Greater funding is needed for innovative technology and energy conservation to reverse the expected increase in greenhouse gas emissions, says an energy industry group report.

“We believe that if properly implemented, our policy position will allow Canada to play a significant international role in addressing global warming, without putting our economy at unnecessary risk,” says the report, released by the Canadian Association of Petroleum Producers (CAPP).

CAPP president Pierre Alvarez said the updated federal plan on Kyoto released last week addresses some of
industry’s concerns in terms of competitiveness, clarity and cost burden.

FIle photo by Mike Sturk, Business Edge
CAPP’s Pierre Alvarez says plan addresses some concerns.

However, CAPP says more work is needed, and it still opposes Prime Minister Jean Chretien’s intention to ratify Kyoto by the end of the year.

Under Kyoto, Canada will be forced to purchase significant volumes of foreign emissions-reduction credits, CAPP says, funnelling away money that could be better used for research and development.

The association, which represents about 150 companies in the energy industry, argues absolute caps on individual or sectoral industry emissions are unfair, and emissions should be allowed to vary with output to accommodate new investment.

And as industry moves forward in reducing intensity, the target intensity level (emissions per unit of output) should adjust to reflect progress achieved.

In the federal plan, the government indicates that under an emissions intensity approach, emission permits received by a firm would grow or shrink based on production. While the system would provide incentives to reduce emissions, it wouldn’t place an absolute cap on industry’s or any firm’s emissions.

“The government will continue discussions with industry and provincial and territorial governments to ensure the approach taken on emissions intensity is reasonable and the targets achievable,” the federal plan says.

CAPP is also cautioning that proceeding with Kyoto could pose risks to the future development of the oilsands.

Meanwhile, the head of the Canadian Chamber of Commerce says Ottawa’s updated plan has finally acknowledged that Canada’s response to climate change must allow the economy to grow.

But there’s still no firm pricetag revealing the true cost of implementing the Kyoto Accord, said Nancy Hughes Anthony, president and CEO of the Canadian Chamber of Commerce. “This is a huge concern for us,” she said.

The federal plan says no region will bear an unreasonable burden under Kyoto, but only reflects nine of the 12 proposals put forward by provincial and territorial environment ministers.

“We are continuing our discussions with them on the issues that remain,” said federal Environment Minister David Anderson. A meeting of federal and provincial ministers is scheduled for Friday of this week.

A key sticking point remains a guarantee sought by the provinces to be compensated for any losses incurred under Kyoto, something not included in the federal plan.

The federal plan proposes several measures to support individual actions by Canadians, as well as action to promote emissions reductions in the transportation and building sectors.

Natural Resources Minister Herb Dhaliwal said establishing a clear target that will not change and recognizing early action by industry “will go a long way to providing the certainty that investors are seeking.”

But Aldyen Donnelly, president of the Greenhouse Emissions Management Consortium (GEMCo), says that under Canadian law, virtually no commitments in Ottawa’s latest Kyoto plan are legally binding on future Canadian parliaments.

GEMCo is a not-for-profit corporation of energy companies, including EPCOR Utilities, ATCO Electric and TransCanada Pipelines Ltd., that participate in voluntary, market-based mechanisms to reduce their greenhouse gases.

Donnelly said even if a future session of Parliament wanted to keep the commitments announced last week, given the current emissions from Canada’s largest industrial sectors and the size of the cuts required under Kyoto, “it’s not possible.”

The only way the energy sector will be able to meet Kyoto targets will be to buy foreign credits or fund emissions-offset projects in developing countries, she added. “The whole Canadian energy sector is going to be required to send money to developing nations in order to operate businesses in Canada . . . it’s just a (federal) tax.”

But Matthew Bramley, climate change director at the Pembina Institute, welcomed the federal plan, saying: “The economic modelling that’s being done shows that it can be done with minimal economic disruption and with a number of important benefits for Canada.”

The country needs to ratify the accord now so Canadians can engage in “the real debate” on how to achieve the reductions in Canada, Bramley said. “I think we need to hear what the government of Alberta is prepared to do to constructively contribute to implementing Kyoto.”

Parliament was scheduled to begin debate Monday this week on a ratification motion, with a vote expected by early December.

Specific measures in the federal government’s plan, by sector, include:

* Transportation: a 25-per-cent improvement in average vehicle fuel
efficiency, encouraging greater use of alternative, low-emission fuels such as ethanol, and increasing the use and availability of public transit.

* Buildings: improving energy efficiency in new-home construction, encouraging retrofitting of existing homes and encouraging the use of more energy-efficient equipment in heating and cooling systems.
n Individuals/citizens: asking Canadians to reduce individual emissions by improving home energy efficiency, using more efficient vehicles and reducing vehicle use. The average Canadian is responsible for 5.4 tonnes of greenhouse gas emissions a year. The plan challenges every Canadian to reduce his or her emissions by one tonne.

* Large industrial emitters (includes companies in the upstream and downstream oil and gas sectors, electricity generation, mining and manufacturing):

These industries are expected to produce about half of Canada’s total greenhouse gas emissions by 2010, and are to cut 55 megatonnes of emissions under the plan. A megatonne is one million tonnes.

Details of industrial emissions reductions will be ironed out in further discussions, and it’s expected the new system will be developed by 2003-2004 and implemented as soon as possible.

Despite claims to the contrary from critics, Kyoto won’t be a body blow to Canada’s economic health, says Environment Minister Anderson.

While not providing specifics, Ottawa’s plan says fuel prices shouldn’t increase significantly as a result of its
implementation, and that many of the recommended actions toward achieving Kyoto’s targets could result in lower energy bills, for business and consumers, through greater energy efficiency.

The federal plan predicts the country’s GDP would fall by 0.4 per cent in 2010. So rather than growing by 18 per cent between 2002 and 2010, the economy would grow by about 17.6 per cent. Employment would increase by 1.26 million jobs instead of 1.32 million.

The plan promises to increase investments in climate change-related innovation and technology in areas such as renewable energy, bioproducts, bioenergy and biofuels; fuel cells and hydrogen; clean coal technology; and carbon dioxide capture and storage.

Ottawa says it will be involved in the international trade in emissions permits as permitted under the Kyoto Protocol, and its plan includes a proposed system of domestic emissions trading.

(With files from Mark Lowey.)