Appendix: Recent Climate Policy Developments

  • Table A.1 describes many recent climate policy developments and whether that policy is included in the analysis of EF2017. Policies already implemented as of summer 2015, such as Quebec’s cap-and-trade system and B.C.’s carbon tax, are not included in the table but are still incorporated in the projections.
  • EF2017 includes many recently announced climate policies. The following criteria were applied to determine whether a certain policy was included in EF2017:
    • The policy was publically announced prior to January 2017.
    • Sufficient detail exists to credibly model a policy, or reasonable assumptions can be made about the details of a policy.
    • Goals and targets, including Canada’s international climate targets, are not explicitly modelled. Rather, the policies currently in place to address those targets are included.

Table A.1 - Recent Major Climate Policy Announcements

Table A.1 - Recent Major Climate Policy Announcements
Description Details EF2017
Pan-Canadian Framework on Clean Growth and Climate Change In December 2016, Canada’s First Ministers released the Pan-Canadian Framework on Clean Growth and Climate Change (Pan-Canadian Framework), which outlined the actions that will contribute to meeting or exceeding Canada’s 2030 climate change target of a 30% reduction below 2005 GHG emission levels. Pillars of the Pan-Canadian Framework include: 1) pricing carbon pollution, 2) complementary actions to reduce emissions, 3) adaptation and climate resilience, 4) and clean technology, innovation, and jobs.

The framework describes many new actions associated with the four pillars. Elements of the framework which were announced prior to December 2016 are discussed in the following rows.
Some elements of the Pan-Canadian Framework are included in EF2017, as described in the following seven rows.
Emission standards for heavy-duty vehicles (for post-2018 and beyond model years) In October 2014, the federal government provided notice of its plan to develop regulations to reduce GHG emissions from on-road heavy-duty vehicles and engines for post-2018 model years. ECCC recently stated it expects to bring forward these regulations in the near future.

The regulation would aim to reduce GHG emissions from on-road heavy-duty vehicles through emission standards applicable to manufacturers and importers of new heavy-duty vehicles, engines and trailers.
Post-2018 model year emission standards for heavy-duty vehicles are included in EF2017 and are modeled similarly to the existing U.S. heavy-duty vehicle standards.
Canada-U.S. joint action to reduce methane emissions from the oil and gas sector In March 2016, Canada and the U.S. announced joint action to reduce methane emissions from the oil and gas sector by 40 to 45% below 2012 levels by 2025.

In May 2017, the federal government released a technical backgrounder detailing the proposed regulations to deliver on this commitment. The regulations will apply to oil and gas facilities responsible for the extraction, production and processing, and transportation of crude oil and natural gas, including pipelines. The first federal requirements come into force in 2020, with the rest of the requirements coming into force in 2023.
Regulation of methane emissions is included in EF2017.
Pan-Canadian Approach to Pricing Carbon Pollution The federal government outlined its proposed approach to carbon pricing in Canada in October 2016. Jurisdictions have the flexibility to implement: (i) an explicit price-based system (a carbon tax like British Columbia’s or a carbon levy and performance-based emissions system like in Alberta), or (ii) a cap-and-trade system (e.g. Ontario and Quebec). Revenues from carbon pricing remain in the jurisdiction of origin.

In May 2017, the federal government released a technical paper on the implementation of a federal carbon pricing backstop. It provides details on how carbon will be priced in jurisdictions that do not have a carbon pricing system in place.

A national carbon price is included in EF2017. Key assumptions regarding the inclusion of this policy are described in Chapter 2, Key Assumptions.

In all cases, the minimum carbon price starts at $10/tonne in 2018 and increases by $10/tonne per year to reach $50/tonne in 2022. This is consistent with the minimum carbon price for jurisdictions with an explicit price-based system in the Pan-Canadian approach to carbon pricing.

In the Reference Case, the carbon price is held at $50/tonne from 2022 to 2040. In the HCP and Technology Cases, the price continues to increase, reaching $90/tonne in 2030 and $140/tonne in 2040. The same carbon price is applied to all provinces and territories regardless of existing carbon pricing intentions as a simplifying assumption.

Initiative to green the federal government The federal government announced in November 2016 that it would act to reduce its own GHG emissions. This includes initiatives to reduce energy consumption in government buildings through repairs and retrofits, and investments to shift the government vehicle fleet to electric and hybrid vehicles.  This initiative is included in EF2017.
Federal phase-out of traditional coal-fired generation by 2030 In November 2016, the federal government announced it is amending the regulations applicable to coal-fired electricity generation to ensure that all traditional coal-fired units are phased out by no later than 2030. Alberta, Saskatchewan, New Brunswick, and Nova Scotia have coal-fired power plants that would be impacted by these regulations. Prior to this announcement, Alberta had already committed to phasing out pollution from coal-fired plants by 2030. The phase-out of coal-fired generation is included in EF2017. Equivalency agreements with Saskatchewan and Nova Scotia were announced and are discussed later in this table.
Federal clean fuel standard The federal government announced a plan in November 2016 to work with provinces, territories, and stakeholders to develop a clean fuel standard. A clean fuel standard requires the lifecycle carbon footprint of fuels supplied to decline over time.

