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Regulatory Framework for Air Emissions
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© Her Majesty the Queen in Right of Canada, represented by the Minister of Environment, 2007. All rights reserved.
Catalogue no.: En84-53/2007
ISBN 978-0-662-69717-6
Library and Archives Canada Cataloguing in Publication
Canada
Regulatory framework for air emissions.
Text in English and French on inverted pages.
Title on added t.p.: Cadre réglementaire sur les émissions atmosphériques.
Available also on the Internet.
ISBN 978-0-662-69717-6
Cat. no.: En84-53/2007
1. Air--Pollution--Law and legislation--Canada. 2. Air-Pollution
--Government policy--Canada. 3. Greenhouse gas mitigation--Government
policy--Canada. 4. Air quality management--Technological innovations
--Government policy--Canada. I. Canada. Environment Canada II. Title.
III. Title: Cadre réglementaire sur les émissions atmosphériques.
TD883.148.C3C36 2007 344.7104’6342 C2007-980080-7E
Printed on recycled paper using vegetable-based ink.
Table of Contents
Executive Summary iii
Preface 1
I The Clean Air Regulatory Agenda 5
II Regulatory Framework for Industrial Air Emissions 7
A Overview
B Equivalency Agreements
C Regulatory Framework for Greenhouse Gas Emissions
Approach for determining sectoral emission reduction targets •
Compliance mechanisms
D Regulatory Framework for Air Pollutant Emissions
Approach for determining sectoral emission reduction targets •
Compliance mechanisms
E Compliance, Penalties, and Enforcement
F Air Quality Objectives
G Anticipated Benefits and Impacts of Regulating Industry
Overview • Predicted changes in ambient air quality and
acid deposition • Health benefits • Environmental benefits •
Anticipated economic impacts • Cost and benefit conclusions
H Next Steps
III Actions for Transportation Sources 29
A Emissions from the Sector
B Regulating the Fuel Consumption of Motor Vehicles
C Regulating the Rail Sector
D Regulating the Marine and Aviation Sectors
E Regulations to Reduce Air Pollutant Emissions from On-Road
and Off-Road Vehicles and Engines
IV Actions on Consumer and Commercial Products 33
A Energy Efficiency Standards
B Volatile Organic Compound Emissions
V Regulatory Framework for Improvement of Indoor Air Quality 35
VI Conclusion 37
Annex: “Business-as-Usual” Projection 38
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Executive Summary
Canada’s New Government has launched a To address these challenges in a coordinated
concrete and realistic agenda to protect the way will require nothing short of a complete
health of Canadians, to improve environmental transformation in the capital stock of energy
quality, and to position Canada as a clean producing and consuming businesses and
energy superpower. Canada has historically households across Canada. While cooperation
relied on a variety of non-compulsory measures among all orders of government will be required,
to reduce air emissions. However, these have only the Government of Canada is uniquely
not proved sufficient to reduce the health and situated to lead on this issue if we are to meet
environmental risks across the country. Overall, the challenge in a cost-effective manner that
Canada is lagging behind other countries. will ensure the continued competitiveness of the
For example, according to an Organisation Canadian economy. The government’s regulatory
for Economic Co-operation and Development framework will provide a nationally-consistent level
(OECD) study, Canada ranks near the bottom of protection for the health of Canadians and their
of all OECD countries in terms of per capita environment.
and total emissions of smog-causing pollutants.
While Canada accounts for just 2% of global Making significant progress on environmental
greenhouse gas emissions, its per capita issues is a key priority for this government. In
emissions are among the highest in the world the Speech from the Throne in October 2006,
and continue to increase. the government committed to “take measures
to achieve tangible improvements in our
The proposed framework is comprehensive and environment, including reductions in pollution
includes mandatory and enforceable reductions in and greenhouse gas emissions.”
emissions of greenhouse gases and air pollutants
that will deliver tangible benefits to the health of The Clean Air Regulatory Agenda is the
Canadians and their environment. It also engages cornerstone of the government’s broader efforts
all Canadians to take significant, measurable to address the challenges of climate change and
action at home, in Canada. air pollution. In October 2006, the government
published a Notice of Intent to regulate air
Climate change is a global issue of major emissions, which provides the basis for the Clean
concern for Canadians. It is crucial that Canada Air Regulatory Agenda. It provides a regulatory
do its part to address its own contribution to global framework for short-term industrial emission
climate change. Air pollution is a significant threat reduction targets, actions for transportation
to human health and the Canadian environment. sources, actions on consumer and commercial
In order to address the real concerns of Canadians products, and the regulatory framework for
suffering from the health effects of air pollution, improvement of indoor air quality.
and to clean up Canada’s environment, the
government must act to reduce emissions of air For the first time in Canada, there will be
pollutants. regulations setting mandatory and enforceable
iiiRegulatory Framework for Air Emissions
reduction targets for emissions of greenhouse • contribute to a technology fund, which would
gases and air pollutants from all major industrial then act as a means of promoting the
sources. Because industrial emissions of development, deployment, and diffusion of
greenhouse gases and air pollutants each account technologies that reduce emissions of
for 50% of Canada’s total emissions and share greenhouse gases across industry;
many common sources, the coordination of • use emissions trading, including inter-firm
requirements will allow firms to make cost-effective trading, emission reduction credits from non-
decisions to maximize synergies in reducing their regulated activities, and certain credits from the
emissions. The industrial regulations will cover Kyoto Protocol’s Clean Development
facilities in the following sectors: Mechanism; and
• use a one-time recognition of early action for
• electricity generation produced by combustion; firms that took verified action between 1992 and
• oil and gas; 2006 to reduce their greenhouse gas emissions.
