Friday, September 29, 2006

The Kyoto numbers blame-game: eighty percent of what?

There’s a lot of play in Canada’s media about the Environment Commissioner’s assertion that the oil and gas sector contributes 80 percent of Canada’s greenhouse gases (GHGs). To tell the truth, I don’t even know if the Commissioner actually said it. But some media stories say she said it, and that’s what I’m talking about.

Let’s clear this up right now. In 2004, 80 percent of Canada’s GHGs were related to the use of “energy”—see page 5 of Environment Canada’s latest summary of trends. This refers to all energy use in this country: fossil fuel combustion in motor vehicles, electric power generation, forced air furnaces in homes, and any manufacturing process in which fossil fuels are burned, as well as fugitive and process emissions related to energy industries.

Alberta’s oil and gas sector was responsible for a portion of this 80 percent, but not for 80 percent. Anyone who drives a car or rides a bus, train, or plane, or who enjoys a heated home in wintertime also needs to look in the mirror.

But I digress. I promised yesterday that I would get into the Ontario electricity debate, and look at why the McGuinty government is reluctant to paint its recently announced nuclear expansion in bright environmental green. Don’t worry, it’s coming.

Stay tuned.

Thursday, September 28, 2006

Dalton could take the Terminator on the environment

A few weeks ago I mentioned that environmentalism is becoming the new mainstream. I cited California governor Arnold Schwarzenegger as an example of this. He is a moderate Republican seeking re-election, and has obviously chosen the environment as one of his major campaign planks.

Yesterday he buttressed that plank a little more by setting a hard target for greenhouse gas (GHG) reductions in his state: not only will California cut emissions to 1990 levels by 2020, it will cut them to 80 percent below 1990 levels by 2050.

Well, Schwarzenegger’s counterpart in Ontario, Dalton McGuinty, is also facing reelection (though he has more time than the Terminator). Few people realize McGuinty has put Ontario in easy striking distance of 1990 emission levels. How? By recommitting to nuclear power.

If Ontario were to refurbish or replace the nuclear reactors laid up in the 1990s, it could bring its electricity-sector GHGs to nine million tonnes below 1990. That would bring Ontario as a jurisdiction to within eight million tonnes of the target. (My June 8 post gives some of the backup numbers.)

How could we wipe out the remaining eight million tonnes? For starters, by encouraging further electrification in transportation, both in light-duty cars and mass transit vehicles. Others will surely have their own ideas. But it’s doable.

And we could accomplish this well before 2020.

We are truly this close. But McGuinty refuses to tout his nuclear plan as green. To find out why, read my next post.

Friday, September 22, 2006

Suing the automakers: is California dreamin’?
California’s lawsuit against automakers for exhaust emissions from motor vehicles is generating worldwide headlines. Is this is just a bunch of noise? I don’t think so. Forget for a moment the strict legalities involved, though they are a source of legitimate worry for automakers. (Don’t go by the recent unsuccessful similar actions against major power generating companies, e.g. Connecticut v. American Electric Power. This case is under appeal, and could result in a landmark application of the doctrine of public nuisance.)

Instead, let’s focus for a moment on the PR aspect of this, because it’s the more immediate problem for the automakers. This is an electoral move, calculated to give California’s attorney general Lockyer some positive visibility in his quest for election as state treasurer in November. If his gambit is successful, auto emissions will be an election issue. It’s always a good populist move to attack big companies during an election. So the auto companies can expect some nastiness, which might reverberate past November.

How should they respond?

I have suggested in recent posts that hybrid vehicles—ones with powertrains that integrate a gasoline or diesel engine with an electric motor—are the wave of the future when it comes to reducing emissions from motor vehicles. We need to make hybrids more widespread. How? Encourage consumer uptake by making these vehicles less expensive. The province of Ontario already offers a $2,000 sales tax rebate to anyone who buys a hybrid. The government of Canada now needs to match this, with a GST rebate.

No doubt the Naomi Klein set in Canada would love to stick it to the automakers—which are all big foreign-owned multinationals. But a California-style move in this country would be stupid. Let’s be realistic and think this through. Ontario and Canada need the auto industry. The auto industry needs to develop hybrids. Let’s push for the GST rebate.

Tuesday, September 19, 2006

Liberals, Environment Canada bureaucrats brace for AG’s Kyoto blast

Any day now, the federal Auditor General’s environment commissioner will release the report of her inquiry into federal Kyoto programs.

It won’t be a happy tale.

Canada, she will report, has told its citizens and the rest of the world that it’s in the vanguard of the movement to halt the increase in greenhouse gas (GHG) emissions. She will tell us that her inquiry has revealed that Canada is indeed a world leader—in talking about reducing GHGs. While Canada spent the nine years since the 1997 Kyoto Accord talking about reducing GHGs, actual GHG emissions skyrocketed.

