Canada: Climate Change And The Electricity Sector The Provincial – Federal Challenge For Canada

This Climate Change Bulletin is part of a series that is prepared periodically by BLG's Climate Change Group to alert our clients of emerging issues and initiatives that are relevant to their businesses and strategic interests. Future Climate Change Bulletins and Legal Alerts will review and consider issues facing various provinces as well as different industrial sectors. Comments and questions are always welcome.

The Current Situation In Canada

The Provincial and Federal response to climate change is emerging piecemeal. For now, it remains largely incomplete. Over the last ten years we have seen a plethora of proposals appear, with details to be announced "later." Only recently in British Columbia has legislation been passed which might begin to come to grips with the challenge of reducing the absolute level of greenhouse gas emissions (GHGs) in that province. Meanwhile, the level of Canada's GHG emissions continues to rise. Among the G8 economies, Canada ranked highest in percentage increase (1990 – 2004). Among countries that track their emissions in detail, Canada's GHG growth was surpassed only by Portugal, Spain and Turkey.1

In addition to statements made by the Provinces and the Federal government, goals have been set by municipalities, businesses and not-for-profit organisations. Potentially, these individual players can fit within the interstices of a Federal-Provincial structure. However, this higher-level structure must be internally consistent and capable of responding to the climate change challenge by reducing GHGs, absolutely, over an acceptable timeframe.

Of the 758 megatonnes (mt) of Carbon Dioxide equivalent (CO2e) emitted across Canada in 2004, 620 mt (82%) came from the energy sector (stationary combustion sources, transportation and fugitive sources).2 Within the energy sector, 360 mt (58% of the energy total) is produced by electricity and heat generation.3 Inevitably, the electricity sector is at the heart of any realistic plan to reduce Canada's GHG emissions. How might this be done?

Approaches To GHG Reduction

Broadly speaking, there are four main approaches that may be considered for reducing harmful emissions to the air.


Until the mid-1990s, industrial countries relied on various command-and-control regulations which set allowable limits to emissions to be monitored and regulated by government inspectors.


In the 1990s, a new approach was introduced under the U.S. Clean Air Act to reduce acid rain through a cap-and-trade system for sulphur dioxide and nitrogen oxides. (Cap-and-trade was discussed in the previous newsletter in this series.) This approach uses market incentives to oblige industrial installations, such as power producers, to meet a gradually diminishing level of emissions by either physically reducing in-plant emissions or by buying credits from other participants in the capped system. The European Union Emissions Trading System now uses this approach to reduce emissions of carbon dioxide.

Carbon Tax

A third approach is a carbon tax which is applied to a range of fossil fuels at various points of use, usually on the final consumer, the individual or the household. This could appear as so many cents per litre on gasoline, or on household energy use for heating and cooling. It should be noted that the recent carbon tax proposal by the federal Liberal Party would not initially impose a tax at the pump for gasoline. Such a tax has been introduced in Québec and British Columbia. It is intended to work by making the more carbon intensive fuels more expensive relative to the less carbon intensive. As such, it could succeed (in terms of reducing GHGs) by working simultaneously on producers and consumers to select the lower carbon solution for space heating and cooling, personal mobility, etc. The lower carbon option would become more economic, and the consumer would make that choice. Carbon taxes can be made more attractive by promising that the proceeds will be paid into a low-carbon technology fund to stimulate innovations to accelerate the transition to a low-carbon economy.

There are several reasons why the carbon tax approach may be vulnerable to failure. First, it is impossible to calculate what size of tax would produce a specific GHG reduction over a defined period of time. Heroic assumptions can be made, but it is not possible to predict with any quantifiable level of confidence. There is evidence, from the UK's escalator tax on gasoline in the late 1990s, that public anger could crack politicians' resolve long before the target reductions are in sight. So, from both a political and an environmental perspective, the carbon tax does not look like a sturdy policy instrument on its own.

