Economic Instruments for Long-term Reductions in Energy-based Carbon Emissions

147 Pages·2005·2.15 MB·English

S t a t e o f t h e D e b a t e
Economic Instruments for
Long-term Reductions in
Energy-based Carbon
Emissions
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Economic Instruments for
Long-term Reductions in
Energy-based Carbon
Emissions
MANDATE
About Us
The National Round Table on the Environment and the Economy (NRTEE) is dedicated to exploring new
opportunities to integrate environmental conservation and economic development, in order to sustain Canada’s
prosperity and secure its future.
Drawing on the wealth of insight and experience represented by our diverse membership, our mission is to gen-
erate and promote innovative ways to advance Canada’s environmental and economic interests in combination,
rather than in isolation. In this capacity, it examines the environmental and economic implications of priority
issues and offers advice on how best to reconcile the sometimes competing interests of economic prosperity and
environmental preservation.
The NRTEE was established in 1994 as an independent advisory body reporting to governments and the
Canadian public. Appointed by the Prime Minister, our members are distinguished leaders in business and
labour, universities, environmental organizations, Aboriginal communities and municipalities.
How We Work
The NRTEE is structured as a round table in order to facilitate the unfettered exchange of ideas. By offering
our members a safe haven for discussion, the NRTEE helps reconcile positions that have traditionally been
at odds.
The NRTEE is also a coalition builder, reaching out to organizations that share our vision for sustainable
development. We believe that affiliation with like-minded partners will spark creativity and generate the
momentum needed for success.
And finally, the NRTEE acts as an advocate for positive change, raising awareness among Canadians and
their governments about the challenges of sustainable development and promoting viable solutions.
We also maintain a secretariat, which commissions and analyses the research required by our members
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The NRTEE’s State of the Debate reports synthesize the results of stakeholder consultations on potential
opportunities for sustainable development. They summarize the extent of consensus and reasons for disagree-
ments, review the consequences of action or inaction, and recommend steps specific stakeholders can take
to promote sustainability.
Economic Instruments for Long-term Reductions in Energy-based Carbon Emissions iii
NATIONAL ROUND TABLE ON
THE ENVIRONMENT AND THE
ECONOMY MEMBERS*
CHAIR Katherine M. Bergman
Harvey L. Mead Dean, Faculty of Science
Sainte-Foy, Quebec University of Regina
Regina, Saskatchewan
VICE-CHAIR
Patricia McCunn-Miller William J. Borland
Calgary, Alberta Director, Environmental Affairs
JD Irving Limited
VICE-CHAIR
Saint John, New Brunswick
Ken Ogilvie
Executive Director Wendy L. Carter
Pollution Probe Foundation Vancouver, British Columbia
Toronto, Ontario
Douglas B. Deacon
Harinder P. S. Ahluwalia Owner, Trailside Café and Adventures
President and CEO Mount Stewart, Prince Edward Island
Info-Electronics Systems Inc.
The Honourable Michael Harcourt
Dollard-des-Ormeaux, Quebec
Chair
Edwin Aquilina Cities Advisory Committee
Special Advisor to the Mayor Privy Council Office - Pacific
City of Ottawa Vancouver, British Columbia
Ottawa, Ontario
Linda Louella Inkpen
Louis Archambault St. Phillips, Newfoundland and Labrador
President & CEO
Diane Frances Malley
Groupe-conseil Entraco Inc.
President
North Hatley, Quebec
PDK Projects Inc.
Jean Bélanger Nanaimo, British Columbia
Ottawa, Ontario
Cristina Marques
David V.J. Bell Co-Owner and Developer of Dreamcoast Homes
Professor Emeritus Toronto, Ontario
Senior Scholar and Former Dean
Patrice Merrin Best
Faculty of Environmental Studies
President & CEO
York University
Luscar Limited
Toronto, Ontario
Edmonton, Alberta
* List reflects NRTEE membership at time of report approval.