• forest products;
• smelting and refining; These unprecedented measures will result
• iron and steel; in mandatory reductions in greenhouse gas
• some mining; and emissions. For the first time since Canada signed
• cement, lime, and chemicals. the Kyoto Protocol, Canadian industry will be
required to make a measurable contribution to the
Looking first at greenhouse gases, to put industry
global effort to control greenhouse gas emissions.
on the path to contribute to deep long-term
reductions in greenhouse gas emissions, the Canada cannot, however, go overnight from a
government will put in place short-term emission country whose total greenhouse gas emissions
reduction targets that will come into force in 2010. have progressively increased to one whose
emissions are declining steadily.
For existing facilities, the emission-intensity
reduction target for each sector is based on an The short-term industrial targets for greenhouse
improvement of 6% each year from 2007 to 2010. gases in this regulatory framework will stabilize and
This yields an initial enforceable reduction of then start reducing overall emissions from industry.
18% from 2006 emission-intensity levels in 2010.
Every year thereafter, a 2% continuous emission- The short-term targets are being supplemented by
intensity improvement will be required, resulting a series of targeted initiatives to support increased
in an industrial emission-intensity reduction of development of renewable energy, more efficient
26% by 2015. Targets for new facilities will be use of existing energy sources, and cleaner
established based on cleaner fuel standards. transportation.
These targets will result in absolute reductions in
emissions of greenhouse gases from industry as Taken together, these regulatory and non-regulatory
early as 2010 and no later than 2012, even if the actions, coupled with ambitious new initiatives being
economy grows as expected. taken by provincial and territorial governments,
mean that Canada's greenhouse gas emissions
In order to provide flexibility and minimize the from all sources are expected to begin to decline as
economic impact of the regulations, there will early as 2010 and no later than 2012. Thereafter,
be several options for firms to meet their legal absolute emissions continue to decline.
obligations. They can:
The government is committed to reducing
• reduce their own emissions through abatement Canada's total emissions of greenhouse gases,
actions; relative to 2006 levels, by 20% by 2020.
ivRegulatory Framework for Air Emissions
Turning now to air pollutants, the government objectives that have been set in advance by the
stated in the Notice of Intent that it would set fixed government, restrictions will be placed on the
targets that “are at least as rigorous as those in firm’s use of credits from emissions trading.
the U.S. or other environmental performance-
leading countries”. National emission caps will As part of its ongoing work with the U.S.
be set for each pollutant of concern. The national to address transboundary air pollution, the
emission caps represent the following percentage government will also expedite discussions with
reductions from 2006 levels: 40% for nitrogen the United States on a cross-border SOx and NOx
oxides (NOx), 55% for sulphur oxides (SOx), 45% emissions trading system. Canada and the U.S.
for volatile organic compounds (VOCs), and 20% have also recently agreed to start negotiations for
for particulate matter (PM). Limits will also be an annex to the Canada-United States Air Quality
set for other air pollutants such as mercury from Agreement to reduce the transboundary flow of
electricity generation, and benzene emissions from particulate matter.
the natural gas, and iron and steel sectors. The
In addition to setting industrial emission targets,
targets for air pollutants will come into force as
the government will set national air quality
early as 2012.
objectives for particulate matter and ground-level
ozone based on an assessment of the health and
To develop these targets and to determine how
environmental effects associated with exposure
the targets will be allocated among the covered
to these air pollutants in the air we breathe in
sectors, the government undertook a benchmarking
Canada.
exercise. This involved assessing the environmental
performance, the technology and operating Sector-specific regulations will be developed, with
practices, and the most stringent operating permits publication of the draft regulations in the Canada
of existing regulatory regimes in Canada and other Gazette, Part I, starting in spring 2008.
jurisdictions. For some sectors, these regulatory
limits or emission performance levels were adapted With this regulatory framework, Canada will have
to take into account characteristics specific to those one of the most stringent sets of regulated targets
sectors in Canada, including the financial situation for greenhouse gases and air pollutants in the
of the sector, potential impacts on the economy, and world.
the raw materials used relative to the benchmarked
jurisdiction. The results of this benchmarking The government has committed to review the
exercise and the date of coming into force will be regulations on industrial air emissions every five
validated through discussions with provinces and years in order to assess progress in reaching
territories, each of the covered sectors, and labour, medium- and long-term emission reduction
environmental and health groups over the next objectives. The first such review would take place
several months. in 2012.
Preliminary analysis indicates that implementation
To provide flexibility in meeting their emission
of the industrial regulatory framework will result in
caps, there will be two options for firms to meet
significant improvements in air quality, including
their legal obligations. They can:
decreases in smog levels and reductions in acid
• reduce their own emissions; or deposition. Substantial health benefits are also
• use emissions trading of SOx and NOx across predicted, with total annual benefits in the year
Canada. 2015 from the reduced risk of death and illness
associated with these air quality improvements
If, however, a firm is in an area where the quality estimated to be $6.4 billion. This robust regulatory
of the air does not meet national air quality system will also promote technological investment
Regulatory Framework for Air Emissions
and innovation in Canada, yielding long-term to maximize our environmental and economic
economic benefits. benefits and will be benchmarked against a
stringent, dominant North American standard. To
That said, strong regulation inevitably comes at do so, the federal government intends to work
a cost – and those costs will be borne, at least in in close collaboration with the U.S. government
part, by individual Canadians and their families. pursuing the concept of a Clean Auto Pact,
However, while these costs are real, they are also towards establishing an environmentally ambitious
manageable. Preliminary analysis performed by North American regulatory standard for cars and
Environment Canada indicates that the annual light-duty trucks. For other transportation sources
economic cost of meeting both the regulated – rail, marine, aviation, and on-road and off-
greenhouse gas targets and the regulated air road vehicles and engines – new standards and
pollution targets should not exceed 0.5% of GDP regulations will be developed and implemented
in any given year up to 2020. to reduce emissions of greenhouse gases and air
To move forward with industrial regulations, pollutants.
the government will meet over the next several
The government commits to setting performance
months with provinces and territories, each
standards for all lighting that would phase out
industry sector, and other stakeholders to discuss
the use of inefficient incandescent light bulbs in
key elements of the regulations. As part of the
common applications by 2012. It is also developing
regulatory development process, a notice will
and will implement new energy performance
be issued under Section 71 of the Canadian
standards for consumer and commercial
Environmental Protection Act, 1999 (CEPA 1999).
products, such as dishwashers, refrigerators,
This notice will require those industry sectors that
air conditioners, and commercial boilers, while
will be covered by the proposed regulations to
also taking action to reduce emissions of volatile
report to the government the 2006 data that will be
organic compounds by minimizing the amount
used to set the emission reduction targets.
of solvents used in consumer and commercial
The government also intends to work with products. These actions will result in significant
provinces and territories to ensure consistency in reductions in air emissions from the products
the way in which regulations are applied by each used daily by households and businesses across
order of government and will work to make the Canada.
best use possible of equivalency agreements.