In short, federal money thrown at climate change went to building a new federal bureaucracy, as well as to funding environmental groups whose put-on-a-sweater-and-turn-down-the-thermostat admonitions appear to be the sum and substance of their contribution to Canada’s energy and Kyoto debate.

Will the AG agree with Environment Minister Rona Ambrose that Canada cannot hope to meet its Kyoto commitments? I hope not. But her lambasting of federal Kyoto programs will be sweet music to the ears of the Conservatives, who are feeling the Kyoto heat these days. Unfortunately for them, the rich melody will soon give way to an atonal cacophony of demands for meaningful action on climate change.

There’s still hope. Canada wasn’t always more talk than action. The bureaucracy mentioned above is not useless; in fact it could and should be a formidable force in climate change policymaking and program delivery.

How could the bureaucracy marshal its considerable resources? Canada was one of the last holdouts against the anti-nuclear campaign that removed nuclear energy from the Clean Development Mechanism in Bonn in 2001. Now that the principal group behind that campaign—the German Green Party—is safely out of power, Canada should lobby to put the atom back into the CDM. The Prime Minister indicated in St. Petersburg (see my July 16 post) that he wants this to happen. The Environment Canada bureaucracy has built an extensive network of international contacts over the years. The time is ripe.

Thursday, September 14, 2006

Federal support for Ontario nukes: making it work

There has been a lot of speculation in recent months about exactly how the U.S. Energy Policy Act (EPAct) of 2005 will support new nuclear projects in that country. The EPAct introduced a series of measures—construction delay insurance, loan guarantees, and power production tax credits—designed to underpin a new wave of nuclear construction.

As I pointed out in some recent posts (August 20 and August 27), the RGGI cap-and-trade system for electricity-related GHGs, involving seven northeastern U.S. states, introduces a potential further avenue of support. In the new permit market, nuclear generators might be able to earn offset credits and sell them to fossil generators.

However, there is now some question as to whether this, in combination with the support measures in the EPAct, gives an unfair competitive advantage to nuclear over fossil generation. This question will acquire greater urgency if and when generation source becomes an issue—and a selling point—as power hungry jurisdictions enter into new supply agreements, especially if these involve trade between covered and non-covered jurisdictions.

For this reason, I predict the emergence of a further form of integration in power companies: integration based on generation type. Because of carbon trading, generating companies’ output will be valued and marketed at least in part on the basis of its emission intensity, measured in grams emitted per watt-hour. This will push up the cost of operating coal-fired plants, thereby removing at least in part their current cost advantages. Fossil-dominated generating firms that operate in cap-and-trade areas—like NRG Energy, which has 6,800 megawatts of fossil-fired capacity in the RGGI—will acquire, or be acquired by, firms with nuclear fleets.

How will this play out in Canada? In Ontario, we have an interesting situation. The biggest generating company, Ontario Power Generation (OPG), operates fossil, nuclear, and hydro plants. Bruce Power, Canada’s only private sector nuclear generating company, operates six CANDU reactors. Collectively, Ontario’s generating companies produce electricity with an emission intensity of 272 tonnes per million kWh. OPG, and by extension the Province of Ontario (its only shareholder), owns Bruce Power’s reactors, which cranked out nearly 33 billion kWh in 2005 and were a major reason for Ontario’s relatively low emission intensity.

In this configuration, who would and should get credit for the carbon-free electricity that Bruce Power generates in a future cap-and-trade system?

Difficult question, but not unanswerable. The critical thing is that the federal government should support Ontario’s nuclear expansion. It is sound industrial policy—Ontario is the engine of Canada’s economy, and electricity powers that engine. And it is sound environmental policy—using nuclear to offset emissions from the fossil plants dovetails perfectly with both climate change and clean air policies. If you reduce carbon dioxide, you also reduce nitrogen and sulphur emissions.

The problem is the partisan political landscape in Ontario. I’ll take this up in my next post.

Thursday, September 07, 2006

Conservatives eye electoral outcomes from a pro-Kyoto move: what’s behind door #3?

Now that CO2 is a regulated substance under the Canadian Environmental Protection Act (CEPA), the government is obliged to do something about it. True, the Conservatives could drag their heels and wait until they win a majority government before either removing CO2 from the list of regulated substances or temporizing by way of some long-winded consultation exercise. But of course they would have to win a majority to have the freedom to do this. And the next election might be won or lost over their action, or inaction, on the environment.

So they’re back at square one, which is right now. And right now the Conservatives can do one of three things. One, they could just ignore the CEPA and hope no one notices. But as I mentioned in my June 18 post, the Liberals, led by Pablo Rodriguez (Honoré-Mercier), indicated they will try to force the Conservatives to do something about CO2. If they could somehow combine with the Bloc and NDP on the Parliamentary committee that looks at environmental issues, the Liberals could make some real mischief: a combined opposition could outvote the government on the committee.

Two, they can try taking CO2 back out of the CEPA. But this is non starter. Even if they managed to cut a deal with the non-Liberal opposition, or even with a Liberal leadership hopeful on the committee, it would be difficult to avoid protests from the green movement, especially the Quebec-based one.

