Industrial Greenhouse Gas Action Plan

This week, the Federal Government introduced an action plan to reduce greenhouse gas emissions from the industrial sector.

I read it as part of research for a book that I am writing, called Zero Carbon Nation, that will talk about the policies we need to reduce our carbon emissions.

I have to confess I began to read the action plan as a skeptic, expecting to see good words, but no action. I will leave it to the reader to guess why that may have been my attitude.

But the plan is actually quite good, and has teeth. It will make a difference in emissions. The plan discards the Kyoto baseline year of 1990 that the rest of the world uses. This baseline year was long ago discarded by the Conservatives for political reasons. So the goal for industrial emitters is to be 20% below 2006 emissions by 2020. The plan leaves in place the “intensity” targets reviled by many, but the absolute reductions required is still 20%. A good start.

During the first years, corporations will be able to buy carbon credits for $15 per tonne, by making a contribution to a government run “technology fund”. Over time, the percentage they can buy in this way diminishes, so that real reductions are required. The government expects the price of carbon to rise by 2020 to $65/tonne. At $15/tonne, I don’t think any action will be taken. But at $65, actions to reduce emissions will become serious.
$65 is not an insignificant price. For example, it would raise the cost of generating power by coal by 6.5 cents/kWh. It would raise the cost of generating power from natural gas by over 3 cents/kWh. With these types of cost increases, renewable energy from wind, hydro, and biomass become widely viable. And nuclear becomes more viable than it already is with its lavish subsidies. So there will be a radical change in electricity generation.

The economic model employed forecasts much less increase in consumer prices as a result of the program. For example, they forecast a 2% higher natural gas price, 4-12% higher electricity prices, and a decrease in overall GDP of .4%, and amount we won’t even notice.

But it is not the higher prices that will change the demand for fossil fuels. After all, the regulations on industrial emitters will change only their behaviour, and the cost to change that behaviour will be passed on to the consumer. So the increase in the price of natural gas beyond what it would have been is merely to pay natural gas producers to reduce their emissions in producing and distributing natural gas. It is not intended to cause consumers to reduce our emissions.

The program is strong on regulations. Incandescent light bulbs are banned starting in 2011. The fuel efficiency of the car fleet has to increase to 35 mpg (6.7 l/100km) by 2011, an increase of 20%. There will be new regulations on emissions of commercial dryers, dehumidifiers, and dishwashers.

Regulation can be one of the most powerful tools available. Refrigerator regulations began in 1993, with a progressive tightening in later years. Today’s refrigerators use 1/3 of the power of earlier models. This is the most inexpensive way to reduce emissions, and save consumers money. It is good to see this tool being used.

The plan outlines some other actions, like marine shore power for ships while in port, to allow them to shut off their diesel engines, and it re-emphasizes the home energy retrofits, renewable energy incentive programs, and thermal heat incentives.

The program makes it mandatory for new tar sands plants or coal plants to design for future carbon sequestration. Will it will ever occur at reasonable cost? We don’t know. And the plan’s success depends on it working. This is a big hole in the plan.
So what was missing? There was nothing to encourage the use of ultra efficient ground source heat. There was nothing to encourage consumers to help, by putting price signals in the marketplace on energy. Instead, we rely on an array of subsidies to encourage consumers along a path of lower emissions. This is nowhere near as effective a strong price signal from a carbon tax, that is matched with tax reductions elsewhere.

But the plan will have an impact. If it is implemented, and not changed. Perhaps our nation has begun its journey to zero carbon. And it is about time.

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