Canadians spend 90% of their time indoors, where
Along with its ambitious agenda to reduce air quality can be compromised by such things as
industrial emissions, the government is taking mould, improperly vented or poorly maintained
action on emissions from transportation sources, furnaces, stoves or heaters, and building
emissions from consumer and commercial materials. For the first time ever, the government
products, and indoor air quality. is developing a comprehensive regulatory agenda
to improve indoor air quality and intends to
Transportation is one of the largest sources of develop a priority list of indoor contaminants that
greenhouse gas and air pollutant emissions in require government action. The government will
Canada. As part of a broader transportation policy then collect information on these contaminants in
package, a mandatory fuel-efficiency standard, order to guide decisions on the development of
beginning with the 2011 model year, will be guidelines and product regulations.
developed through a process that will involve input
from all the stakeholders, and it will be published In consultation with Canadians, the government
by the end of 2008. It will be designed for Canada has developed a regulatory framework that
viRegulatory Framework for Air Emissions
introduces an integrated approach to the and commercial products. In addition to delivering
implementation of mandatory reductions in significant reductions in emissions, the framework
emissions of greenhouse gases and air pollutants provides regulatory certainty with specific
while preserving economic growth. emission-reduction targets and timelines, flexible
compliance mechanisms, and regular monitoring
Through this regulatory framework, the and review in order to provide a complete package
government is implementing mandatory and that delivers a better overall outcome than
enforceable measures for the major sources of air previous plans.
emissions: industry, transportation and consumer
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vii\\ b bl
Preface
Canada’s New Government has launched an Addressing these challenges in a coordinated
ambitious and realistic agenda to protect the way will require nothing short of a complete
health of Canadians, to improve environmental transformation in the capital stock of energy-
quality, and to position Canada as a clean producing and consuming businesses and
energy superpower. The proposed framework households across Canada. While cooperation
is comprehensive and includes mandatory among all orders of government will be required,
and enforceable reductions in emissions of the Government of Canada is uniquely situated
greenhouse gases and air pollutants. It also to provide the leadership on this issue that will
engages all Canadians to take significant, be required to meet the challenge in a cost-
measurable action at home, in Canada. effective manner in order to ensure the continued
competitiveness of the Canadian economy. This
Climate change is a global issue of major concern transformation will not be achieved through
to Canadians. Human activities continue to the sum of different and potentially conflicting
increase the concentration of greenhouse gases in provincial plans, or by setting up rules for industry
the atmosphere, producing changes in the climate that vary from one area of the country to another.
that are already apparent. These changes include The government’s Clean Air Regulatory Agenda,
altered wind and precipitation patterns and the along with other initiatives to reduce emissions of
increased incidence of extreme weather events, greenhouse gases and air pollutants, will provide
droughts, and forest fires. In addition, glacier a nationally-consistent approach.
melt and warmer oceans could lead to significant
rises in sea levels. The changes could imperil the In October 2006, the government published a
way of life of vulnerable communities around the Notice of Intent to regulate air emissions, which
world and here in Canada. The changes would provides the basis for the Clean Air Regulatory
also result in significant economic costs. It is Agenda. This technical paper sets out in detail the
crucial that Canada do its part to address its own architecture of the regulatory framework, including
contribution to global climate change. short-term industrial emission-reduction targets.
Air pollution is a significant threat to human The Clean Air Regulatory Agenda is the
health and the Canadian environment. Each cornerstone of the government’s efforts to address
year, smog contributes to thousands of deaths. the challenges of climate change and air pollution.
Other air pollution problems, such as acid With this regulatory framework, Canada will have
deposition, threaten biodiversity, forests and fresh one of the most stringent sets of regulated targets
water ecosystems. In order to address the real
concerns of Canadians suffering from the health
Notice of intent to develop and implement regulations
effects of air pollution, and to clean up Canada’s and other measures to reduce air emissions, Canada Gazette,
environment, the government must act to reduce Part I, October 21, 2006, Vol. 140, No. 42 at page 3351,
available at www.ec.gc.ca/ceparegistry/documents/notices/
emissions of air pollutants. g1-14042_n1.pdf.
Regulatory Framework for Air Emissions
for industrial emissions of greenhouse gases and at home and take more environmentally-
air pollutants in the world. sustainable modes of transportation; and
• $1.3 billion for public transit capital investments.
