Made in Canada Clean Air Act

The Federal government, to much fanfare, announced the Clean Air Act today. It is truly remarkable in its content. It basically commits the government to making no progress on cleaner air within its mandate.
It sets a target of 45-65% reduction in greenhouse gas emissions by 2050. But of course, there will be a dozen governments in power in this timeframe. It’s not even as good as “the cheque’s in the mail.” Because sometimes the cheque is in the mail. Here, it is simply proposed to be sent, but by someone else. And only if they agree.

The Act is shocking in its omissions. Not one word is mentioned about renewable energy. No wind energy. No solar. No geothermal. No hydroelectric. No biomass. No wave or tidal energy. No biofuels. A stratagy on emission reductions that doesn’t include renewable energy is sorely lacking.

The Act doesn’t mention Kyoto. How can you propose to tackle CO2 emissions without agreement from the rest of the world? And Kyoto is the only agreement we’ve got.

The wind industry in Canada is having a very good year at installing turbines. It looks like the installed capacity in Canada will double this year. That is significant. And it will move Canada up to .7% of its electricity supply from wind. That may not sound like much. But it is quite significant, as natural gas supplies only about 10 times that amount. And it means that wind is supplying 30-50% of new demand.
A key reason that the wind industry is having a banner year has been Federal programs, in particular the Wind Power Prodution Incentive (WPPI). This incentive was announced in 2001, and the program got rolling about a year later. It paid about 1 cent/kWh for 10 years. (I oversimplify a bit). While it is not that sizable on its own, it makes it less costly for provinces to procure wind power. It has been a critical policy piece to encourage wind energy.

In the 2005 budget introduced by the Liberals, the program was quadrupled from 1000 MW to 4000 MW. A big price tag was put on it – $900 million. But of course that is spread over 15 years – 5 years for firms to register, and it pays for 10 years. So that is about $60 million/year, with a ramp up, and phase down at the end.

To put this in perspective, Atomic Energy of Canada Ltd, a Federal Crown Corporation that makes the Candu reactor, gets $200 million/year, and has gotten this or more every year since the 1950’s. Some estimates put the Federal nuclear subsidies as high as $17 billion. And earlier this year, the new government gave them $200 million extra to pay for 5 years of clean up at Chalk River. We will have to put more funds in after that. Imperial Oil has requested $1 billion plus to help out on the McKenzie Valley natural gas pipeline. The Federal government made equity investments in Syncrude, and Hibernia.

So the fairly modest investment by the Federal government in the WPPI is simply leveling the playing field. Every other major source of energy has had, or continues to have major Federal subsidies.

But while the Liberal budget passed, the funding did not make it through Treasury Board. A Federal budget basically allocates funds to certain programs, but those funds allocations and rules for dispensing them must be approved by Treasury Board before they can be granted. The new government has not yet released the funds.

WPPI has run out of funds. So no new wind projects will receive WPPI. While the government makes positive sounds about supporting wind energy, their only major program to actually do it is stuck in the mud. There are no funds.

The Clean Air Act considers “short term” to be 2010-2015. The only action taken before then for large emitters is consultation. Which has already been going on for years. It is legislated foot dragging.

There are some positive things in the proposed Act that nibble around the edges. There are improved efficiency standards for commercial clothes dryers. And residential dishwashers and dehumidifiers. There is long overdue standards set on outboard motors, ATV’s, and Seadoo’s.

Much of the efficiency improvements talk about harmonizing with the US standards, including vehicles.
It’s a bit like saying you will cut your weight to equal a sumo wrestler. It doesn’t require much weight loss.

The new government has had 9 months to decide what to do with WPPI. The fund is dry. The industry is looking for direction and leadership. Investment is moving to the sidelines. Uncertainty is killing projects. Those who invested in the supply chain are sideswiped by apparent change in government direction. Where is the leadership? Sadly, not in today’s announcement.

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