Quantitative analysis of equivalency determination: coal-fired generation of electricity

Official title: Quantitative analysis of equivalency determination of the renewed equivalency agreement for the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations

1. Issue

The Canada-Nova Scotia equivalency agreement for the non-application of the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations (the federal Regulations), is set to expire on December 31, 2024. Canada and Nova Scotia (NS) are proposing to enter into a new equivalency agreement (proposed Equivalency Agreement) for the period January 1, 2025, to December 31, 2029. The results of the quantitative analysis of greenhouse gas (GHG) emissions within this document provides the basis for this determination of equivalency and renewed equivalency agreement.

2. Background

Federal Regulations and amendments

In September 2012, the Government of Canada published the federal Regulations in the Canada Gazette, Part II.[1] The federal Regulations establish an emissions standard for coal-fired electricity generation of 420 tonnes of carbon dioxide per gigawatt-hour of electricity produced (t CO₂/GWh) from electricity generating units fueled by coal, petroleum coke, or their derivatives (the Standard). New units with a commissioning date that is on or after July 1, 2015, are subject to the Standard. Existing units, which were commissioned prior to July 1, 2015, were required to comply with the Standard after a period that ranges from 45 to 50 years of operation, depending on the unit’s commissioning date. On December 12, 2018, amendments to the federal Regulations (the Amendments) were published in Canada Gazette, Part II to accelerate the phase-out of conventional coal-fired electricity generation by December 31, 2029. In August 2023, the Government of Canada published the proposed Clean Electricity Regulations (proposed CER) in the Canada Gazette, Part I, which proposed to introduce new limitations on GHG emissions from fossil fuel-based electricity generation starting in 2035.

Equivalency agreements under the Canadian Environmental Protection Act, 1999 (CEPA)

Protection of the environment is a shared jurisdiction between the Government of Canada and provincial governments. As a tool for minimizing regulatory duplication and offering flexibility in achieving equivalent policy outcomes, section 10 of the Canadian Environmental Protection Act, 1999 (CEPA) allows the Governor in Council, on the recommendation of the Minister of the Environment, to make an Order so that the provisions of the CEPA regulations that are the subject of an equivalency agreement do not apply in a province or territory. For this to occur, the province or territory must first enter into an equivalency agreement with the Minister of the Environment. An equivalency agreement is a written agreement entered into by the Minister of the Environment and the province or territory declaring that there are in force in the province or territory, laws containing provisions that are equivalent to the given federal regulation and laws containing provisions that are similar to sections 17 to 20 of CEPA for the investigation of alleged offences under environmental legislation of the province or territory.

The Department of the Environment (the Department) has indicated that it is willing to consider developing equivalency agreements for GHG emission regulations with interested provinces and territories, in order to reduce regulatory overlap and provide greater flexibility for regulated sectors. In the case of GHG regulations, provincial or territorial laws are considered to be equivalent if they result in equivalent GHG emission outcomes, calculated in terms of carbon dioxide equivalent (CO₂e). In particular, GHG emissions under provincial or territorial regulations must be no greater than they would have been if the corresponding federal regulations had applied instead. This allows a province or territory to attain the GHG outcome that would have occurred under the federal Regulations in a way that best suits its particular circumstances.

Nova Scotia equivalency agreement and provincial policy

In 2014, Canada and Nova Scotia signed the Canada-Nova Scotia equivalency agreement for the period 2015–2019 as provided for under CEPA. The agreement declared that provisions under the Nova Scotia Environment Act and Greenhouse Gas Emissions Regulations (the NS GHG Regulations) will result in equivalent or better GHG emissions outcomes compared to those expected under the federal Regulations. Specifically, the NS GHG Regulations impose province-wide GHG emissions caps for its electricity sector until 2030.

In 2019, Canada and Nova Scotia entered into the current equivalency agreement under Section 10 of CEPA for the period 2020–2024, that accounts for the 2015–2029 period and was modelled taking into consideration the Amendments to the federal Regulations.

Nova Scotia has a total of eight coal-fired units that are required to meet the Standard by December 31, 2029. Prior to January 1, 2030, six of the eight units are not required to meet the Standard, and maintaining its current coal-fired generation represents the most cost-effective option for Nova Scotia to meet its electricity demand.

It is important to note that modelling for the proposed Equivalency Agreement does not account for any potential impacts that may be induced by the proposed CER, as those regulations were not finalized prior to the development of the proposed Equivalency Agreement. Furthermore, modelling that was used in the 2020 equivalency agreement will be used as the basis for this renewed equivalency agreement. A condition for the proposed equivalency agreement is to reassess, within 24 months, equivalency following any changes to federal or provincial electricity sector regulations. The reassessment provides the necessary insurance that robust modelling and analysis, which will account for changes in electricity sector regulations, can be completed to better align with associated GHG emission reductions achieved by changes in electricity sector regulations.

3. Objectives and description for the proposed agreement

Objectives

The objectives of the proposed equivalency agreement are to provide Nova Scotia the flexibility to design their system in a way that works best for the province, while avoiding duplication of efforts in controlling GHG emissions, and ensuring that industry does not face compliance with two sets of regulations to achieve equal or better GHG emission outcomes as compared to the federal Regulations.