The best contribution that a modest carbon tax might make would be to provide revenue for a low-carbon technology fund. This would be relatively simple to administer, and it would be easy to monitor results. Not dramatic perhaps, but a useful contribution to a suite of low-carbon initiatives.

Carbon Intensity

Lastly, there is the carbon intensity approach which has been adopted by the Alberta government and proposed by the Federal government. This approach sets targets for the amount of carbon used per unit of production. It will certainly lead to reductions in GHGs if the economy as a whole is either static or shrinking. Likewise, for sectoral goals, it will work if that sector (e.g. electricity) is either static or shrinking. If the economy (or sector) is expanding, assumptions may be made about how big a reduction in carbon intensity will produce what size of absolute GHG reduction over what period of time. This is what is being done in Alberta and is what Ottawa is proposing. However, the assumptions in the models may not be borne out by reality, and the absolute reduction targets may not be met. This is a far less predictable approach to GHG reduction than cap-and-trade.

What We Have In Canada Today

The move towards regulating greenhouse gas emissions is underway, albeit in its early stages. Some provinces have stated ambitious absolute reduction targets (respecting the Kyoto Protocol) without much detail of how they might be achieved. Alberta has (like the Federal government) based its strategy on intensity targets, rather than absolute reductions. On the other hand, Alberta is the first province to have a climate change act in force.

In the last few months, British Columbia has been putting a comprehensive strategy in place, based on absolute reductions (33% against 2007 levels to be reached by 2020). This includes a cap-and-trade system linked to both the Western Climate Initiative in the U.S. and to the International Carbon Action Plan, which aims to trade carbon offsets and carbon credits internationally. The BC model is the closest to the European Union Emissions Trading System (EU ETS) in structure and ambition. Interestingly, there is no technology fund escape clause for non-compliance. This may reflect the predominance of hydroelectric generation in that province.

Québec was the first North American jurisdiction to adopt a carbon tax, which came into force in October 2007. Québec plans to meet a Kyoto compliant reduction target by establishing voluntary, binding agreements on reductions with industry. Québec and Ontario recently signed an MOU to establish a joint cap-and-trade system. Finally, Ontario has announced that it expects to become the newest member of the Western Climate Initiative, a step up from its current observer status.

The Federal-Provincial legislative mosaic has so far produced something of everything – carbon intensity targets, cap-and-trade, a carbon tax, voluntary agreements, and so on. Alberta and the Federal government stand in the intensity corner – although their regimes are far from compatible with one another. BC is the most internationally committed to international cap-and-trade, with Québec and Ontario perhaps soon to move in that direction.

Conclusion – The Physical Bottom Line

To conclude, we should step outside the political and regulatory labyrinth to return to the broad issues involved in reducing GHG emissions in Canada. In terms of Canada's megatonnes of CO2 equivalent, the big provinces are Alberta and Ontario, each emitting over 200 mt. Three provinces emit between 70 and 100 mt – Québec, Saskatchewan and BC – while other provinces each emit less than 20 mt. The provinces with the fastest growth in emissions between 1990 and 2005 are Alberta and Saskatchewan, due mostly to the oil sands.

The big pieces of the GHG reduction challenge are the promised closure (by 2014) of coal-fired plants in Ontario and the successful application of carbon-capture-and-storage to the development of the oil sands. Reductions of GHG emissions by these and other necessary measures can best be achieved if there is a consistent approach to the problem by the Federal government and the provinces - most effectively based on cap-and-trade.


1. Statistics Canada, Human Activity and the Environment: Annual Statistics 2007 and 2008. Section 1. Climate Change in Canada

2. 'CO2 equivalent' includes all six greenhouse gases regulated by the Kyoto Protocol, with each gas weighted by its 'global warming potential' relative to CO2.

3. Government of Canada, 2006 Canada's Fourth National Report on Climate Change – Actions to Meet Commitments under the United Nations Framework Convention on Climate Change.

About BLG

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