These regulations will have real, tangible health
and environmental benefits for Canadians, and In addition, in December 2006, the government
these benefits, in turn, will have positive economic announced two key environmental measures.
effects. A robust regulatory system will also The first was the new Chemicals Management
promote technological investment and innovation Plan, which takes immediate action to regulate
in Canada, yielding long-term economic benefits chemicals that are harmful to human health or
from enhanced productivity, improved energy the environment. Canada was the first country
efficiency, greater competitiveness, and more in the world to categorize 23,000 legacy
opportunity to sell Canadian products and know- chemical substances. This action has allowed
how abroad. the government to move forward to ensure that
chemical substances are handled safely. The
That said, strong regulation will inevitably come government has challenged industry to provide
at a cost – and those costs will be borne, at the government with information on how they
least in part, by individual Canadians and their are safely handling 200 high-priority chemical
families. Consumer products, including cars and substances. The government has committed
home appliances, could become more expensive. $300 million over four years to implement the
Electricity and fuel prices may rise. All Canadians Chemicals Management Plan.
must be prepared to bear this extra responsibility
The government also announced that it would
in order to get the job done.
require fuel producers and importers to have an
average annual renewable content of at least
In implementing the Clean Air Regulatory Agenda,
five percent of the volume of gasoline that they
the government will work with provincial and
produce or import by 2010. Upon successful
territorial governments, industry, environmental
demonstration of renewable diesel fuel use under
and health groups, scientists, municipalities,
the range of Canadian conditions, the government
communities, and individual Canadians. These
will require an average two percent renewable
partnerships will ensure that all segments of
fuel content in diesel fuel and heating oil by no
Canadian society have the opportunities to reduce
later than 2012. The government also announced
air emissions and achieve a cleaner, healthier
funding of $365 million to bolster the development
Canada for current and future generations.
of biofuels and other bioproducts. These actions
The government is also taking other action. In will significantly reduce air emissions from the fuel
the last Speech from the Throne, the government Canadians use to travel, to transport goods, and to
committed to “take measures to achieve tangible heat their homes.
improvements in our environment, including To complement the Clean Air Regulatory Agenda,
reductions in pollution and greenhouse gas the government will also reduce emissions of
emissions.” Budget 2006 allocated $1.9 billion to greenhouse gases and air pollutants through
initiatives that will help reduce greenhouse gas targeted incentives and programs for industry and
emissions and clean up the air Canadians breathe, consumers:
including:
• ecoENERGY Initiatives: to help Canadians use
• a 15.5% tax credit on the purchase of monthly energy and fuels more efficiently, boost
public transit passes to encourage individual renewable energy supplies, and develop cleaner
Canadians and their families to leave their cars energy technologies. These include programs to
Regulatory Framework for Air Emissions
offer support and information on retrofits to reductions in greenhouse gas emissions and air
homeowners and small businesses and pollutants;
organizations; to encourage the construction • a rebalancing of the tax system to encourage
and retrofit of more energy-efficient buildings investments by the oil sands and other sectors
and houses; and to accelerate energy-savings in clean and renewable energy while phasing
investments within Canada’s industrial sector. out accelerated capital cost allowance for oil
• ecoTRANSPORT Initiatives: to reduce the sands development;
environmental impacts of transportation and • an extension to 2020 of existing tax incentives
secure Canada’s future prosperity and for clean energy production and an expansion of
competitiveness, by making the transportation eligibility to cover wave and tidal energy, as well
system more sustainable, both economically as additional solar energy and waste-to-energy
and environmentally. They include measures to technologies;
reduce emissions from urban passenger • performance-based rebates on vehicles
transportation; to reduce the health and according to their fuel efficiency and levies on
environmental effects of freight transportation; to vehicles that are fuel-inefficient;
share information on fuel-efficient vehicles and • $36 million over the next two years to support
their use; and to promote environmentally- programs to get older, higher-emitting vehicles
friendly vehicle technologies. off the road;
• $2 billion over seven years to support the
In addition, the Minister of Natural Resources and production of renewable fuels, including
Alberta’s Minister of Energy have commissioned $1.5 billion for operating incentives for
the Canada-Alberta ecoENERGY Carbon Capture producers of alternative, lower-emission fuels
and Storage Task Force. The Task Force is made and $500 million to invest with the private sector
up of CEOs from the oil, power and pipeline in establishing large-scale facilities for the
industries, as well as a member of the academic production of next-generation renewable fuels,
community. It has been tasked with examining such as the Iogen Corporation facility;
the opportunities for the large-scale application of • extension of the public transit tax credit,
carbon capture and storage technology in Canada. announced in Budget 2006, to different types of
Based on that examination, the Task Force will transit passes;
provide a comprehensive set of options describing • funding to protect Canada’s natural heritage,
how government and industry can work together to including $225 million for conserving
take advantage of those opportunities. ecologically-sensitive lands and $110 million for
protecting species at risk;
On March 19, 2007, the government further
• $22 million over the next two years to strengthen
demonstrated its commitment to environmental
environmental enforcement;
action to provide health and environmental
• $92 million over the next two years to improve
benefits for Canadians by allocating $4.5 billion in
the water Canadians drink, to clean polluted
Budget 2007 for initiatives to reduce greenhouse
waters, to protect ecosystems, and to ensure the
gas emissions and air pollution, as well as for
sustainability of Canada's fish resources; and
water conservation, and enforcement initiatives.
• over $200 million in funding for renewal of the
These initiatives included the following:
Canadian Coast Guard fleet and to support
fisheries science and research.
• $1.5 billion in funding for the Climate Change
Trust Fund, a new national fund that provides These other initiatives will deliver real results while
financial support for provincial and territorial industrial regulations are developed and will
government projects that will result in real
Regulatory Framework for Air Emissions
promote the technological innovation required to The government supports the Kyoto process, and
support upcoming regulations. In addition, these actions at home will be the basis for Canada’s
initiatives, including the regulations, start Canada participation in future international cooperative
on the road to making real progress towards its efforts to address climate change.
Kyoto commitments to reduce greenhouse gas
emissions. Significant, long-term progress on greenhouse
gases and air pollutants will be realized only
The real reductions in emissions that will be driven through the development, commercialization,
by the regulations, coupled with the impacts and deployment of new, cleaner energy and
of both the non-regulatory actions above and transportation technologies and through the active
ambitious new initiatives being taken by provincial participation of all Canadians and all aspects of
and territorial governments, mean that Canada’s Canadian society.
greenhouse gas emissions from all sources are
expected to begin to decline as early as 2010 and The government recognizes the need to work with
no later than 2012. Thereafter, absolute emissions all consumers, industry, and the provinces and
continue to decline. territories as we move forward to implement this
aggressive plan. All Canadians will need to do their
The government is committed to reducing part to reduce greenhouse gases and air pollution
Canada’s total emissions of greenhouse gases, to help protect their health and their environment.
relative to 2006 levels, by 20% by 2020 and by This paper lays out the government’s plan to lead
60% to 70% by 2050. the way, both domestically and internationally.