The Conservatives’ third option is the most daring, and could yield the most benefits. They could pull a Richard-Nixon-goes-to-China, and take a giant step into truly meaningful environmental policy by starting a cap-and-trade system for CO2 and pollution emissions. Concurrently, they could double the Wind Power Production Incentive (WPPI) from 1,000 to 2,000 megawatts and extend it to nuclear generation. Then, they could offer a $2,000 GST rebate to anyone who buys a hybrid car. This would match Ontario’s provincial sales tax credit for similar purchases.

The cap-and-trade system could start within four or five years. This gives more than enough time to kick-start new nuclear projects, especially in Ontario—provided the Conservatives give nukes some incentive via the WPPI. This might also encourage Quebec to rehabilitate Gentilly 2. As I pointed out in my June 8 post, the Ontario move alone would displace 20 million tonnes of emissions annually from coal-fired generating plants. Twenty million tonnes is a bigger reduction than any measure the Liberals ever dreamed of when they were running things. And it’s just one province.

How Nixonian would that be? Very. No one expects this from the Conservatives. The moral effect could be overwhelming.

Think of it: environment problem—solved. No one can argue with the sheer size of the emission reductions entailed in Ontario’s nuclear plans. “Fiscal imbalance” problem—solved. Federal money goes to Ontario, Quebec, and New Brunswick for new reactors or reactor overhauls. And perception problem—solved. The centerpiece of the WPPI is wind power, and every green advocate has been calling for more wind power. How could they possibly disagree with this?

Could these moves pay off with Quebec and Ontario votes? Take the giant step and find out.

Wednesday, September 06, 2006

Will the environment be an issue in the next Canadian federal election?

Over the last few weeks we have seen major developments in environmental policy at the state level in the U.S. On August 15, the Regional Greenhouse Gas Initiative (RGGI), a coalition of seven northeastern states, introduced a model rule governing the operation of a cap-and-trade system for electricity related greenhouse gases (GHGs).

In early August, California Governor Arnold Schwarzenegger agreed with U.K. Prime Minister Tony Blair to cooperate in transatlantic emission trading. This would eventually see California companies buying or selling carbon permits to or from U.K.—or even European Union—companies.

And just last week, Schwarzenegger signed a historic carbon-emission deal with the Democrat-controlled California state senate. The California deal includes a provision to establish a carbon market. It is looking like this move will strengthen the Terminator’s bid to win this November’s gubernatorial election.

Didn’t I say on August 13 that environmentalism is becoming part of the new mainstream, especially among moderate conservatives?

Does this have implications for Canada? You bet it does. The Harper Conservatives are looking to shore up support among several critical constituencies, among which is the pro-Kyoto crowd. Was I dreaming, or did I hear on the early-morning CBC that the Conservatives are pondering the idea of regulating GHGs?

It looks like they may have no choice. The former Liberal government, in one of its last legislative moves, added carbon dioxide, the principal GHG, to the Canadian Environmental Protection Act (CEPA). This leaves the Tories with three choices.

I’ll deal with these in my next post. Stay tuned.

Sunday, September 03, 2006

Using wind to power the nuclear renaissance in Canada

In my July 31 post, I said the Harper government could solve its Kyoto problems by doubling the Wind Power Production Incentive (WPPI) to 2,000 megawatts and extending it to other forms of clean power production, including nuclear.

Why would this solve the government’s problems? Doubling the WPPI would provide financial support to a form of energy that no one disagrees with (in principle). According to the Canadian Wind Energy Association, it would kick-start the installation of untold megawatts of wind energy. However, for reasons I went into in my June 2 post, I doubt that even this generous financial support would result in a huge infusion of wind energy into Canadian electricity systems. (We would see a lot of NIMBY battles; just ask Enbridge how its wind projects are moving.)

But that’s not the point. Wind is a hugely visible form of generation. Everyone knows about the windmill at the CNE in Toronto. It’s a conversation piece, cited by every green advocate as the wave of the future. (Never mind that it’s only 750 kilowatts and that it doesn’t generate anything when the wind isn’t blowing—as I noticed as I drove by it at around 11:00 a.m. on July 26 of this year, in the middle of a suffocating Toronto heat wave with every operational air conditioner in the city running at full blast.)

So even if doubling the WPPI resulted in only, say, 500 mW of new wind installations, these 500 mW would be tangible, visible evidence of the government’s support for wind and its commitment to addressing climate change and clean air.

Most people don’t realize that these massive windmills contribute only a tiny proportion to our electricity supply mix. This is why the WPPI should be extended to include other forms of clean generation. This support would help buy down the risk of new nuclear projects, which is where we would achieve by far the biggest reductions in greenhouse gas (GHG) and pollution emissions.

Could Harper successfully sell such a policy move to the pro-Kyoto constituency in Quebec, whose support could help him turn his minority government into a majority? I bet he could.