Transcript Manitoba Perspectives on Emissions Trading

Manitoba Perspectives on
Emissions Trading
Bryan Gray
Manitoba Energy
Science and Technology
March 14, 2003
Outline
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Manitoba and Climate Change
Trading: Requires a Buyer and Seller
Why Trade
Federal Proposal of Nov 21,2002
The Manitoba Context
– Need clarity and communication from Ottawa
– Seize Opportunities-contribute to Canada’s goal
• Next Steps
EST Kyoto Seminar for Business Mar 14, 2003
Manitoba and Climate Change
• Premier Doer accepts Axworthy Task Force
recommendations and releases Action Plan.
• The Plan states:
– “climate change is a real and pressing problem for Manitoba…”
– “strong support for ratification of Kyoto…”
– “Kyoto reduction targets are only a modest beginning for what
must be done…”
– “It is our moral obligation to take all reasonable steps now to
reduce emissions and begin adapting to climate change.”
• Strong advocate - smart Kyoto implementation
EST Kyoto Seminar for Business Mar 14, 2003
Trading: Buyers and Sellers
• A relatively small number of Canadian ghg
emitters will be required to account for their
emissions and meet reduction targets by
holding emission quota or permits or credits
that match their emissions.
• Others that can produce emission reductions
or sink enhancements can sell such
reduction credits.
EST Kyoto Seminar for Business Mar 14, 2003
Trading: Buyers and Sellers
• Will we have a liquid ghg market?
– 500 entities may need emissions credits
• 6 of these are in Manitoba
– Quantum has moved from 1990 -6% to an
upside of approximately 1990 +15% for some
of the fastest growing major emitters.
– Many major emitters still not willing to accept
55mt LFE target
EST Kyoto Seminar for Business Mar 14, 2003
Trading: Buyers and Sellers
• Market uncertainty
– Uncertainty of recognized offset sectors to
generate credits for sale
– Government role in subsidizing offsets
– Stakeholders opposed to purchases of
international credits (greened or otherwise)
– Promise to cap price risk at max C$15
– Promise to cap quantity risk at -15% 2010 bau
EST Kyoto Seminar for Business Mar 14, 2003
Trading: Buyers and Sellers
• Market uncertainty
– Federal escape clause from LFE DET/covenant
emission reduction requirements
• “The Government is prepared to discuss an
approach whereby a pre-approved commitment of
larger emissions reductions over the somewhat
longer term could be accepted in lieu of reductions
in the nearer term.” (p.32, Climate Change Plan for Canada, Nov. 21, 2002)
– 2nd budget period targets - restoration rate
EST Kyoto Seminar for Business Mar 14, 2003
Why Trade
• Basic environmental economics suggest
market forces = greatest efficiencies and
allow market (not government) choices.
• Economic efficiency is not a determining
factor in the November 2002 federal plan.
– Home renovations are equally prominent as
coal fired electric sector ghg reductions.
– Contrary to AMG I / Markal cost curves
EST Kyoto Seminar for Business Mar 14, 2003
Why Trade
• Some suggest international projects are
available in unlimited quantity to produce
credits under C$5.
• Canadian stakeholders have said keep our
capital in Canada.
• Multiple public policy objectives in seeking
ghg reductions.
EST Kyoto Seminar for Business Mar 14, 2003
Federal Proposal (Nov/02)
• Far short of the approximate 240Mt
required for Kyoto first budget period.
• Largest industrial emitters allowed to
continue to increase ghg emissions.
• Coal power will continue to have a
significant market price advantage over
clean-renewable alternatives.
• No change in bau growth of coal power
EST Kyoto Seminar for Business Mar 14, 2003
Federal Proposal (Nov/02)
• Massive public investment required.
• No progress to date in defining where
investments will be made in programs.
• Investment continues to be deterred by
uncertainty.
• 2008 is coming.
EST Kyoto Seminar for Business Mar 14, 2003
Manitoba Context
• Manitoba’s rate of increase in emissions is far
below the national rate – only 1 Mt since 1990
• Canada’s rose by 120 Mt (nearly two thirds of this
in Alberta)
• Manitoba’s emissions are 1/3 of Saskatchewan’s
• Large ghg emitting firms who may be subjected to
federal kyoto regulations make up less than 4% of
Manitoba economy
• 97% of Manitoba hydro power is CO2 free
• Our economy is well-positioned to handle Kyoto
EST Kyoto Seminar for Business Mar 14, 2003
Manitoba Greenhouse Gas Emissions
1990-2000 (& 2010 Projection)
25
20
15
10
5
EST Kyoto Seminar for Business Mar 14, 2003
20
10
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
0
19
90
million tonnes of CO2e
30
Provincial Greenhouse Gas Emissions
250
million tonnes CO2e
200
150
100
50
0
Manitoba
Sask
Quebec
EST Kyoto Seminar for Business Mar 14, 2003
Ontario
Alberta
Manitoba Emissions by Sector
HEATING 3.1
MFG, MINES &
CONSTRN 1.7
MT
AGRI 6.9
PIPE, OIL & GAS
1.4 MT
ELEC'Y
1 MT
TRANS FUELS 6.6
WASTE 0.7
EST Kyoto Seminar for Business Mar 14, 2003
Manitoba Context
• Need Clarity and Communication
– Federal statements suggest 6 Manitoba firms may be
subject to federal ghg reduction requirements.
– Manitoba companies need clear statement of intention
from Ottawa as to how they will be regulated by federal
Kyoto implementation.
– Sectors outside the “covered sector” need to know how
they might play a role in creating offset reductions.
– Clean-renewable electricity must play a greater role.
EST Kyoto Seminar for Business Mar 14, 2003
Manitoba Context
• Seize Opportunities
– Manitoba Action Plan - Kyoto and Beyond
proposes a series of actions that could provide
between 20 and 25 Mt of ghg reductions here
and elsewhere in Canada for the first and
second budget period of Kyoto.
– Low-impact hydro power developed in
partnership with interest First Nations.
EST Kyoto Seminar for Business Mar 14, 2003
Manitoba Context
• Seize Opportunities
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Ethanol and bio-diesel
Hydrogen
Wind and geothermal and methane power
Carbon storage and sequestration research
Manufacturing
Energy efficiency
EST Kyoto Seminar for Business Mar 14, 2003
Next Steps
• Industry has to know if they are “in”
• “Entity” role in trading must be defined
• “Uncovered” sectors must assess opportunities.
– Who is the buyer?
– Subsidy price level and mechanism?
– Verification and admin costs?
– “bau” must be resolved
• Federal-provincial programs and funding must be
agreed to.
EST Kyoto Seminar for Business Mar 14, 2003
Next Steps
• Must have engagement of industry and
stakeholders in substantive discussions for
them to gain detailed understanding of
program and have opportunity for
meaningful input into policy and regulation
drafting.
EST Kyoto Seminar for Business Mar 14, 2003