I. The Clean Air
Regulatory Agenda
On October 21, 2006, the government published playing field, and to protect competitiveness for
a Notice of Intent, which proposed an integrated, Canadian industry in different regions by avoiding
nationally-consistent approach to the regulation a patchwork of different regulations being applied
of greenhouse gas and air pollutant emissions to the same industrial sectors. An integrated,
in order to protect the health and environment nationally-consistent approach will enable firms
of Canadians. Because greenhouse gases and to reduce their emissions in an efficient and cost-
air pollutants share many common sources, effective manner. The federal government has
the coordination of requirements will allow firms never regulated emissions of greenhouse gases
to make cost-effective decisions to maximize or air pollutants across industries before.
synergies in reducing their emissions.
For industrial sources, the October 2006 Notice of
The government signalled its determination to Intent indicated the government would introduce a
address greenhouse gases and air pollutants from framework for short-term targets and compliance
key sources, and outlined a regulatory agenda for options by spring 2007.
industrial sources, transportation, and consumer
and commercial products; for more stringent In the transportation sector, the Prime Minister
energy efficiency standards; and for improved reaffirmed in a speech on February 6, 2007, that,
indoor air quality. The government is committed to for the first time ever, Canada’s New Government
reducing Canada’s total emissions of greenhouse will regulate the fuel efficiency of motor vehicles,
gases, relative to 2006 levels, by 20% by 2020 beginning with the 2011 model year. There is
and by 60% to 70% by 2050. currently a Memorandum of Understanding
between the auto industry and the government,
Environmental protection is an area of shared with a target of 5.3 Mt of greenhouse gas
jurisdiction between the federal government emissions reductions by 2010. The government
and the provinces and territories. The federal will build on this agreement to establish an
government has clear jurisdiction to regulate air ambitious regulated fuel-efficiency standard for
emissions in order to protect the environment and the 2011 model year, benchmarked against a
the health of Canadians. stringent, dominant North American standard.
The government recognizes the importance of The government is also developing and will
endeavouring, in co-operation with provinces, implement regulations to reduce smog- and acid
territories, and aboriginal peoples, to achieve rain-forming emissions from vehicles, engines and
the highest level of environmental quality for fuels; and will take action to reduce air emissions
all Canadians. Provinces have taken important from other modes of transportation, including rail,
action to reduce air pollutant emissions in their aviation, and marine.
own jurisdictions. However, national consistency
is necessary to provide a minimum level of For the consumer and commercial products
air quality for all Canadians, to ensure a level sector, the government is developing regulations
Regulatory Framework for Air Emissions
that strengthen energy efficiency standards gases and air pollutants is being taken in order
and labelling requirements for consumer and to maximize the benefits to the health of all
commercial products. The government is also Canadians and to the environment.
developing, for the first time ever, a comprehensive
The next four sections present an overview of
regulatory agenda that will address indoor air
progress on the overall Clean Air Regulatory
quality.
Agenda since the publication of the Notice of
The goal of these actions is to improve significantly Intent. This includes overviews of:
and measurably the health of Canadians and the
• the regulatory framework for industrial sectors,
environment by reducing emissions of greenhouse
including short-term targets, proposed
gases and air pollutants.
compliance mechanisms, and an initial
Since the publication of the Notice of Intent, work assessment of impacts of the framework on the
has been ongoing on each of these priorities. health of Canadians, on the environment, and
Two draft regulations for the transportation sector on the economy;
have been published in the Canada Gazette to • regulatory and other actions for transportation
reduce smog-forming pollutants from vehicles and sources;
engines. Work has also commenced on a series of • regulatory and other actions for consumer and
amendments to the Energy Efficiency Regulations. commercial products; and
• the regulatory framework for improving indoor
As indicated in the Notice of Intent, an integrated air quality.
approach to reducing emissions of greenhouse
II. Regulatory Framework for
Industrial Air Emissions
A. Overview For greenhouse gases, the framework sets a
2010 implementation date for emission-intensity
In the Notice of Intent, the government committed reduction targets. For air pollutants, the framework
to develop and implement an integrated, sets fixed emission caps that will enter into force
nationally-consistent approach to the regulation as soon as possible between 2012 and 2015.
of industrial air emissions. In November and
In order to minimize costs to industry and the
December 2006, extensive consultations were
impact on the economy, the framework contains
undertaken with the provinces and territories,
compliance mechanisms intended to provide
industry, aboriginal groups, and health and
industry with flexibility in meeting its regulatory
environmental groups on elements of the
obligations. The framework also requires rigorous
proposed approach and the development of the
monitoring and reporting in order to ensure
regulatory framework. A companion document
compliance assessment and transparency.
was published to further elaborate and present
elements and options for consultation. These The short-term targets are expressed as
consultations and the public comments received in reductions from 2006 levels. To support the
response to the Notice of Intent have informed the development and implementation of regulations,
development of the regulatory framework. comprehensive and consistent baseline data for
2006 will be required from facilities in the regulated
This section presents that regulatory framework.
sectors. To this end, the government will require
The regulations will mandate reductions in
facilities in those sectors that will be covered
emissions of greenhouse gases and air pollutants
by the regulations to report 2006 emissions
from the following industrial sectors: electricity
and other relevant data under a notice issued
generation produced by combustion, oil and gas
under section 71 of the Canadian Environmental
(including upstream oil and gas, downstream
Protection Act,1999 (CEPA 1999).
petroleum, oil sands, and natural gas pipelines),
forest products (including pulp and paper and Preliminary analysis of environmental modelling
wood products), smelting and refining (including and assessment of the environmental and health
aluminum, alumina, and base metal smelting), iron benefits and economic costs of the industrial
and steel, iron ore pelletizing, potash, cement, lime, regulatory targets have been completed and are
and chemicals production, including fertilizers. presented in this document. Further analysis is
Improving the Health of Canadians and Their
Environment through an Integrated, Nationally Consistent Section 71 of CEPA 1999 allows the Minister of the
Approach to Reducing Industrial Air Emissions: A Companion Environment to issue a notice requiring the provision of
Document to the Notice of Intent to Develop and Implement information for the purpose of assessing whether to control or
Regulations and Other Measures to Reduce Air Emissions, the manner in which to control a substance. These data may
November, 2006, available at www.ec.gc.ca/ceparegistry/ be required of persons who possess or who may reasonably be
documents/gene_info/NOI_DisPap/NOI_DisPap.cfm. expected to have access to the information.
