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Canada Releases Draft Clean Electricity Regulations

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Canada’s Minister of Environment and Climate Change (the “Minister”), in collaboration with the Minister of Energy and Natural Resources, has announced the release of proposed Clean Electricity Regulations (the “Proposed Regulations”) (see our earlier bulletin on prior consultations here). The Proposed Regulations would establish significant and ambitious emission performance standards (“EPS”) to reduce greenhouse gas (“GHG”) emissions from fossil fuel-generated electricity generation facilities in all provinces and territories across Canada starting in 2035. Environment and Climate Change Canada (“ECCC”) estimates that the Proposed Regulations would result in a net reduction of 342 million metric tonnes (Mt) of CO2e emissions between 2024 and 2050 and a net benefit to society of $28.9B. The Proposed Regulations also impose significant registration, record keeping, and reporting obligations on covered electricity generation facilities. The Proposed Regulations represent a significant foray by the federal government into electricity policy, which has traditionally been an area of provincial jurisdiction. In their current form, the Proposed Regulations are expected to attract opposition from some provincial governments, and potential constitutional legal challenges. ECCC is seeking feedback on the Proposed Regulations. Interested stakeholders are encouraged to review the Proposed Regulations and submit detailed comments by no later than November 2, 2023.  We anticipate that policy developments are being targeted for announcement before or at the UNFCCC Conference of the Parties meetings (COP28 Paris Agreement negotiations) that start on November 30, 2023, in Dubai, UAE. This bulletin briefly summarizes key details of the Proposed Regulation: Application. The Proposed Regulations would apply to any “unit” (defined as an assembly comprised of any equipment that is physically connected and that operates together to generate electricity, and (a) must include at least a boiler or combustion engine and (b) may include duct burners and other combustion devices, heat recovery systems, steam turbines, generators, emission control devices and carbon capture and storage (“CCS”) systems) that meets the three following criteria:…

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ECCC Consulting on Developing a Clean Electricity Standard

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Environment and Climate Change Canada (ECCC) today released a discussion paper, “A Clean Electricity Standard in support of a net-zero electricity sector” (the Discussion Paper), as part of its first steps in developing and consulting on a Clean Electricity Standard (CES) under the Canadian Environmental Protection Act, 1999. This bulletin summarizes key details of the Discussion Paper and provides important information on ECCC’s consultation on developing a CES.   Purpose. The Discussion Paper indicates that its purpose is to support the government’s intention to introduce regulations to achieve a net-zero electricity system by 2035 and invite comments regarding the scope and design of the CES. The Discussion Paper notes that Canada’s electricity system is currently 82% non-emitting but remains Canada’s 4th largest source of emissions, accounting for 8.4% of total greenhouse gas (GHG) emissions in 2019.   Proposed CES Regulations. The Discussion Paper notes that carbon pricing will be insufficient to ensure that the electricity sector achieves net-zero emissions by 2035 or likely even by 2050. Therefore, a nation-wide CES regulation will complement carbon pricing by requiring the phase-out of all conventional fossil fuel electricity generation and incentivizing fuel switching in other sectors. The scope and design of the CES regulations will also need to provide enough compliance flexibility to allow for the use of natural gas for emergency events, back-up power to complement renewables, and supplying power during seasonal peaks of demand. The proposed CES regulations may, among other things: apply to all sources of emitting electricity generation that sell to the grid; transition the electricity sector to net-zero by 2035 while providing increased supply of electricity to support electrification and the role of available technologies in the provision of clean power to Canadians; be stringent enough to achieve its objectives while including compliance flexibility, such as robust GHG offsets, and allow for the…

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Federal Government Strengthens Carbon Pricing Benchmark Stringency Criteria

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The federal government has issued its strengthened benchmark stringency criteria in line with previously announced increases to the carbon price (rising at $15/tonne per year to $170/tonne by 2030). The government previously indicated its intent to strengthen the benchmark stringency criteria for the post-2022 period in September 2020. The government intends to seek confirmation from provinces and territories on whether they intend to maintain or implement a carbon pricing system for the 2023-2030 period and assess provincial and territorial submissions against the updated federal benchmark criteria in 2022 for the 2023 to 2030 period. The 2016 benchmark continues to apply for assessments of carbon pollution pricing system stringency for the 2018-2022 period. Provinces and territories must implement (a) an explicit price-based system (i.e., (i) a carbon levy on fossil fuels, or (ii) a hybrid system comprised of a carbon levy on fossil fuels and an output-based pricing system for industry) or (b) a cap-and-trade system. Partial explicit price-based system must be designed to fully replace either the federal fuel charge or the federal OBPS. Where a province or territory implements a partial system that does not fully replace the federal fuel charge or OBPS, the corresponding federal backstop system part (i.e., fuel charge or OBPS) will apply in full in the jurisdiction. The updated benchmark sets new requirements for both explicit price-based systems and cap-and-trade systems, in the following areas: Explicit price-based systems: (i) carbon price ($65/tonne in 2023, rising $15 per year to $170/tonne in 2030); (ii) common scope; (iii) price signal (no measures to offset, reduce or negate); (iv) stringency of output-based pricing systems (OBPS) for industry; (v) restriction on OBPS and performance-based rebate approaches under a carbon levy; (vi) offset credits; and (vii) public reporting. Cap-and-trade systems: (i) maximum emissions cap (corresponding at minimum to projected emissions levels…

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