Canada: The Federal Government Takes A Stand On Carbon Emissions In Coal - And Natural-Gas Fired Generation

On December 17, 2016, the federal Ministry of Environment and Climate Change Canada (ECCC) announced its intention to address carbon dioxide (CO₂) emissions in electricity generation to meet its greenhouse gas reduction commitments made as part of the United Nations Framework Convention on Climate Change (Paris Agreement). The Notice of intent published in the Canada Gazette (Notice) outlines a plan to amend the already-existing Reduction of Carbon Dioxide Emissions from Coal-Fired Generation of Electricity Regulation (Coal Regulation) and to develop new regulations to address electricity generation from natural gas (Proposed Natural Gas Regulation).  The Proposed Natural Gas Regulation will be enacted under the Canadian Environmental Protection Act, 1999.

The ECCC intends to have a final version of the amended Coal Regulation in place by the end of 2017, with the amendments coming into force in 2026. The timeline for the Proposed Natural Gas Regulation will see a similar publication date, but will come into force sometime in 2020.

The Impact on Coal

The Coal Regulation, put in place in 2012 by the previous government to accomplish similar goals, has already set an emissions limit for coal-fired generation of 420 tonnes of carbon dioxide emitted per gigawatt hour of electricity produced (t/GWh). Although this limit has been in effect since July 1, 2015, there are several permitted exemptions. For example, CO₂ diverted through carbon capture and storage (CCS) does not count toward the limit, and temporary exemptions may be granted to coal-fired generation plants upgrading to CCS technology.

The Notice does not identify whether the stated emissions limit of 420 t/GWh will be universal or whether CCS offsets or other exceptions will continue to apply. However, the government's goal of phasing out coal-fired generation by 2030 is clear.

The Impact on Natural Gas

The Proposed Natural Gas Regulation will impose federal emissions limits on natural gas-fired generation including:

• 420 t/GWh for new and existing large combustion units (defined as units with a nameplate capacity greater than 100 MW) and for new boilers; and
• 500 t/GWh for new and modified small combustion units (defined as units with a nameplate capacity of 100 MW or less).

Additionally, an interim target of 550 t/GWh will apply until 2045 (or for the first 15 years, whichever is earlier) to boilers converted from coal to natural gas, after which time the limit reverts to 420 t/GWh.

Federal – Provincial Coordination

To some electricity producers, these changes may have little impact due to equivalent or more stringent provincial regulations already in place. For example and as described in a previous post, Alberta announced an intention to phase out coal-fired generation by 2030. Where provincial and federal legislation overlap, the federal government has the ability to exempt producers from complying with the federal legislation, as referenced in the Notice. However, this is likely to amount to an exemption from federal reporting or other procedural requirements where the producer is already reporting provincially, rather than any substantive exemptions.

Next Steps

The announcement confirms that the federal government will work with stakeholders, including the provinces, territories, Indigenous peoples, and other stakeholders, including both industry and environmental NGOs. Although the Notice sets out the basic emissions limits that will be put in place from 2020 for natural gas-fired generation to 2030 for coal-fired generation, the bulk of the details remain to be addressed in the substance of the amendments to the existing Coal Regulation and the yet-to-be-drafted Natural Gas Regulation. Impacted electricity producers should follow the drafting process closely and seek out opportunities to engage with the ECCC during the consultation process.

Interested parties may submit comments on the general approach put forward in the Notice by February 17, 2017 by mail or email to the Director of Electricity and Combustion at the ECCC. Contact information is provided in the Notice.

The Federal Government Takes A Stand On Carbon Emissions In Coal - And Natural-Gas Fired Generation

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