Regulatory Framework for Air Emissions
ongoing, and continues to support discussion on
the proposed framework.
B. Equivalency Agreements
The government will validate the benchmarked air
The federal government will set stringent national
pollutant targets over the next several months. The
standards and will work to reach equivalency
government will work with industry, provinces and
agreements with those provinces that set
territories, labour, and environmental and health
provincial emissions standards that are at least as
groups during the validation process. The regulatory
stringent as the federal standards. Equivalency
framework for air pollutants – that is, the targets, the
agreements will allow provincial leadership, while
compliance mechanisms, and the timeframe for the
ensuring a nationally-consistent level of health and
entry into force of the regulations – will be finalized
environmental protection.
by fall 2007, after the government has validated the
benchmarked air pollutant targets.
As the proposed federal regulations are
While this validation process is underway, developed, the government intends to work with
sector-specific regulations will be developed provinces and territories to avoid as much as
for the general provisions and those related to possible any duplication and to ensure consistency
greenhouse gases, leading to publication of the in the way in which regulations are applied.
draft regulations in the Canada Gazette, Part I,
Most provinces restrict the emissions of air
starting in spring 2008. The regulations will be
pollutants. However, standards vary considerably
revised to incorporate the air pollutant provisions
across the country. Alberta has also recently
a few months later, following normal regulatory
released draft regulations to reduce industrial
procedures.
greenhouse gas emissions in its territory.
The government will monitor the evolving
regulatory framework as the regulations are Since the federal government recognizes
developed and implemented over the next two the important role played by the provinces
years and will make adjustments, as needed. and territories in air management, work will
be undertaken with interested provinces and
In addition, the government has committed to territories to make the best use possible of
review the regulations on industrial air emissions equivalency agreements.
every five years in order to assess progress in
reaching medium- and long-term emission reduction When an equivalency agreement has been
objectives. The first such review would take place reached, the Governor in Council can suspend the
in 2012. The review would entail an assessment application of the specified CEPA 1999 regulations
of the effectiveness of measures taken to reduce in the signing province, so that only the equivalent
greenhouse gas emissions and air pollutants, provincial regime applies. The federal Minister of
and of advances in industrial technology (energy the Environment remains responsible for reporting
production, industrial processes, and pollution annually to Parliament on the administration
abatement) in order to determine the potential for of the CEPA 1999 provisions that permit these
further emissions reductions consistent with the equivalency agreements. CEPA 1999 authorizes
goal of continuous improvement. The review would the Minister to enter into an equivalency agreement
also examine the state of air quality and possible with a province, territory, or aboriginal government if
changes in the Canadian industrial sector mix, the Minister and the other jurisdiction’s government
including regional changes, that could affect the demonstrate that there are provisions in force in
goal of achieving tangible benefits for the health of that jurisdiction that:
Canadians and their environment.
Regulatory Framework for Air Emissions
a) meet or exceed the equivalent level of
environmental protection mandated by federal C. Regulatory Framework
regulations in force; and for Greenhouse Gas
b) include rights similar to those prescribed in Emissions
sections 17 to 20 of CEPA 1999 (the right
of citizens to request an investigation of
alleged offences under the other jurisdiction’s C.1 Approach for determining
legislation). sectoral emission reduction
targets
Provincial enforceable certificates of approval or
permitting or licensing systems can be recognized Short-term emission-intensity targets
as a basis for an equivalency agreement. Once
an equivalency agreement is negotiated, the The government will put in place short-term
Governor in Council may make an order declaring emission-intensity reduction targets that will
that the provisions of the CEPA 1999 regulation come into force in 2010. These targets will result
that are the subject of the equivalency agreement in absolute reductions in emissions of greenhouse
do not apply in the jurisdiction of the particular gases from industry as early as 2010 and no
province, territory or aboriginal government with later than 2012, even if the economy grows
which the agreement has been negotiated. The as expected. The targets will also make a vital
result is that the regulation (or portion of it) would contribution to the government’s commitment
“stand down”, leaving the subject matter of the to reduce national absolute greenhouse gas
CEPA 1999 regulation to be governed by the laws emissions by 20% from 2006 levels by 2020.
of the province, territory, or aboriginal government
with which the agreement was negotiated.
Targets Ways to comply
(in addition to in-house reductions)
Existing facilities Climate change technology fund: one fund/two components
6% improvement each year Deployment & Infrastructure: access as % of total target over 2010-2017
from 2007 to 2010, giving an period – 70%, 65%, 60%, 55%, 50%, 40%, 10%, 10%
enforceable 18% reduction Research & Development: access over 2010-2017 period – 5 Mt
from 2006 emission intensity, annually
starting in 2010 Explore credit for certified project investments
2% annual improvement Contribution rate to funds ($/tonne over 2010-2017 period) – $15, $15,
thereafter $15, $20, $20 escalating with GDP
New facilities Trading
3-year grace period Domestic trading
Clean fuel standard Access to domestic offsets
2% annual improvement Access to Clean Development Mechanism at 10% of total target
Actively explore linkages to a Canada-U.S, -U.S. regional or
-state-level greenhouse gas emissions trading system
Credit for early action of 15 Mt
Source: Environment Canada.