The proposed standard would be broadly applied to many sectors of the economy, flexible for fuel suppliers and complementary to carbon pricing.
The clean fuel standard was under development at the time of analysis and is not included in EF2017.
Federal regulations to reduce hydrofluorocarbon (HFC) consumption In November 2016, the federal government proposed regulatory measures to reduce HFCs. HFCs are powerful GHGs and are increasingly used in commercial, industrial, and residential applications such as refrigeration, air-conditioning, foam insulation, and aerosols. These regulations aim to reduce HFCs, a potent GHG, and will impact GHG emission trends. They are unlikely to demonstrably impact the energy system and are not included in EF2017.
B.C. – Climate Leadership Plan The B.C. government released its Climate Leadership Plan in August 2016. The plan highlights 21 action items to reduce GHG emissions in key areas such as transportation, industry and utilities, and natural gas. Some elements of the B.C.’s Climate Leadership Plan are incorporated into EF2017. This includes extending B.C.’s low carbon fuel standard to reducing the carbon intensity of transportation fuels by 15% by 2030 and incentives for zero emission vehicles.

Many other actions described in the B.C. Climate Leadership Plan were still under development at the time of analysis and are not included in EF2017.
Alberta - Climate Leadership Plan In spring 2016, the Alberta government unveiled a climate change and emissions strategy based on recommendations put forth by the Climate Leadership Panel in fall 2015. The main elements of the Alberta Climate Leadership Plan, including recent announcements related to the plan, are discussed below. Elements of the Alberta Climate Leadership Plan are described in the following five rows.
Alberta - carbon pricing:

end-use emissions
In January 2017, an economy-wide carbon levy on GHG-emitting fuels came into effect in Alberta. The levy is set at $20/tonne in 2017 and will increase to $30/tonne in 2018. The funds generated by the levy will be recycled back into the Alberta economy through direct payments to low- and middle-income families, small business tax reductions and investments in energy efficiency, technology and infrastructure. The carbon levy is included in EF2017. In the Reference and HCP cases, the levy increases to $40/tonne in 2021 and $50/tonne in 2022 in alignment with the federal government’s plan to price carbon pollution.
Alberta - carbon pricing: large industrial emitters Alberta announced plans to replace its existing carbon pricing program for large industrial emitters, the Specified Gas Emitters Regulation, with a new program referred to as the Carbon Competitiveness Regulation by the Climate Leadership Panel. Large emitters would pay a carbon levy of $30/tonne starting in 2018 on their combustion emissions.

The Climate Leadership Panel proposes a sector-specific output-based performance standard as a method to mitigate competitiveness impacts of carbon pricing on trade-exposed industrial sectors. Under the performance standard Alberta firms would receive allocations, essentially free emission permits, on a per-unit-of-output basis. The allocations would equal the emissions per-unit-of-output of the top quartile in terms of emission intensity in a given industry. This approach provides firms with an incentive to reduce their emission intensity and a measure of protection for emission-intensive and trade-exposed industries.
Pricing of industrial GHG emissions is included in EF2017. In the Reference and HCP cases, the price for industrial emissions increases to $40/tonne in 2021 and $50/tonne in 2022 in alignment with the federal government’s plan to price carbon pollution.
Alberta - accelerated coal phase-out The Alberta government has stated its plan to phase out pollution from coal-fired electricity generation by 2030.

Under existing federal regulations, 12 of Alberta’s 18 remaining coal-fired plants will be retired prior to 2030; the six remaining plants will also be phased out under the Alberta plan.
The accelerated phase-out of coal-fired generation in Alberta is included EF2017.
Alberta – Renewable Electricity Program As part of the Climate Leadership Plan, Alberta established the Renewable Electricity Plan. The Plan calls for the development of 5 000 MW of renewable electricity between 2017 and 2030. The target of the program is to have at least 30% of the electric energy produced in Alberta produced from renewable energy resources.

Through a competitive process managed by Alberta Electricity System Operator, auctions will be held starting in 2017. The auctions will identify the lowest cost qualified renewable electricity projects, which will receive support through a renewable energy credit payment mechanism. Support will be funded through a portion of carbon pricing revenues from large industrial emitters. 
The Renewable Electricity Program is included in EF2017.
Alberta - 100 MT limit on oil sands GHG emissions In the fall of 2016, the Alberta government passed legislation that limits oil sands GHG emissions to an annual maximum of 100 MT.