Economic Instruments for Long-term Reductions in Energy-based Carbon Emissions v
Alfred Pilon John Wiebe
Corporate Secretary President & CEO
Office franco-québécois pour la jeunesse GLOBE Foundation of Canada
Montreal, Quebec Vancouver, British Columbia
Qussai Samak Judy Williams
Union Advisor Partner
Confédération des syndicats nationaux MacKenzie Fujisawa
Montreal, Quebec Vancouver, British Columbia
Keith Stoodley Eugene Nyberg
Vice-President Acting President & CEO
OceanTalk NRTEE
St. John’s, Newfoundland and Labrador Ottawa, Ontario
vi National Round Table on the Environment and the Economy
TABLE OF
CONTENTS
Mandate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
National Round Table on the Environment and the Economy Members . . . . . . . . . . v
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Ecological Fiscal Reform and Energy Task Force Members . . . . . . . . . . . . . . . . . . . . . . . . xi
Introduction: The EFR and Energy Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Part 1: General Findings and Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.1 Purpose of the Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.2 Ecological Fiscal Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2. CONTEXT: THE NEW ENERGY ECONOMY—CANADA’S OPPORTUNITY . . . . . . . . . . . . . . . . . . . 13
2.1 Global Energy Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Canada’s Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3. CONTEXT: MAXIMIZING OVERALL ADVANTAGES TO SOCIETY—LONG-TERM
CARBON EMISSION REDUCTIONS WITHIN AN INTEGRATED POLICY FRAMEWORK . . . . . . 15
3.1 Co-benefits: Nine Reasons for an Integrated Policy Framework . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2 Why Long-term Carbon Emission Reductions Cannot be an Implied
or Secondary Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4. ECONOMIC INSTRUMENTS FOR LONG-TERM CARBON EMISSION REDUCTIONS
AND TECHNOLOGY DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.1 Economic Instruments and Canada’s Climate Change Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.2 Macroeconomic Impacts of Fiscal Policy to Promote Long-term Carbon Emission Reductions . . . 22
4.3 General Findings: Using Economic Instruments for Long-term
Carbon Emission Reductions and Technology Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.4 Application of Targeted Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.5 Transition Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5. A COORDINATED, LONG-TERM CARBON EMISSION REDUCTIONS STRATEGY. . . . . . . . . . . . . 31
5.1 Staging and Considerations for a Coordinated Technology Transition Strategy . . . . . . . . . . . . . . . 32
6. LESSONS: THE EXPERIENCE WITH ASSESSING FISCAL INSTRUMENTS . . . . . . . . . . . . . . . . . . 35
6.1 Data Reliability and Comprehensiveness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.2 Sensitivities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.3 Technology Paths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.4 Examining Mid- to Long-term Futures: Uncertainties and Unknowns . . . . . . . . . . . . . . . . . . . . . . . 36
6.5 Market Settings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.6 Other Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Economic Instruments for Long-term Reductions in Energy-based Carbon Emissions vii
7. SUMMARY OF FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
PART 2: Specific Findings from the Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8. CASE STUDY SCOPE, BOUNDARIES AND METHODOLOGIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.1 Overview of Case Study Methodologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9. SPECIFIC FINDINGS: INDUSTRIAL ENERGY EFFICIENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.1 Status of Industrial Energy Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.2 Status of Industrial Energy Efficiency to 2030 Assuming Business as Usual . . . . . . . . . . . . . . . . 50
9.3 Industrial Energy Efficiency Scenarios to 2030 with Government Intervention . . . . . . . . . . . . . . 50
9.4 Macroeconomic Impact: Industrial Energy Efficiency Case Study . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.5 Policy Implications: Industrial Energy Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10. SPECIFIC FINDINGS: EMERGING RENEWABLE POWER TECHNOLOGIES . . . . . . . . . . . . . . . . . 55
10.1 Status of the Emerging Renewable Power Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.2 Status of the Emerging Renewable Power Sector to 2030 Assuming
Business as Usual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.3 Status of the Emerging Renewable Power Sector to 2030 with
Government Intervention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.4 Macroeconomic Impact: Emerging Renewables Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.5 Policy Implications: Emerging Renewable Power Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11. SPECIFIC FINDINGS: HYDROGEN ENERGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
11.1 Status of the Hydrogen Energy Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
11.2 Status of the Hydrogen Energy Sector to 2030 Assuming Business as Usual . . . . . . . . . . . . . . 66
11.3 Status of the Hydrogen Energy Sector to 2030 Assuming Government Intervention . . . . . . . . . 66
11.4 Macroeconomic Impact: Hydrogen Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
11.5 Policy Implications: Hydrogen Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
12. MACROECONOMIC IMPACTS OF THE PROPOSED MEASURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
13. A SUPPORTING SUITE OF COORDINATED ECONOMIC INSTRUMENTS . . . . . . . . . . . . . . . . . . . 75
14. SUMMARY OF RECOMMENDATIONS, PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Industrial Energy Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Emerging Renewable Power Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Hydrogen Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
A Supporting Suite of Coordinated Economic Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
A. EXECUTIVE SUMMARY: CASE STUDY ON ENERGY EFFICIENCY . . . . . . . . . . . . . . . . . . . . . . . . . 81
B. EXECUTIVE SUMMARY: CASE STUDY ON RENEWABLE GRID–POWER ELECTRICITY . . . . . . 93
C. EXECUTIVE SUMMARY: CASE STUDY ON HYDROGEN TECHNOLOGIES . . . . . . . . . . . . . . . . . 111
D. SELECTED READING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
E. PROGRAM PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
F. ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
viii National Round Table on the Environment and the Economy