Regulatory Framework for Air Emissions
The government is introducing the toughest
What is carbon dioxide equivalence?
action on greenhouse gases ever proposed
by a Canadian government. The government’s For comparison purposes, greenhouse gas emissions
are reported in units of carbon dioxide equivalent (CO2e).
emission-intensity targets are 6 percentage points Each greenhouse gas has a unique average atmospheric
more stringent, at 18%, than the emission-intensity lifetime and heat-trapping potential. Greenhouse gas
targets proposed on July 16, 2005, at 12%. emissions are often calculated in terms of how much
carbon dioxide (CO2) would be required to produce a
Unlike the 2005 proposal, this plan also requires
similar warming effect. This is called the carbon dioxide
annual improvements in emission intensity of 2%, equivalent value and is calculated by multiplying the
meaning that, by 2015, a 26% emission-intensity amount of the gas by its associated global warming
improvement will be required under this plan. potential (GWP). For example, the GWP for methane
is 21, so each tonne of methane that is emitted is
considered to have a cumulative warming effect over the
Short-term mandatory reductions in greenhouse next 100 years equivalent to 21 tonnes of CO2.
gas emissions by sector are defined in terms
of reductions in emission intensity from their GWP is based on a number of factors, including the
heat-absorbing ability (known as radiative efficiency) of
emission intensity in 2006, the base year. That is, each gas relative to that of carbon dioxide, as well as
greenhouse gas emissions per unit of production the amount of each gas removed from the atmosphere
are capped. The regulatory release limit for over a given number of years (known as the decay rate)
relative to that of carbon dioxide.
individual facilities within a given sector that will
be needed to achieve this overall percentage Under the Kyoto Protocol, the Conference of the
reduction will be determined as part of the process Parties decided that the values of GWP calculated
for the Intergovernmental Panel on Climate Change’s
to develop the detailed regulations.
(IPPC) Second Assessment Report were to be used
to convert the various greenhouse gas emissions into
The emission-intensity approach ties targets to comparable CO2 equivalents when the overall sources
production. This means that firms will not be able and sinks for the period 2008-2012 are being computed.
to claim emission reduction credits by shutting For consistency, these GWP values will be used, even
though the GWP values for some of the gases have
down production for economic reasons or obtain subsequently been revised.
credits for moving production out of Canada.
Rather, credits can only be earned through cleaner
100-year
production. More importantly, these rigorous Global
targets will yield absolute reductions even as the Chemical Warming
economy grows. As the World Resources Institute Gas formula Potential
noted in a 2006 report, “[f]or environmental Carbon dioxide CO2 1
performance, what matters overall is that targets Methane CH4 21
are set at reasonably stringent levels and Nitrous oxide N 2O 310
subsequently are met. This may be achieved with
Hydrofluorocarbons CnHxF(2n+2-x)
absolute or intensity targets.” 140 - 11 700
(HFCs) 0Regulatory Framework for Air Emissions
This yields an initial required reduction of 18% What are fixed process emissions?
from 2006 levels in 2010, the year the proposed
greenhouse gas regulations would come into An example of fixed process emissions
force. Every year thereafter, a 2% continuous Calcination in cement and lime production:
improvement in emission intensity will be required. Limestone, a raw material used to produce cement and
lime, contains some carbon. When limestone is heated
By 2015, therefore, a reduction in the emission to extract the ingredients needed to produce cement and
intensity of 26% from 2006 levels would be lime (a process known as calcination), carbon dioxide is
mandated. This basic approach will be applied to formed and released into the atmosphere. There are no
known techniques or practices to avoid the release of
existing facilities in each sector.
carbon dioxide when limestone is calcined.
The 18% emission-intensity reduction calculation An example of non-fixed process emissions
applies only to combustion and non-fixed process
Anode effect in aluminum production: Anode effects
emissions. Regulatory release limits per unit of are brief periods of instability and disequilibrium in the
output for existing facilities would reflect this. Pre- aluminum smelting process. These effects result in a
chemical reaction that releases perfluorocarbons (PFCs),
defined fixed process emissions would have a 0%
which are potent greenhouse gases. Anode effects
reduction in emission intensity from 2006 levels can be controlled through modifications in the smelting
in 2010. Fixed process emissions are emissions process. Newer facilities have, in general, fewer
that are tied to production and for which there is emissions from anode effects, so this type of emission is
not considered to be from a fixed process.
no alternative technology that will reduce them.
The only way to reduce these emissions is to
reduce production. Processes that are currently
considered fixed may not be considered fixed The three-year grace period means that no
in the future if technologies or processes are improvements are expected in the first three years
developed that could reduce or capture and store of operation and no target will apply during those
the emissions. years. Targets begin to apply in the fourth year
of operation, even if that year is before 2010. For
At the sector level, the share of fixed process example, a facility that began operation in 2005
emissions in total emissions varies. For each sector, will begin to accrue a target in 2008, based on its
the basic approach will be an 18% reduction from emission-intensity performance in 2007 and the
2006 levels in 2010 with continuous improvement application of a cleaner fuel standard.
in emission intensity thereafter. Fixed process
emissions will have to be determined on the basis A flexible approach to implementation will be taken
of the characteristics of firms and sectors. in those special cases where the equipment used
in a plant facilitates carbon capture and storage
Approach to setting targets for new facilities or another technology offering significant and
imminent potential for emission reductions.
