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					Comments on Canada’s Large Final Emitters (LFE)
  and Domestic Offsets Climate Change Plans

                                      CBA National Environmental, Energy and Resources
                                       Law Section/Department of Justice Annual Meeting
                                                                    October 22, 2004
                                                                     Ottawa, Ontario



GRAY E. TAYLOR
gtaylor@dwpv.com
1 First Canadian Place, 44 th Floor
Toronto, ON M5X 1B1
Ph: 416 863 5533 Fax: 416 863 0871
www.dwpv.com
           PRESENTATION OUTLINE

1.   Issues with LFE System

2.   CEPA Notice on Reporting of GHGs

3.   IETA Canada Working Group on the Carbon Market
     Agreement with Natural Resources Canada October
     23, 2003

4.   Domestic Offsets Issues

5.   International Trading Issues

                                                       2
              ISSUES WITH LFE SYSTEM


1.   50 % of Canada’s total GHG emissions but less than 25% of
     reductions

2.   “business as usual” expectation of GHG emissions may be too
     low, based on historic projections

3.   a) $15 per tonne price cap may lead to a need to prevent
     international trades in AAUs or in the special $15 units

     b) $15 per tonne subject to “prudent management of emissions”?

4.   complexity  recent consultation on cogeneration


                                                                      3
               ISSUES WITH LFE SYSTEM
                                 (Cont’d)




5.   International participation 
       •    ERUPT and CERUPT approach not likely
       •    government participation in private funds?
       •    who is running this show?

6.   US/Canada economies converging while Kyoto diverges - efforts
     to maintain competitiveness

7.   Long term emission targets for projects
       •    long term emission targets for projects
       •    how to cover emission reduction deficit in 2008-2012 period?

8.   R&D incentives interacting with compliance mechanisms
       •    covenants appropriate?
       •    how to cover emission reduction deficit in 2008-2012 period?

                                                                           4
              CEPA Notice re Reporting GHGs



• Effective March 13, 2004 to March 13, 2007

• covers GHGs in Kyoto Protocol
               • CO2
               • methane (CH4)
               • nitrous oxide (N2O)
               • sulphur hexafluoride
               • HFCs
               • CFCs


• requires operators of facilities to file GHG data


                                                      5
             CEPA Notice re Reporting GHGs
                              (Cont’d)




• facility threshold is greater than 100 thousand tonnes of CO2
  equivalent in 2004 (CO2e uses Global Warming Potentials from
  IPCC)

• threshold does not include CO2 from biomass combustion but must
  report if facility exceeds threshold

• reporting facilities encouraged (authorized?) to used UNFCCC
  national inventory methodologies




                                                                    6
               CEPA Notice re Reporting GHGs
                                   (Cont’d)




•   reports to include

       •   company name (individuals?)
       •   “parent” companies (not defined), their ownership percentage
           (why?) and Dun and Bradstreet number (why?)
       •   direct emissions of CO2, methane and N2O by source category
           (Stationary Fuel Combustion, Industrial Process, Fugitive, Other
       •   Direct emissions of SFs, HFCs and FCs




                                                                              7
     CEPA Notice re Reporting GHGs
                        (Cont’d)




• how quantities of emissions determined (monitoring, mass
  balance, emission factors or engineering estimates)

• facility definition means all on one site or on contiguous or
  adjacent sites owned or operated by a single person and
  functioning as a single integrated site

• operator to file is as of December 31 for whole year or, if
  operations are terminated, the last operator for the portion of
  the year in which operations took place

• opportunities for gamesmanship!!


                                                                  8
     INTERNATIONAL EMISSIONS TRADING ASSOCIATION (IETA)
       CANADIAN WORKING GROUP ON THE CARBON MARKET
     AGREEMENT WITH NATURAL RESOURCES CANADA (NRCAN)
                      OCTOBER 23, 2003


1.     Sustainability
        sustainable development through emission reductions with
       environmental integrity, economic efficiency and social equity
       efficient and transparent market

2.     Linking
        to minimize costs, link on equivalency basis to foreign
       emission trading systems

3.     International Consistency
        consistent with Kyoto Protocol, including all 6 GHGs




                                                                        9
             CANADIAN IETA WORKING GROUP AGREEMENT
                           WITH NRCAN
                                          (Cont’d)


4.   Certainty
      predictable and certain to facilitate planning but flexible to
     accommodate international change

5.   Instruments
      all units tradable, including offset units tradable for Kyoto units,
     and no limit on use of Kyoto units

6.   Transparency
     prices and volumes transparent, subject to normal commercial
     confidentiality




                                                                              10
            CANADIAN IETA WORKING GROUP AGREEMENT
                          WITH NRCAN
                                       (Cont’d)




7.    Liquidity  need adequate supply of tradable units

8.    Low Transaction Costs to facilitate trading

9.    Single Market  throughout Canada

10.   Banking
      throughout first Kyoto commitment period and accommodate
      Kyoto changes if made




                                                                   11
      CANADIAN IETA WORKING GROUP AGREEMENT
                    WITH NRCAN
                                (Cont’d)




11.   Private Sector/Government
       private sector

        1)   develop trading infrastructure (exchange, derivatives,
             dealers, brokers, etc.)
        2)   services (verification, trading, financing, etc.)

       federal government

        1)   assures overall performance
        2)   provides framework (legislation to create instruments and
             registry)


                                                                      12
       DOMESTIC OFFSETS ISSUES
      AND INTERNATIONAL TRADING



1.   Discuss if there is time.




                                  13
Gray E. Taylor
gtaylor@dwpv.com
1 First Canadian Place, 44 th Floor
Toronto ON M5X 1B1
Ph: 416 863 5533 Fax: 416 863 0871
www.dwpv.com

				
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