Manitoba Perspectives on Emissions Trading Bryan Gray Manitoba Energy Science and Technology March 14, 2003

Manitoba Perspectives on Emissions Trading

Bryan GrayManitoba Energy

Science and TechnologyMarch 14, 2003

EST Kyoto Seminar for Business - Mar 14, 2003

Outline

• Manitoba and Climate Change• Trading: Requires a Buyer and Seller• Why Trade• Federal Proposal of Nov 21,2002• The Manitoba Context

– Need clarity and communication from Ottawa

– Seize Opportunities-contribute to Canada’s goal

• Next Steps


Manitoba and Climate Change

• Premier Doer accepts Axworthy Task Force recommendations and releases Action Plan.

• The Plan states:– “climate change is a real and pressing problem for Manitoba…”

– “strong support for ratification of Kyoto…”

– “Kyoto reduction targets are only a modest beginning for what must be done…”

– “It is our moral obligation to take all reasonable steps now to reduce emissions and begin adapting to climate change.”

• Strong advocate - smart Kyoto implementation


Trading: Buyers and Sellers

• A relatively small number of Canadian ghg emitters will be required to account for their emissions and meet reduction targets by holding emission quota or permits or credits that match their emissions.

• Others that can produce emission reductions or sink enhancements can sell such reduction credits.



• Will we have a liquid ghg market?– 500 entities may need emissions credits

• 6 of these are in Manitoba

– Quantum has moved from 1990 -6% to an upside of approximately 1990 +15% for some of the fastest growing major emitters.

– Many major emitters still not willing to accept 55mt LFE target



• Market uncertainty– Uncertainty of recognized offset sectors to

generate credits for sale– Government role in subsidizing offsets– Stakeholders opposed to purchases of

international credits (greened or otherwise)– Promise to cap price risk at max C$15– Promise to cap quantity risk at -15% 2010 bau



• Market uncertainty– Federal escape clause from LFE DET/covenant

emission reduction requirements• “The Government is prepared to discuss an

approach whereby a pre-approved commitment of larger emissions reductions over the somewhat longer term could be accepted in lieu of reductions in the nearer term.” (p.32, Climate Change Plan for Canada, Nov. 21, 2002)

– 2nd budget period targets - restoration rate


Why Trade

• Basic environmental economics suggest market forces = greatest efficiencies and allow market (not government) choices.

• Economic efficiency is not a determining factor in the November 2002 federal plan.– Home renovations are equally prominent as

coal fired electric sector ghg reductions.– Contrary to AMG I / Markal cost curves


Why Trade

• Some suggest international projects are available in unlimited quantity to produce credits under C$5.

• Canadian stakeholders have said keep our capital in Canada.

• Multiple public policy objectives in seeking ghg reductions.


Federal Proposal (Nov/02)

• Far short of the approximate 240Mt required for Kyoto first budget period.

• Largest industrial emitters allowed to continue to increase ghg emissions.

• Coal power will continue to have a significant market price advantage over clean-renewable alternatives.

• No change in bau growth of coal power


Federal Proposal (Nov/02)

• Massive public investment required.

• No progress to date in defining where investments will be made in programs.

• Investment continues to be deterred by uncertainty.

• 2008 is coming.


Manitoba Context

• Manitoba’s rate of increase in emissions is far below the national rate – only 1 Mt since 1990

• Canada’s rose by 120 Mt (nearly two thirds of this in Alberta)

• Manitoba’s emissions are 1/3 of Saskatchewan’s• Large ghg emitting firms who may be subjected to

federal kyoto regulations make up less than 4% of Manitoba economy

• 97% of Manitoba hydro power is CO2 free• Our economy is well-positioned to handle Kyoto


Manitoba Greenhouse Gas Emissions1990-2000 (& 2010 Projection)

0

5

10

15

20

25

30

millio

n t

on

nes o

f C

O2e


Provincial Greenhouse Gas Emissions

0

50

100

150

200

250

Manitoba Sask Quebec Ontario Alberta

mil

lio

n t

on

ne

s C

O2

e


Manitoba Emissions by Sector

WASTE 0.7

HEATING 3.1

AGRI 6.9

TRANS FUELS 6.6

MFG, MINES & CONSTRN 1.7

MT

PIPE, OIL & GAS 1.4 MT

ELEC'Y1 MT


Manitoba Context

• Need Clarity and Communication– Federal statements suggest 6 Manitoba firms may be

subject to federal ghg reduction requirements.

– Manitoba companies need clear statement of intention from Ottawa as to how they will be regulated by federal Kyoto implementation.

– Sectors outside the “covered sector” need to know how they might play a role in creating offset reductions.

– Clean-renewable electricity must play a greater role.


Manitoba Context

• Seize Opportunities– Manitoba Action Plan - Kyoto and Beyond

proposes a series of actions that could provide between 20 and 25 Mt of ghg reductions here and elsewhere in Canada for the first and second budget period of Kyoto.

– Low-impact hydro power developed in partnership with interest First Nations.


Manitoba Context

• Seize Opportunities– Ethanol and bio-diesel– Hydrogen– Wind and geothermal and methane power– Carbon storage and sequestration research– Manufacturing– Energy efficiency


Next Steps

• Industry has to know if they are “in”• “Entity” role in trading must be defined• “Uncovered” sectors must assess opportunities.

– Who is the buyer?

– Subsidy price level and mechanism?

– Verification and admin costs?

– “bau” must be resolved • Federal-provincial programs and funding must be

agreed to.


Next Steps

• Must have engagement of industry and stakeholders in substantive discussions for them to gain detailed understanding of program and have opportunity for meaningful input into policy and regulation drafting.

Documents

Manitoba Perspectives on Emissions Trading Bryan Gray Manitoba Energy Science and Technology March 14, 2003