existing units on biomass. This could grow markets for bio-based fuels, and spur the development of technologies and expertise surrounding biomass electricity generation that could be used both in Canada and abroad. Businesses in land-rich Alberta, Saskatchewan and Ontario could look at biomass to help replace coal plants, if the economics make sense.
  • Renewables. Wind and solar generation could also experience increased interest as alternatives to coal-fired units that may eventually be retired or never built. Stable, long-term financial incentives to encourage this shift, along with removing regional and local barriers to renewable energy implementation, could result in opportunities for businesses in Canada, especially in Ontario, Alberta, Saskatchewan and Nova Scotia, that are poised to move on renewable energy.
  • Electricity Marketing. Exports from provinces with an abundance of hydroelectric and renewable capability to coal-reliant jurisdictions could mean new opportunities for participants in the energy market and developers of transmission infrastructure. This opportunity could particularly apply to those operating in markets connecting Ontario and Nova Scotia.


As consultation on the proposed regulations carries through the fall, companies involved in a host of industries across the country should consider the potential impacts, whether positive or negative, on their businesses and seize the opportunity to comment. Regardless of the details in the final regulations, it is clear the federal government plans to discourage reliance on coal-fired power and reduce greenhouse gas emissions in the electricity generation sector. In the long term, this should result in new market opportunities for companies that can strategically position themselves.


1 "Reduction of Carbon Dioxide Emissions from Coal-Fired Generation of Electricity Regulations," Canada Gazette Vol. 145, No. 35 – August 27, 2011.

2 "Coal-Fired Power Generation - An Overview - Energy Brief," National Energy Board of Canada, September 2008, based on information from Statistics Canada, 2006.

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