CANADA UNVEILS SOFTENED FINAL GHG PERFORMANCE STANDARD FOR COAL UNITS

Government Maintains 10-Year Exemption for CCS Projects

Tamar Hallerman
GHG Monitor
09/07/12

The Canadian government has finalized new greenhouse gas emissions performance standards for coal-fired power plants that more closely mirror a similar regulation proposed by the U.S. Environmental Protection Agency earlier this spring. To the ire of environmental groups, Environment Canada announced weaker standards than initially proposed at a press conference this week in Saskatoon, Saskatchewan. Under the final regulations, all new and end-of-life coal units must emit less than 926 pounds of CO2 per megawatt-hour of electricity beginning in July 2015, similar to the emissions intensity of an unmitigated natural gas combined cycle unit. The final rulemaking represents a loosening of expectations compared to the 827 lb/MWh standard the government initially proposed in August 2011, as well as a move towards the U.S. standard, which is currently proposed at 1,000 lbs/MWh for new fossil fuel-fired units (see table). The final Canadian standards also extend the permitted economic lifetime of individual coal units—or the deadline by which plant operators must either upgrade or retire units—from 45 to 50 years.

In his remarks at the event, Canadian Environment Minister Peter Kent said the federal government spent the better part of a year talking with industry and provincial officials before finalizing the standards, which he described as “stringent.” He said the regulations will help the federal government reach its goal of reducing emissions 17 percent below 2005 levels by 2020. “Clearly, if we want to make headway on reducing emissions, we have to take a hard look at coal-fired plants. And that’s exactly what we’ve been doing,” Kent said, adding that the reductions made under the standards would be the equivalent of taking 2.6 million cars off the road annually.

Final Rule Allows CCS Projects to Defer Compliance for 10 Years

Similar to its U.S. counterpart, the new Canadian performance standards will essentially require coal plant operators to retire old units, switch to natural gas or install carbon capture and storage technology. In order to help incentivize CCS, the government said it would allow a 10-year compliance exemption for operators that choose to pursue CCS on their coal units, a measure also included in the proposed rulemaking. The U.S. standard as proposed includes a similar provision to incentive the technology by providing a pathway that allows for CCS operators to average a coal unit’s emissions over 30 years. That option gives operators up to a decade to install the technology, according to the EPA.

During his speech, Kent mentioned policies moving ahead in the United States aimed at limiting greenhouse gas emissions as motivation for Canada to do the same. “The United States is also moving towards lower or non-emitting types of generation—from high-efficiency natural gas and renewable energy to coal with carbon capture and storage,” he said.

Canada Takes Sector Approach to Reducing Emissions

The emissions performance standards for coal represent the Canadian government’s most recent effort to limit greenhouse gas emissions from the country’s largest emitters via a sector-by-sector approach instead of putting a blanket price on all CO2 emissions via a carbon tax or a cap-and-trade scheme. The federal government has already finalized greenhouse gas limits for light duty vehicles and renewables, and standards limiting emissions from the oil and gas industries are expected to come next.

While coal accounts for only about 15 percent of Canada’s electricity generation, it is responsible for more than three-quarters of the electricity sector’s greenhouse gas emissions, according to government figures. The regulations could particularly shift the energy landscapes of provinces in western Canada, such as Saskatchewan and Alberta, which rely primarily on an aging coal infrastructure for electricity. For those provinces, the government said it would allow for some flexibility via equivalency agreements, which would allow individual provinces to apply their own regulations as long as they are of similar stringency to the national performance standards.

Green Groups Accuse Government of Pandering to Industry

Environmental groups, disappointed in the loosening of the emissions reduction requirements, criticized the government for softening the standards in order to cater to the interests of coal companies and electricity generators. “We want good, robust and stringent regulations for coal-fired electricity in Canada,” Ed Whittingham, executive director of the Pembina Institute, said in an interview. “This was an opportunity to make a big dent in Canada’s greenhouse gas emissions, and we don’t think they should have been weakened from what we first saw last year.”

Coal industry officials said they are not content with the final regulations either. “We certainly recognize that Environment Canada has moved from its previous position, but we remain very disappointed in the final regulations,” Ann Marie Hann, president of the Coal Association of Canada, said in an interview. “From our perspective, they still don’t strike the right balance between trying to address the environmental issues associated with GHG emissions and the social and economic considerations that come from coal-fired generation. There seems to be a preponderance in the regulations for addressing the environmental issue, but they seem to be doing that at the expense of the coal industry and the people and the people that rely on that industry for jobs.”

Neither Whittingham nor Hann said they expect coal operators to move towards CCS as a result of the standards. “What we need to incentivize CCS is a price on CO2. [The performance standards] alone are not going to do the trick, from what I’ve seen” Whittingham said. Hann argued that CCS is not yet commercialized enough to be considered a viable option for the coal industry. “Carbon capture and storage is several years away. In the meantime, these regulations come into effect in 2015 and the first plants will be required to meet the standards in 2020. That is less than eight years away, and the general consensus that at best CCS technology is not proven,” she said. “Power plants have to make decisions today about how they’re going to produce power. They cannot possibly be factoring in carbon capture and storage technology now because it’s unproven. By default, what these regulations are doing is forcing power plants to switch to natural gas.”