Few if any of Alberta’s big industrial greenhouse gas emitters will be able to meet their Kyoto targets without being forced to buy emission-reduction credits from countries such as Russia, predicts an industry expert.
The electrical power-generation, oil and gas, and manufacturing sectors in the province are all using energy as efficiently as they can, and none will be able to easily reduce greenhouse gases further at the emission stack, said Liz Siarkowski, manager, climate change, for TransCanada Corp.
“The feeling that most in industry have is that they are not going to be able to make the (Kyoto) targets,” she said in an interview. “There’s nothing that they would be able to do that would allow them to reduce emissions cost-effectively, if they already have the most efficient equipment.”
Under the federal government’s Kyoto plan, Canada’s so-called large emitters will have to reduce greenhouse gas emissions collectively by 55 million tonnes by 2010.
These large emitters include the electricity, the oil and gas (including the pipeline and refining industries), and the industrial manufacturing sectors.
Ottawa requires a 15-per-cent cut in greenhouse gases from each sector, based on each sector’s “emissions intensity,” Siarkowski said last week in Calgary, during a talk sponsored by Alberta’s Climate Change Central organization.
In other words, each sector won’t be compelled to reduce its emissions by an absolute total number of tonnes. Instead, each sector will have to reduce its greenhouse gases by 15 per cent by 2010 based on the amount of product (such as electricity, oil and gas, etc.) they produce.
Emissions intensity is a way of allowing each sector to grow competitively and therefore increase its greenhouse gas emissions as production increases.
But the problem, Siarkowski said, is that increasing production of power or oil and gas or steel to meet consumer demand will also lead to an increase in emissions intensity.
The federal plan, if it simply requires a 15-per-cent emissions reduction from each company, will penalize firms that have invested in new equipment to make their facilities energy efficient, she added.
These firms won’t be able to cost-effectively make any further reductions at their facilities, so they’ll have to buy emission-reduction credits from foreign sources in order to meet their Kyoto target, Siarkowski said.
Companies can use such credits, purchased through an international emissions-trading program to be set up under the Kyoto treaty, to reduce further their domestic emissions.
Under Ottawa’s Kyoto plan, companies will have to pay up to $15 per tonne of carbon dioxide gas or equivalent for international credits. The federal government has pledged to pick up the cost of any credits that exceed $15 a tonne, but are still needed to meet the country’s overall Kyoto target.
Under Kyoto, Canada will have to reduce its greenhouse gas emissions by six per cent from 1990 levels, or a total cut of 240 million tonnes by 2008-2012.
Siarkowski said TransCanada’s evaluation of its pipelines and power plants shows there are some direct emission reductions the company can make for less than $15 per tonne.
But these direct reductions won’t be sufficient to cut TransCanada’s emissions intensity by 15 per cent as required by the federal Kyoto plan, she said. So the company could then be forced to buy international credits to make up the difference.
Several other energy company officials in the audience indicated their firms are facing the same situation.
Each company’s additional costs for complying with Kyoto could be passed on to consumers in the form of higher prices for electricity or oil and gas. “It will be the people who pick up the cost,” one energy company official predicted.
Alberta’s electricity sector, for example, generates about 80 per cent of the province’s power from coal-fired plants that emit relatively high amounts of greenhouse gases.
Depending on how Ottawa allocates the 15-per-cent reduction required across the sector, Alberta’s electricity sector could face the steepest cuts in the country, Siarkowski said.
Some companies could end up having to reduce emissions between 32 and 49 per cent, depending on how Ottawa allocates the reductions and whether the federal policy ends up creating “winners and losers,” she said.
Siarkowski said that TransCanada, which is among Canada’s top 10 greenhouse gas emitters, supports becoming more energy efficient and reducing emissions, and pursues both objectives.
The problem is the tight timeframe for meeting the Kyoto targets, Siarkowski said. “Rather than spending $15 a tonne to buy credits that may just be an offshore transfer of money, our preference would be to use that money for deployment and development of technology (to reduce emissions).”
But with the start of the 2008-2012 Kyoto compliance period only three years away, she added, there’s not enough time to develop and deploy new emission-reduction and energy-efficiency technologies.