Description

The proposed equivalency agreement published along with this analysis recognizes Nova Scotia’s actions to reduce emissions from the electricity sector, as well their plans to move directly from coal-fired electricity to non-emitting in the longer term. The proposed equivalency agreement would set conditions to enable the federal Regulations to continue to be stood down in Nova Scotia from January 1, 2025 to December 31, 2029.

4. Equivalent environmental outcomes

GHG emissions

For the purpose of determining equivalent outcomes, in 2019, the Department modelled the GHG emissions levels of the electricity sector from 2015–2029 in Nova Scotia under the federal Regulations. These cumulative GHG emissions were compared with the cumulative GHG emissions allowed under the NS GHG Regulations and were determined to be equivalent.

Assumptions underlying the modelling included factors such as population growth, GDP growth, energy demand, historical emissions, as well as regulations and policies in the oil and gas, transportation, and building sectors. to the modelling also recognizes early action on the part of Nova Scotia (beyond what would be required by the federal Regulations) with respect to the replacement of units with hydroelectricity imported from Muskrat Falls via the Maritime Link as part of the province’s commitment to transition from coal to non-emitting energy to decarbonize the electricity system in the pre-2030 period.

The Department’s analysis, using the 2019 modelled GHG emission levels, found that the Nova Scotia GHG Regulations are equivalent to the federal Regulations over the 2015–2029 period, as summarized in Table 1.

Table 1. Comparison of GHG emissions under federal and provincial electricity regulatory regimes (in megatonnes of CO₂e)

1 A positive difference represents an “over achievement”, while a negative sign represents an “emission deficit”. Any differences in the table above is due to rounding.

2 Federal baseline emissions determined by the 2020-2024 equivalency agreement to have been equivalent to the federal Regulations.

3 Historical provincial emissions.

4 The remaining emission cap from the NS GHG Regulations compliance period of 2021–2024

5 Nova Scotia’s emission caps stated in the NS GHG Regulations.

As depicted in Table 1, Nova Scotia had actual emissions of 57.3 Mt CO₂ in the 2015–2023 period, whereas the GHG emissions modelled for the federal Regulations were 65.8 Mt CO₂ for the same period. During the 2024 and 2025–2029 period, Nova Scotia’s emissions are capped at 10.7 and 27.5 Mt CO₂, respectively, while GHG emissions modelled for the federal Regulations are 7.2 Mt CO₂ and 35.7 Mt CO₂ over the same periods. Overall, the analysis shows that over the 2015–2029 period, GHG emissions under the NS GHG Regulations would be 95.5 Mt CO₂ compared to an allowable 108.7 Mt CO₂ under the federal Regulations. Therefore, the Department concluded that there will be equivalent outcomes over this period.

Air pollutant emissions

The federal Regulations establish a regime for the reduction of carbon dioxide (CO₂) emissions. As such, the determination of equivalent outcomes is made on the basis of GHG emissions and not air pollutant emissions. However, the air pollutant emissions impacts of continued coal use as a result of proposed Equivalency Agreement were assessed qualitatively, using historical analysis. Overall, the Department’s modelling suggests that the NS GHG Regulations will result in lower air pollutant emissions as compared to the outcomes under the federal Regulations.

5. Rationale for renewal of equivalency agreement

In 2019, GHG emission levels from Nova Scotia’s electricity utility sector that would have occurred under the federal Regulations were modelled by the Department and compared to those expected to occur under the NS GHG Regulations over the period of January 1, 2015, to December 31, 2029.

Cumulatively, the actual emissions and emission caps for Nova Scotia from 2015–2029 are lower than the projected emissions under the federal Regulations over the same period. More specifically, the Department’s analysis determined that the federal Regulations would result in 35.7 Mt of CO₂ from the electricity utility sector over the proposed agreement period. Nova Scotia intends to maintain their NS GHG Regulations that will limit emissions in the sector to no more than 27.5 Mt CO₂ over the proposed agreement period, meaning that the NS GHG Regulations are deemed to be equivalent to the federal Regulations. The Department is also satisfied that Nova Scotia’s Environment Act contains mechanisms that are similar to sections 17 and 20 of CEPA for the investigation of alleged offences, and therefore all CEPA requirements related to equivalency agreements have been met.

Continuing to stand down the federal Regulations in Nova Scotia for the next 5 years will minimize regulatory duplication in Nova Scotia and allow the province to attain equivalent GHG outcomes in a way that best suits its particular circumstances. This is in-line with Government of Canada objectives regarding regulatory coordination and cooperation with relevant jurisdictions. However, the impact of any changes to federal or provincial electricity sector regulations will require a reassessment of the equivalency agreement to align with potential emissions differences.

6. Implementation, enforcement and service standards

The renewed equivalency agreement would allow for the continued standing down of the federal Regulations in Nova Scotia. Nova Scotia would provide the Department with annual GHG emissions and electricity generation data, as well as other information such as statistics on its enforcement actions concerning the NS GHG Regulations.