Download AN UPDATE ON: GREENHOUSE GAS REGULATION

The Climate Change Regulatory Patchwork:
Impacts on Energy Contracts
RON EZEKIEL
Fasken Martineau
604 631 4708
[email protected]
Outline
Regulatory Patchwork
Regulatory Convergence?
Impact on Energy Contracts
Canada’s Emissions
Source: Environment Canada, 2005 Inventory
Regulatory Patchwork
Federal Regulatory Landscape
Clean Air Act / Notice of Intent
Turning the Corner Plan
Reduce by 20% relative to 2006 by 2020
Reduce by 60-70% relative to 2006 by 2050
Reduce emissions intensity of major sources by 18%
relative to 2006 by 2010, and then 2%/year
New facilities have 3 year grace period, clean fuel
standard, and then 2%/year
Regulatory Patchwork
Federal Regulatory Landscape
Clean Air Act / Notice of Intent
Compliance options:
internal reductions
Tech Fund ($15/tonne, $20/tonne, linked to GDP)
Emissions trading (both inter-firm and project-based)
CDM (capped at 10% of target)
Finalize regulatory framework this fall
Publish draft regs in 2008
Finalize regs by 2010
Regulatory Patchwork
Federal Regulatory Landscape
Kyoto Protocol Implementation Act
Plan in Response
CERs and ERUs less than 1/3 Canada’s gap
AAUs cannot be adequately “greened”
85% of Canada’s GHG emissions emitted in areas
under sole or partial provincial/territorial jurisdiction
Regulatory Patchwork
Provincial Regulatory Landscape
British Columbia
2007 Throne Speech Commitments
Reduce by 33% relative to current levels by 2020
Western Regional Climate Action Initiative
AZ, CA, NM, OR, WA, UT, MB
Regional Goal (15% below 2005)
Regional market based mechanism
Regional registry
Regulatory Patchwork
Provincial Regulatory Landscape
Alberta
Climate Change and Emissions Management
Amendment Act / SGER
Reduce intensity by 12% from baseline on 07/01/07
Reduce intensity by 50% relative to 1990 by 2020
Compliance options:
internal reductions
Tech Fund ($15/tonne, investments in Alberta only)
Emissions trading (both inter-firm – performance
credits; and project-based in Alberta)
Regulatory Patchwork
Provincial Regulatory Landscape
Saskatchewan
Energy and Climate Change Plan
Stabilizing GHG emissions by 2010
Reduce emissions to 32% below current by 2020
Reduce emissions by 80% below current by 2050
Manitoba
Kyoto and Beyond Plan
Reduce emissions by 18% relative to 1990 by 2010
Reduce emissions by 23% relative to
1990 by 2012
Regulatory Patchwork
Provincial Regulatory Landscape
Ontario
Being Developed
Reduce emissions by 6% relative to 1990 by 2014
Reduce emissions by 15% relative to 1990 by 2020
Reduce emissions by 80% relative to 1990 by 2050
Quebec
Quebec and Climate Change Plan
Reduce emissions by 6% relative to 1990 by 2012
Green Fund funded by new carbon fee
on energy
Regulatory Patchwork
Provincial Regulatory Landscape
Nova Scotia
Environmental Goals and Sustainable
Prosperity Act
Reduce emissions by 10% relative to 1990 by 2020
New Brunswick
Climate Change Action Plan
Reduce emissions by 10% relative to 1990 by 2020
Regulatory Convergence?
Lots of targets, few details
Federal plan may be default, but
jurisdictional issues exist
Federal government will also rely on
equivalency agreements, permitting
suspension of federal plan in Provinces
with equivalent regulatory regime
Regulatory Convergence?
There will be pressure to converge
Early movers (Alberta / Feds) may set
standard, but linkages to US may also
determine path if Canada departs from
Kyoto, or a different regime emerges
after 2012
Regulatory Convergence?
Some time before regulatory regime
resolves, and still some variances
But there are indications that common
elements will exist:
Internal reductions
Inter-firm trading, beating caps or intensity
Project-based offsets, from emissions
outside regulatory sphere and possibly
international (CDM)
Impacts on Energy Contracts
Internal reductions
Inter-firm trading
Project-based development
Project-based purchases
Typical - Internal Reductions
OWNER
Qualifications?
Conflicts?
VERIFICATION
SERVICES
ACCREDITED
VERIFICATION
BODY
PROJECT
SERVICES
CONSULTANT
Typical - Internal Reductions
OWNER
VERIFICATION
SERVICES
ACCREDITED
VERIFICATION
BODY
Quit
Claim?
PROCUREMENT /
CONSTRUCTION
PROJECT
SERVICES
CONSULTANT
Typical – Inter-firm
Credit streams?
Credit risk?
Production risk?
OWNER
OWNER
Typical – Project Development
BUYER
COMPETING
CLAIMANTS
OFFSET
PURCHASE
AGREEMENT
QUIT CLAIM
PROPONENT
VERIFICATION
SERVICES
ACCREDITED
VERIFICATION
BODY
OWNERSHIP
AGREEMENT
PROPONENT
PARTNERS
PROJECT
SERVICES
CONSULTANT
Typical – Project Development
BUYER
OFFSET
PURCHASE
AGREEMENT
FINANCING
LEGAL
PROCUREMENT /
CONSTRUCTION
COMPETING
CLAIMANTS
QUIT CLAIM
PROPONENT
VERIFICATION
SERVICES
ACCREDITED
VERIFICATION
BODY
OWNERSHIP
AGREEMENT
PROPONENT
PARTNERS
PROJECT
SERVICES
O&M
CONSULTANT
Typical – Project Purchases
Credit streams?
Credit risk?
Production risk?
PROPONENT
OWNER
Conclusion
Lots of targets, few details
Keep an eye on early movers, they may
set standard
Keep an eye on Kyoto and post-2012 for
US role
Prepare for emissions trading
Questions?
Ron Ezekiel