Recently Implemented Policies and Upcoming Programs Effecting Ontario

Greenhouse Gas Emissions Reporting Regulation (O.Reg. 452/09)

On January 01, 2010 the Greenhouse Gas Emissions Reporting Regulation (O.Reg. 452/09) took effect in Ontario. The passing of this regulation requires that all facilities emitting over 25,000 tonne of carbon dioxide equivalent (CO2 eq) report their emissions to the Provincial Ministry of Environment (MOE). An estimated 300 operators will be impacted by this regulation. The first year of reporting commences in January 2010 and the submission of the report is required by June 2011.

As an operator it is essential to determine whether you are required to report your facilities emissions and to have a full understanding of the process of reporting them.

Who will be affected?

As stated above all facilities emitting over 25,000 tonne CO2 eq are required to report their emissions. The MOE has drawn up a list of the facilities that will most likely be impacted by the new regulation; however it is important to keep in mind that the list is not exhaustive;

• Fossil fuel, steam and electric power generation, natural gas distribution, steam and air conditioning supply

• Oil and gas extraction, nickel-copper gold and silver ore mining, limestone mining and quarrying, sand and gravel mining quarrying

• Sawmills, hardwood veneer and plywood mills, structural wood product manufacturing, particle board and fiberboard mills, waferboard mills, mechanical pulp mills, chemical pulp mills, paper, newsprint and paperboard mills

• Waste collection, sewage treatment facilities

• Food crops grown under cover, wet corn milling, oilseed processing, sugar manufacturing, fruit and vegetable canning, pickling, drying, breweries, distilleries

• Petroleum and coal product, petroleum refineries, industrial gas manufacturing, inorganic and organic chemical manufacturing, resin and synthetic rubber, artificial and synthetic fibres, chemical fertilizers, pharmaceutical and medicine, glass, concrete and cement, gypsum, lime, iron, steel and aluminum.

• Commercial and service industry machinery, engine and power equipment, automobiles and parts, aerospace products, railroad rolling stock

• Professional, scientific, and technical services, colleges and CEGEPS, universities, Federal Government Public Administration

In order to further help facilities understand whether they are affected by the new regulation the MOE has identified the following 26 potential process GHG emissions in addition to general stationary combustion and electricity generation that may be generated at a facility.

And small emitters?

The MOE is encouraging all facilities to report their emissions, even small operators (considered to be 10,000 to 25,000 tonne CO2 eq). It is considered that the lower threshold (10,000 tonne CO2 eq) will become the North American standard, but even more significant is that Ontario has joined the Western Climate Initiative (WCI) which is expected to cover 90 percent of GHG emissions in the province. As such, smaller facilities can benefit from early reporting by learning and understanding the process as it will be required under the WCI in 2012 (more on the WCI below).

Important components of the regulation

• The first year of reporting allows for flexibility in the use of quantification methods, however starting 2011 mandatory use of identified standard methods will be applied.
• Annual third party verification of emissions beginning for the reporting year of 2011 and completed annually by September 1st (2010 does not require third party verification but it is encouraged).
• The quantification methods and verification process are harmonized with the WCI.

The Western Climate Initiative

In 2009, Ontario joined 10 other states and provinces - Washington, Oregon, California, Utah, New Mexico, Arizona, Montana, British Colombia, Manitoba and Quebec- in forming the Western Climate Initiative, whose aim is to reduce GHG emissions independently from the federal governments through a cap-and-trade system. The WCI’s goal is to reduce emissions by 15 percent from 2005 levels by 2020. The cap-and-trade program will take effect January 2012 and cover emissions from electricity (including imports), industrial combustion at large sources, and industrial processes. By the second phase (2015) approximately 90 percent of GHG emissions will be covered by the program including transportation, residential, commercial and industrial fuel emissions.

What is cap-and-trade?

A cap-and-trade system is a market mechanism that essentially takes, in this case CO2 eq, and transforms it into a marketable and tradable commodity just like any other. By placing a dollar value on CO2 eq emissions operators are inclined to search for potential reduction strategies as to avoid the economic burden associated with high emissions. As such, cap-and-trade systems are said to promote technological advancements and fast and effective reductions.

How will the cap-and trade system work?

• A mandatory emissions cap is set.
• Allowances/credits are allocated to operators. Credits can then be bought or sold between emitters.
• Measurement and reporting. Each emitter must hold a number of credits equal to its tonnes of emissions for the compliance period.
• Enforcement. In the case of the WCI if the facility does not have the appropriate number of credits a penalty of three allowances will be assessed for each one they are short.

Verification

Third-part verification of the facilities’ reported GHG emissions is critical to ensuring accuracy and conformity to the Greenhouse Gas Emissions Reporting Regulation but will become even more significant under the WCI as emissions are capped and carbon credits are traded and sold between emitters. The one year delay for third party verification under the Greenhouse Gas Emissions Reporting Regulation is because at present there are no accredited verifiers in the country. The one year delay will allow for companies, such as IESC to go through the application process, which may take up to one year. IESC has already begun the process by requesting the necessary documentation and we are completing the application. As such, we expect that by June 2011 we will receive our accreditation, and may be potentially one of the few companies in the province qualified to undertake such verification assessments.