Clean Air Regulatory Agenda - Regulatory Framework for Industrial Air Emissions

1. Clean Air Regulatory Agenda - Regulatory Framework for Industrial Air Emissions Climate Change Hub – NB Lung Association June 29th, 2007

2. GHGs were added to CEPA 1999 List of Toxic Substances (Schedule I) Nov 2005. The Notice of Intent (October 21, 2006) publicly stated the Government of Canada’s commitment to develop a regulatory framework for air emissions Federal Aspects—Legislation

3. Regulatory Framework for Air Emissions • Responding to • Uneven effort across the country to reduce air emissions • Inconsistent messages to industry • Insufficient action to protect health and the environment • This approach provides • Nationally consistent regulations • The basis for negotiations with our international partners • Regulatory Framework, including targets, to be reviewed every 5 years (first review in 2012).

4. Sectors within the Regulatory Framework The industrial sectors are: • electricity • oil and gas • forest products • smelting and refining • iron and steel • some mining • cement, lime and chemicals

5. Framework Consultations • Work underway: • Validate sector-specific air pollutant targets by June 2007, including their date of coming into force • Develop sector-specific air emissions regulations • Translate greenhouse gas target structure into sector-specific regulatory targets • Define the scope of offsets system and the administration of technology fund • Finalize air pollutant regulatory framework by fall 2007 • Begin publication of draft regulations by spring 2008

6. Section 71 notice • To support the development and implementation of regulations, comprehensive and consistent baseline data for 2006 will be required from facilities in the regulated sectors • To this end, the government will require facilities in regulated sectors to report 2006 emissions and other relevant data under a notice issued under section 71 of the Canadian Environmental Protection Act,1999 (CEPA 1999)

7. Air Pollutants

8. Air pollutant targets are aligned with the best in the world • Benchmarking to other jurisdictions • Examined the most stringent standards for each pollutant in each sector in Canada (provinces), in the U.S., and internationally • Where no benchmark exists, targets developed based on specific activities and equipment in similar sub-sectors (e.g.: oilsands) • Adjustment to Canadian circumstances where appropriate • Identified sectoral targets based on these stringent regulatory emissions requirements • Calculated national caps for the four main smog-forming pollutants

9. 2,500 2006 Industrial Air Emissions 2015 Projected Industrial Air Emissions with proposed targets 2,000 1,500 kilotonnes - 55% 1,000 - 40% 840kt - 45% 500 600kt 360 kt - 20% 160 kt 0 Volatile Organic Nitrogen Oxides Sulphur Oxides Particulate Compounds Matter (NOx) ( SOx ) (VOC) (PM) Air pollutant emission targets Targets NATIONAL CAPS for 2012 to 2015 (%reduction from 2006 emissions) • NOx – 600 kt Cap (~40%) • SOx – 840 kt Cap (~55%) • VOCs – 360 kt Cap (~45%) • PM – 160 kt Cap (~20%) + SECTOR SPECIFIC CAPS for 2012 to 2015 ALL TO BE VALIDATED BY JUNE 2007, INCLUDING THE DATE OF COMING INTO FORCE

10. Air pollutant compliance options Ways to comply In-house Reductions • Fuel switching • Equipment and Process Upgrades • Control technologies Domestic Trading for NOx and SOx • Cap and trade system • Feasibility of offsets will be assessed Pursue discussions on Canada- US trading for NOx and SOx

11. Air Pollutants Targets – Pulp and Paper and Electricity Sectors Pulp and Paper * PPAQF: Pulp and Paper Air Quality Forum Electricity Generation Produced by Combustion

12. Air Pollutants Targets – Petroleum Refining and Wood Products Petroleum Refining Wood Products (Flakeboard, Plywood, Sawmills etc.)

13. Health Benefits will be significant • Estimated health impacts indicate that benefits will occur across a range of health conditions sensitive to air quality • These benefits include an estimated 1,200 fewer premature deaths per year as a result of the air pollution reductions foreseen under regulations. • Avoided deaths also account for the lion’s share of the $6.4 billion in monetized benefits of regulating clean air, with an expected annual value of $6 billion by 2015

14. Health Benefits follow regional differences in population and air quality Health Benefits 2015 • Total health benefits generally follow the distribution of population across provinces • On a per capita basis, benefits are highest for residents of Quebec (about $225), Saskatchewan ($260) and Alberta ($200)

15. Greenhouse Gases

16. Compliance Year Reporting True-up Penalties April – June 2011 July 2011 - January – March 2011 January – December 2010 GHG targets Existing facilities • 18% reduction from 2006 emission intensity by the end of 2010 • 2% annual improvement thereafter until 2020 • brings us to a 38% reduction from 2006 emission intensity levels by end of 2020 New facilities • 3 year grace period • Clean fuel standard • 2% annual improvement after 3 year grace period

17. GHG compliance options Ways to comply 1. In-house reductions 2. Climate Change Technology fund: one fund/two components • Deployment & Infrastructure: focus on opportunities for near term emission reductions • Research & Development: focus on new transformative technologies • Explore credit for certified project investments • Contribution rate to funds: $15/tonne 2010-2012, then $20/tonne in 2013. Thereafter escalates with GDP rate of growth 3. Trading • Domestic inter-firm trading • Access to domestic offsets • Access to the Clean Development Mechanism (no more than 10% of firms’ total target) • Linkages with other countries 4. Credit for early action • One time credit; 15Mt total with a maximum of 5Mt any given year

18. Estimated Sector GHG reductions in 2010

19. Transportation • Auto • Currently a voluntary agreement by auto industry to reduce sector emissions by 5.3Mt by 2011 • In 2011, a fuel-efficiency standard will come into effect under the Motor Vehicle Fuel Consumption Standards Act. • the regulations will be published by end of 2008 • Rail • Currently has a voluntary agreement, will be regulated after that (2011) under the Railway Safety Act • Marine • Adopting international standards for emissions (developed by the International Maritime Organization) and will apply under the Canada Shipping Act • Aviation • Currently a voluntary agreement to improve fuel efficiency and reduce GHGs • International Civil Aviation Organization developing standards and recommended practices for reduced air emissions (both GHG and air pollutants) • Standards would be regulated under the Aeronautics Act

20. Consumer & commercial products • Amendments to Energy Efficiency Act • new energy performance standards for 18 currently unregulated products (e.g. commercial clothes washers, large air conditioners) • more stringent requirements for 10 currently regulated products (e.g. dehumidifiers, dishwashers) • Performance standards for lighting • Phase out incandescent light bulbs in common (but not all) applications by 2012 • consultations underway to determine exemptions

21. Next Steps

22. Section 71 notice • To support the development and implementation of regulations, comprehensive and consistent baseline data for 2006 will be required from facilities in the regulated sectors • To this end, the government will require facilities in regulated sectors to report 2006 emissions and other relevant data under a notice issued under section 71 of the Canadian Environmental Protection Act,1999 (CEPA 1999)

23. Continued engagement • Series of meetings over the next several months • Sectoral discussions to • Validate air pollutant targets, including timeframe for their entry into force • Implement the GHG target structure by sector • Discussions on cross-cutting regulatory provisions • Trading • Offsets • Credit for early action • Technology fund • Materials will be available on-line

24. Thank you / Merci In-depth Technical Briefing available at: http://www.ec.gc.ca/default.asp?Lang=En&n=FD9B0E51-1 or http://www.ec.gc.ca/default.asp?Lang=Fr&n=FD9B0E51-1