The legislation exempts certain oil sands emissions from the cap, including cogeneration emissions attributable to electric generation and up to 10 MT of emissions related to new or expanded upgrading capacity.
The MT limit on oil sands GHG emissions is included in EF2017.
Saskatchewan – 50% renewable target Saskatchewan’s provincial utility, SaskPower, set a target of increasing renewable generating capacity up to 50% of total capacity by 2030. Currently about 25% of generating capacity in Saskatchewan is renewable. As a target, this initiative is not explicitly modelled.
Saskatchewan – equivalency agreement on coal phase-out The Saskatchewan government announced in November 2016 that it and the federal government reached an agreement in principle to finalize an equivalency agreement related to the federal government’s plan to phase-out traditional coal-fired electric generation by 2030. Through the agreement, Saskatchewan would be allowed to run its traditional coal-fired plants beyond 2030 on the condition that it meets or improves upon federal emission requirements over time on an electricity system-wide basis. The equivalency agreement between Saskatchewan and the federal government is included in EF2017.
Ontario – cap-and-trade program Ontario’s cap-and-trade program came into effect in January 2017. The cap will be set at 142 MT for the first year of the program and will decline to 125 MT by 2020.

The program will be phased in and provide temporary allowances to trade-exposed industries. Revenues from the plan will be invested in GHG-reducing initiatives for homes and businesses, such as electric vehicle purchase incentives and energy retrofits.
The Ontario cap-and-trade program is included in EF2017. The analysis assumes the permit price increases to $20/tonne in 2019 and to $50/tonne by 2022 in the Reference and HCP Case. This is a simplifying assumption as the future price of GHG emissions under a cap-and-trade system is uncertain and will be determined by the supply and demand for emission permits.

In the Reference Case, the permit remains at $50/tonne through the remainder of the projection period. In the High Carbon Price Case, the permit price continues to increase at $5/tonne per year after 2022, reaching $90/tonne in 2030 and $140/tonne by 2040.
Ontario - Climate Change Action Plan In June 2016, the Ontario government released its Climate Change Action Plan. The five year plan introduces key actions Ontario will take towards meetings its emissions reduction targets. It also defines how revenues from the province’s cap-and-trade program will be spent.

The plan lists key actions to be taken in nine areas, such as transportation, land-use planning, and research and development. The Ontario government will consult with stakeholders regarding the design and implementation of many of these actions.
Some elements of Ontario’s Climate Action Plan are incorporated into EF2017. This includes the implementation of a renewable fuels standard for gasoline and incentives for electric vehicles.

Other actions described in the Ontario Climate Action Plan were still under development at the time of analysis and are not included in EF2017.
Quebec – The 2030 Energy Policy In spring 2016, Quebec released an energy policy document that aims to guide the province’s energy transition to 2030. The document outlines the government’s plans to establish a cohesive governance structure to manage the transition, promote a low-carbon economy, diversify Quebec’s energy supply, and take a new approach to fossil fuel energy. It also sets out targets to be achieved by 2030 for improving energy efficiency, reducing petroleum consumption and increasing renewable energy production.

Legislation enabling the implementation of the 2030 Energy Policy was passed in December 2016. A series of action plans describing the measures that will be taken to implement the Policy will be forthcoming.
Measures to implement the Quebec 2030 Energy Policy were still under development at the time of analysis and are not included in EF2017. The Quebec cap-and-trade system is included in EF2017.

The Quebec zero emission vehicle mandate mentioned in the 2030 Energy Policy is discussed in the following row.
Quebec – zero-emission vehicle standard In October 2016, the Quebec government passed legislation establishing a zero-emission vehicle (ZEV) standard for the province. The standard requires car manufacturers to sell a minimum percentage of zero-emission ZEVs, starting with 2018 models.

Currently, 10 U.S. states, including California and several northeastern states, have adopted ZEV standards.
The ZEV standard is included in EF2017. The implementation of the mandate is modelled after ZEV standards in several states.
New Brunswick – Climate Change Action Plan New Brunswick released a climate change action plan in December 2016 that outlines the province’s response to climate change. The plan includes over 100 action items related to climate change. Actions described in the New Brunswick Climate Change Action Plan were still under development at the time of analysis and are not included in EF2017.
Nova Scotia – federal agreement on carbon pricing and equivalency agreement

In November 2016, Nova Scotia and the federal government announced an agreement in principle on Clean Growth and Climate Change. Nova Scotia stated it would implement its own cap-and-trade program. Nova Scotia also announced it would establish a new equivalency agreement to allow Nova Scotia’s coal-fired plants to operate at some capacity beyond 2030.

Aligning with the assumptions related to the federal carbon pricing plan, carbon pricing via a cap-and-trade program in Nova Scotia is included in EF2017.

The equivalency agreement between Nova Scotia and the federal government is included in EF2017.
Newfoundland and Labrador - Management of Greenhouse Gas Act The Newfoundland and Labrador government passed legislation in June 2016 that enables the regulation of GHG emissions from industrial facilities in the province. The plan will include a form of carbon pricing for industrial emitters, the revenues of which will support funding of emission-reducing technology. Regulations to enact the plan were still under development at the time of analysis and are not included in EF2017.      

 

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