2006 September Report of the Commissioner of the Environment and Sustainable Development

Uncertainties with the 2010 projection for business-as-usual emissions

The 2010 projection for business-as-usual emissions is not only the basis for reduction targets, but is also a key starting point for assumptions behind the policy choices made in the 2002 and 2005 plans. The 2010 business-as-usual projection has, however, come to be seen by many as outdated and problematic. Also, no public document has been made available that has separated out the 2010 business-as-usual figures for each of the large industrial emitter sectors. Without a reliable baseline showing what the business-as-usual emissions would be, there is a risk that the level of expected reductions may not be realized or may be inaccurate, and that the cost and effort to achieve the expected reductions may be greater than anticipated.

Uncertain reductions from the Greenhouse Gas Technology Investment Fund

Up to 9 million tonnes of the total target of 45 million tonnes can be addressed through companies' investments in the Greenhouse Gas Technology Investment Fund. Financial contributions are expected to support the development and deployment of innovative domestic technologies that could reduce greenhouse gas emissions. However, investments in the Fund are not expected to generate emission reductions within the system's 2008–12 time frame. Thus, industry is essentially borrowing credit from the future for its compliance in the 2008–12 period. There is also a risk that companies may receive credit for research and development they already have planned, making it difficult for the government to verify what is new, additional research and development for greenhouse gas reductions.

Potential legal challenges to the current approach

The System proposes that new industrial facilities require emission intensity targets equivalent to the emission standard that can be achieved by applying the best available technology in a manner that is economically achievable. However, it is uncertain whether giving different targets for new facilities, compared to other targets for existing facilities, is allowed under legislation. Additionally, for the Large Final Emitter System to work, it was necessary for the federal government to add greenhouse gases to the toxic substances listed under Schedule I of the Canadian Environmental Protection Act, 1999. Industry has expressed opposition to declaring greenhouse gases "toxic" because of concern that putting those emissions in the same category as other substances like lead, mercury, and PCBs may have implications outside the system, such as how investors may perceive these industries. Legal challenges could undermine the Large Final Emitter System altogether.

Questions about transparency in reporting

Regulation will establish the requirements for reporting by large industrial emitters, with legal penalties for non-compliance. Considering the need to ensure industry's progress against emission intensity targets and the need for accountability for achieving results, transparent reporting and verification are integral to the system. However, issues of confidentiality and the public reporting of industry data remain unresolved. In the absence of detailed and transparent information, it will be difficult for the public to verify whether real emission reductions have occurred and what progress large industrial emitters have made against their targets.

Potential federal/provincial/territorial harmonization issues

The Large Final Emitter System will allow interested provinces and territories to sign equivalency agreements with the federal government to enforce industry compliance under provincial regulation. In such cases, harmonization between the federal and provincial legislation will require agreement on key definitions, reporting obligations, approaches to verification of data, and penalty structures for non-compliance. If these regulatory elements are not harmonized, then there is a risk that the burden on the federal government of implementing the large final emitter regulation will be greater than anticipated, and that industry will face multiple compliance obligations and greater administrative costs.