Regulatory Framework for Air Emissions

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Executive Summary

Canada's New Government has launched a concrete and realistic agenda to protect the health of Canadians, to improve environmental quality, and to position Canada as a clean energy superpower. Canada has historically relied on a variety of non-compulsory measures to reduce air emissions. However, these have not proved sufficient to reduce the health and environmental risks across the country. Overall, Canada is lagging behind other countries. For example, according to an Organisation for Economic Co-operation and Development (OECD) study, Canada ranks near the bottom of all OECD countries in terms of per capita and total emissions of smog-causing pollutants. While Canada accounts for just 2% of global greenhouse gas emissions, its per capita emissions are among the highest in the world and continue to increase.

The proposed framework is comprehensive and includes mandatory and enforceable reductions in emissions of greenhouse gases and air pollutants that will deliver tangible benefits to the health of Canadians and their environment. It also engages all Canadians to take significant, measurable action at home, in Canada.

Climate change is a global issue of major concern for Canadians. It is crucial that Canada do its part to address its own contribution to global climate change. Air pollution is a significant threat to human health and the Canadian environment. In order to address the real concerns of Canadians suffering from the health effects of air pollution, and to clean up Canada's environment, the government must act to reduce emissions of air pollutants.

To address these challenges in a coordinated way will require nothing short of a complete transformation in the capital stock of energy producing and consuming businesses and households across Canada. While cooperation among all orders of government will be required, only the Government of Canada is uniquely situated to lead on this issue if we are to meet the challenge in a cost-effective manner that will ensure the continued competitiveness of the Canadian economy. The government's regulatory framework will provide a nationally-consistent level of protection for the health of Canadians and their environment.

Making significant progress on environmental issues is a key priority for this government. In the Speech from the Throne in October 2006, the government committed to "take measures to achieve tangible improvements in our environment, including reductions in pollution and greenhouse gas emissions".

The Clean Air Regulatory Agenda is the cornerstone of the government's broader efforts to address the challenges of climate change and air pollution. In October 2006, the government published a Notice of Intent to regulate air emissions, which provides the basis for the Clean Air Regulatory Agenda. It provides a regulatory framework for short-term industrial emission reduction targets, actions for transportation sources, actions on consumer and commercial products, and the regulatory framework for improvement of indoor air quality.

For the first time in Canada, there will be regulations setting mandatory and enforceable reduction targets for emissions of greenhouse gases and air pollutants from all major industrial sources. Because industrial emissions of greenhouse gases and air pollutants each account for 50% of Canada's total emissions and share many common sources, the coordination of requirements will allow firms to make cost-effective decisions to maximize synergies in reducing their emissions. The industrial regulations will cover facilities in the following sectors:

Looking first at greenhouse gases, to put industry on the path to contribute to deep long-term reductions in greenhouse gas emissions, the government will put in place short-term emission reduction targets that will come into force in 2010.

For existing facilities, the emission-intensity reduction target for each sector is based on an improvement of 6% each year from 2007 to 2010. This yields an initial enforceable reduction of 18% from 2006 emission-intensity levels in 2010. Every year thereafter, a 2% continuous emission intensity improvement will be required, resulting in an industrial emission-intensity reduction of 26% by 2015. Targets for new facilities will be established based on cleaner fuel standards. These targets will result in absolute reductions in emissions of greenhouse gases from industry as early as 2010 and no later than 2012, even if the economy grows as expected.

In order to provide flexibility and minimize the economic impact of the regulations, there will be several options for firms to meet their legal obligations. They can:

These unprecedented measures will result in mandatory reductions in greenhouse gas emissions. For the first time since Canada signed the Kyoto Protocol, Canadian industry will be required to make a measurable contribution to the global effort to control greenhouse gas emissions.

Canada cannot, however, go overnight from a country whose total greenhouse gas emissions have progressively increased to one whose emissions are declining steadily.

The short-term industrial targets for greenhouse gases in this regulatory framework will stabilize and then start reducing overall emissions from industry.

The short-term targets are being supplemented by a series of targeted initiatives to support increased development of renewable energy, more efficient use of existing energy sources, and cleaner transportation.

Taken together, these regulatory and non-regulatory actions, coupled with ambitious new initiatives being taken by provincial and territorial governments, mean that Canada's greenhouse gas emissions from all sources are expected to begin to decline as early as 2010 and no later than 2012. Thereafter, absolute emissions continue to decline.

The government is committed to reducing Canada's total emissions of greenhouse gases, relative to 2006 levels, by 20% by 2020.

Turning now to air pollutants, the government stated in the Notice of Intent that it would set fixed targets that "are at least as rigorous as those in the U.S. or other environmental performance leading countries". National emission caps will be set for each pollutant of concern. The national emission caps represent the following percentage reductions from 2006 levels: 40% for nitrogen oxides (NOx), 55% for sulphur oxides (SOx), 45% for volatile organic compounds (VOCs), and 20% for particulate matter (PM). Limits will also be set for other air pollutants such as mercury from electricity generation, and benzene emissions from the natural gas, and iron and steel sectors. The targets for air pollutants will come into force as early as 2012.

