Environmental Challenges and Opportunities of the Evolving North American Electricity Market

1. Environmental Challenges and Opportunities of the Evolving North American Electricity Market Paul J. Miller North American Commission for Environmental Cooperation

2. What is the CEC? • Established under the North American Agreement on Environmental Cooperation (NAAEC) - the environmental side agreement to NAFTA • CEC Council members are heads of federal environment agencies in the NAFTA countries • Secretariat located in Montreal

3. CEC Goals • Complement environmental provisions of NAFTA • Address regional environmental concerns • Help prevent potential trade and environment conflicts • Promote the effective enforcement of environmental law in North America

4. Electricity and the Environment • Electricity sector in Canada and US is single largest source of nationally reported toxics • Major contributors of air pollutants and GHGs. E.g. in US; • 25% of nitrogen oxides • 70% sulfur dioxide • 25% mercury • 35% CO2 • Large hydro power and ecological change • Nuclear waste

5. Strong future growth • North American electricity demand expected to increase to 2010: • 14% in Canada • 21% in US • 66% in Mexico

6. CEC Art. 13 Objectives • Examine environmental challenges and opportunities of the evolving continental electricity market • Identify ways for electricity market integration to promote sustainable development, maximizing economic and environmental benefits.

7. CEC Art. 13 Process Electricity Advisory Board La Jolla Symposium Article 13 Report and Recommendations to Council Public Comments Working Papers Workshops

8. Key Questions • Will incompatible environmental policies in an integrated NA electricity market lead to: • less effective domestic air quality measures (i.e., transboundary air pollution)? • trade and environment disputes? • differing renewables definitions • differing confidentiality limits on environmental information • pollution havens and generation clusters?

9. Possible Future Outlook • Announced plans to build 800 -2,000 new power generating units in North America, to 2007. • Corresponds to announced construction of 230-470 GW new capacity. Total installed 1999 capacity in North America was 990 GW. • Less than 40% announced units likely to be built.

10. Possible Future Outlook New emissions in 2007 pose challenge* *(%) = new emissions relative to 1998-2000 electricity sector emissions (varies by pollutant)

11. Future Uncertainties • Uncertainty over which projects will go forward and location • Uncertainty over fuel choice • Current conditions favor natural gas, but this could change • Upper-end estimates suggest what regions power developers find attractive - possibly because of fuel availability, transmission access, less stringent environmental standards, etc.

12. On-going air emissions work • North American air emission inventories • CEC Council Resolution 01-05 • Criteria air and greenhouse gas emissions • Scoping paper on comparability and data access issues • Government/Public meetings • Western Governors’ Association inventory development for Mexico

13. Opportunities for Environmental Cooperation • explore mutually supportive policies for energy generation and environmental quality at a North American scale • regional airshed management , e.g. • Baja California/southern California ozone/PM2.5 • Vancouver-Puget Sound ozone/PM2.5 • Visibility planning, e.g. Big Bend NP, Grand Canyon NP/northern MX

14. Opportunities (cont.) • regional market-based instruments, e.g. transboundary emissions trading, TRECs • improved access to information on proposed projects and cumulative or transboundary effects • compatible definitions for renewable energy

15. PARTICIPANTS’ OBSERVATIONS Develop transparent and comparable pollution emission data for the North American electricity generation sector at a sufficiently detailed level to support trends analyses, emissions trading policies, airshed modeling, and public right-to-know

16. PARTICIPANTS’ OBSERVATIONS Develop a model framework of necessary elements for a North American (bilateral or trilateral) emissions trading regime that can include emissions of sulfur dioxide and nitrogen oxides

17. PARTICIPANTS’ OBSERVATIONS In addition to emissions trading programs for sulfur dioxide and nitrogen oxides, establish a framework of necessary elements for a greenhouse gas trading regime in North America

18. PARTICIPANTS’ OBSERVATIONS Commission a review of the consistency of North American environmental standards governing the construction and operation of electricity generating facilities, including but not limited to, those sited in border areas

19. PARTICIPANTS’ OBSERVATIONS Implement Article 10(7) of the North American Agreement on Environmental Cooperation which enjoins the CEC Council to develop recommendations for the conduct of transboundary environmental impact assessments on projects which may adversely affect the territory of another Party

20. PARTICIPANTS’ OBSERVATIONS A dialogue should be commenced among industry, government and nongovernmental organizations to explore opportunities for developing a more consistent regional approach to defining "renewable" energy, including a fuller understanding of the rationale behind the many existing definitions

21. Art. 13 Final Report • Final secretariat report with: • findings from analytical report • recommendations from Advisory Board • public input • Final submitted to Council March 2002 • Public release date TBD by Council

22. For More Information Draft report at: http://www.cec.org/electricity Paul J. Miller CEC, Air Quality Program 393, rue St-Jacques Ouest, Bureau 200 Montréal, QC H2Y 1N9 CANADA Ph: 514-350-4326 pmiller@ccemtl.org