New facilities will be granted a three-year grace
period before they have to meet an emission- The approach described above is the one that will
intensity reduction target in order to provide be applicable across the full range of industrial
sufficient time for the facilities to reach normal sectors. Specific sectoral issues will be considered
operating levels. After the third year, the initial in developing the regulations, but all resulting
greenhouse gas emission-intensity target will be emission reductions must be equivalent to those
based on cleaner fuel standards. New facilities will resulting from the general approach.
also be required to improve their emission intensity
each year by 2%, as with existing facilities. New The continuous improvement of 2% in a sector’s
facilities are defined as those whose first year of emission intensity would be applied through 2020.
operation is 2004 or later. As noted above, there will be a review of the
11Regulatory Framework for Air Emissions
regulatory framework, including targets, every five provide more than just a compliance mechanism
years. The first review would take place in 2012. for industry. It would act as an important means
of promoting the development, deployment, and
C.2 Compliance mechanisms diffusion of technologies that reduce emissions of
greenhouse gases across industry.
Firms will have several options to meet their legal
A third-party entity would be created to administer
obligations under the proposed greenhouse gas
the fund. This would be an independent, not-for-
regulations. Ideally, firms will reduce their own
profit entity administered by a board of directors
emissions through abatement actions, such as
composed of individuals originating from industry,
energy efficiency measures, improved energy
federal and provincial governments, and other
management systems, or deployment of carbon
stakeholders. It would operate under a federal
capture and storage or other emission-reducing
mandate.
technologies.
Over the coming months, the process for
There will be limited access to other compliance
determining the allocation of funding to projects
mechanisms. First, firms could meet their
and the legislative authority, governance,
compliance obligations through contributions to a
and administration of the fund will be further
technology fund. Second, they will have access
developed.
to emissions trading, including inter-firm trading,
emission-reduction credits from non-regulated The design of the fund will respect two basic
activities, and qualified credits from the Kyoto principles: no inter-regional transfer of wealth and
Protocol’s Clean Development Mechanism. no government control.
Also, there will be a one-time recognition of early
action for firms that took verified action between Before finalizing the structure of the fund,
1992 and 2006 to reduce their greenhouse gas the government will work with provinces and
emissions. Finally, linkages to North American territories, as well as sectors, to determine the
emissions trading systems will be actively appropriate disbursements of the funds, taking into
pursued. Over time, as the international carbon consideration the development and deployment
market becomes more fully developed and robust, of technologies that would be used by sectors
and as emissions monitoring, verification, and with facilities across the country and provincial
reporting systems evolve further, the government initiatives that support the development of
will consider further international linkages. technology to reduce greenhouse gas emissions,
and potentially, air pollutants as well.
Contributions to a climate change
technology fund Other funds that meet all necessary requirements
could be certified to qualify as part of the
Technological advancement and innovation regulatory framework. In particular, provincial
are critical to achieving significant, long-term funds that are consistent with the federal fund
reductions in greenhouse gas emissions. New could be recognized as equivalent.
technologies, both under development and ready
for deployment, provide a means to transform The fund would be used principally to fund
Canada’s industrial production and thereby investments that have a high likelihood of yielding
significantly reduce emissions. greenhouse gas emission reductions in the near
term. The primary focus would be on funding
Firms would be able to meet part of their regulatory technology deployment and related infrastructure
obligations to reduce greenhouse gases by projects.
contributing to a technology fund. This fund would
12Regulatory Framework for Air Emissions
Carbon capture and storage is one of the most A smaller component of the fund, limited to an
promising technologies for reducing greenhouse additional 5 Mt per year from 2010 to 2017, would
gas emissions associated with a broad array of help finance research and development projects
industrial activities. The fund could support critical aimed at supporting the creation of transformative
infrastructure for carbon capture and storage, technologies that are expected to achieve
including a pipeline in Alberta for CO2 transport. emission reductions in the medium to longer term.
This could complement activities and priorities
being defined through the Canada-Alberta Emissions trading
ecoENERGY Carbon Capture and Storage Task
Emissions trading will be an important component
Force.
of the government’s market-driven approach
The fund could also support an east-west to reducing emissions of greenhouse gases.
electricity grid linking markets from Manitoba to Well-designed emissions trading systems can
Newfoundland. reduce overall costs associated with regulatory
compliance by allowing firms with high costs of
As a way of meeting part of their regulatory
emissions abatement to fund lower-cost emission-
obligations, firms could contribute to the fund at a
reduction projects at other firms. In addition,
rate of $15 per tonne of carbon dioxide equivalent
emissions trading systems create an economic
from 2010 to 2012 and $20 per tonne in 2013.
incentive for companies to do better than their
Thereafter, the rate would escalate yearly at the
regulated targets and bring innovation to bear on
rate of growth of nominal GDP. This rate structure
the challenge of climate change.
would be reviewed every five years as part of the
general review of the regulatory system. The emissions trading system that will be part of
Contributions to the deployment and infrastructure the regulatory framework for greenhouse gases
component would be limited to 70% of the total will have a number of components. Inter-firm
regulatory obligation in 2010, falling to 65% in trading, through which regulated firms may buy
2011, 60% in 2012, 55% in 2013, 50% in 2014, and sell emission credits among themselves,
40% in 2015, 10% in 2016, and 10% in 2017. The will be the central component. A domestic offset
contribution limit will fall to 0% by 2018. system will allow regulated firms to invest in
verified emission reductions outside the regulated
The government will also explore: system. There will be no limit on firms’ access to
domestic emissions trading and offsets.
• The option of providing credits to individual
companies for government pre-certified In addition, Canadian firms will have limited
investments in specific projects. This option access to certain types of credits from the Kyoto
could allow a company that invests in a Protocol’s Clean Development Mechanism for
transformative technology that would compliance with the regulations.
incrementally reduce future emissions to receive
credits from the government for that investment. Potential linkages with regulatory-based trading
These credits could be used towards its systems in the United States will be actively
regulatory obligations. Criteria for such pursued. In particular, the government will examine
investments would be determined in advance by the feasibility of linking with emissions trading
government in consultation with industry and systems such as the Western Regional Climate
other experts; and Action Initiative and the Regional Greenhouse Gas
• Imposing a mandatory requirement for Initiative, as well as other systems, as they become
investments to be made in specific infrastructure established. Over time, as national and regional
projects. carbon markets become more mature and the
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