To develop these targets and to determine how the targets will be allocated among the covered sectors, the government undertook a benchmarking exercise. This involved assessing the environmental performance, the technology and operating practices, and the most stringent operating permits of existing regulatory regimes in Canada and other jurisdictions. For some sectors, these regulatory limits or emission performance levels were adapted to take into account characteristics specific to those sectors in Canada, including the financial situation of the sector, potential impacts on the economy, and the raw materials used relative to the benchmarked jurisdiction. The results of this benchmarking exercise and the date of coming into force will be validated through discussions with provinces and territories, each of the covered sectors, and labour, environmental and health groups over the next several months.

To provide flexibility in meeting their emission caps, there will be two options for firms to meet their legal obligations. They can:

If, however, a firm is in an area where the quality of the air does not meet national air quality objectives that have been set in advance by the government, restrictions will be placed on the firm's use of credits from emissions trading.

As part of its ongoing work with the U.S. to address transboundary air pollution, the government will also expedite discussions with the United States on a cross-border SOx and NOx emissions trading system. Canada and the U.S. have also recently agreed to start negotiations for an annex to the Canada-United States Air Quality Agreement to reduce the transboundary flow of particulate matter.

In addition to setting industrial emission targets, the government will set national air quality objectives for particulate matter and ground-level ozone based on an assessment of the health and environmental effects associated with exposure to these air pollutants in the air we breathe in Canada.

Sector-specific regulations will be developed, with publication of the draft regulations in the Canada Gazette, Part I, starting in spring 2008.

With this regulatory framework, Canada will have one of the most stringent sets of regulated targets for greenhouse gases and air pollutants in the world.

The government has committed to review the regulations on industrial air emissions every five years in order to assess progress in reaching medium- and long-term emission reduction objectives. The first such review would take place in 2012.

Preliminary analysis indicates that implementation of the industrial regulatory framework will result in significant improvements in air quality, including decreases in smog levels and reductions in acid deposition. Substantial health benefits are also predicted, with total annual benefits in the year 2015 from the reduced risk of death and illness associated with these air quality improvements estimated to be $6.4 billion. This robust regulatory system will also promote technological investment and innovation in Canada, yielding long-term economic benefits.

That said, strong regulation inevitably comes at a cost – and those costs will be borne, at least in part, by individual Canadians and their families. However, while these costs are real, they are also manageable. Preliminary analysis performed by Environment Canada indicates that the annual economic cost of meeting both the regulated greenhouse gas targets and the regulated air pollution targets should not exceed 0.5% of GDP in any given year up to 2020.

To move forward with industrial regulations, the government will meet over the next several months with provinces and territories, each industry sector, and other stakeholders to discuss key elements of the regulations. As part of the regulatory development process, a notice will be issued under Section 71 of the Canadian Environmental Protection Act, 1999 (CEPA 1999). This notice will require those industry sectors that will be covered by the proposed regulations to report to the government the 2006 data that will be used to set the emission reduction targets.

The government also intends to work with provinces and territories to ensure consistency in the way in which regulations are applied by each order of government and will work to make the best use possible of equivalency agreements.

Along with its ambitious agenda to reduce industrial emissions, the government is taking action on emissions from transportation sources, emissions from consumer and commercial products, and indoor air quality.

Transportation is one of the largest sources of greenhouse gas and air pollutant emissions in Canada. As part of a broader transportation policy package, a mandatory fuel-efficiency standard, beginning with the 2011 model year, will be developed through a process that will involve input from all the stakeholders, and it will be published by the end of 2008. It will be designed for Canada to maximize our environmental and economic benefits and will be benchmarked against a stringent, dominant North American standard. To do so, the federal government intends to work in close collaboration with the U.S. government pursuing the concept of a Clean Auto Pact, towards establishing an environmentally ambitious North American regulatory standard for cars and light-duty trucks. For other transportation sources – rail, marine, aviation, and on-road and off-road vehicles and engines – new standards and regulations will be developed and implemented to reduce emissions of greenhouse gases and air pollutants.

The government commits to setting performance standards for all lighting that would phase out the use of inefficient incandescent light bulbs in common applications by 2012. It is also developing and will implement new energy performance standards for consumer and commercial products, such as dishwashers, refrigerators, air conditioners, and commercial boilers, while also taking action to reduce emissions of volatile organic compounds by minimizing the amount of solvents used in consumer and commercial products. These actions will result in significant reductions in air emissions from the products used daily by households and businesses across Canada.

Canadians spend 90% of their time indoors, where air quality can be compromised by such things as mould, improperly vented or poorly maintained furnaces, stoves or heaters, and building materials. For the first time ever, the government is developing a comprehensive regulatory agenda to improve indoor air quality and intends to develop a priority list of indoor contaminants that require government action. The government will then collect information on these contaminants in order to guide decisions on the development of guidelines and product regulations.

In consultation with Canadians, the government has developed a regulatory framework that introduces an integrated approach to the implementation of mandatory reductions in emissions of greenhouse gases and air pollutants while preserving economic growth.

Through this regulatory framework, the government is implementing mandatory and enforceable measures for the major sources of air emissions: industry, transportation and consumer and commercial products. In addition to delivering significant reductions in emissions, the framework provides regulatory certainty with specific emission-reduction targets and timelines, flexible compliance mechanisms, and regular monitoring and review in order to provide a complete package that delivers a better overall outcome than previous plans.