A GLOBE-Net editorial budget 2008 - more blue than green

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Source: GLOBE Foundation

This week's 2008 Federal Budget could hardly be called a 'Green Budget' - but it did put in place some important precursors for what many hope will someday be a serious and focused federal strategy that will help Canada achieve its climate change goals.

Budget 2008 promises to put in place a regulatory regime that would ensure significant and lasting reductions in greenhouse gas emissions; mandate improvements in air quality; provide incentives to advance progress on cleaner energy generation; and promote the development of technologies for carbon capture and storage.

While some of the measures put in place at best can be described as 'modest'; they are, nonetheless, important.

While stopping short of implementing a carbon trading system, the Budget allocates $66 million over the next two years to set up key features that such a trading regime would require including: an electronic tracking system for units traded in a carbon market; a single-window reporting system for industry; an industry-supported technology fund to invest in emission reduction projects; an offset system to finance emission reduction projects in non-regulated sectors; and better modelling of air quality.

The Budget summary notes that the greenhouse gas emission regulations that will come into force in 2010 will help establish a price for carbon and support development of market-based carbon trading mechanisms for Canada. The enabling measures to be funded via Budget 2008 will help set the stage for the introduction of such a trading system coincident with the coming into force of the 2010 regulations.

Energy

Along with some small steps forward in terms of using fiscal measures to facilitate greater investment in renewable energy technologies, Budget 2008 offers some significant incentives for more research on less carbon-intensive forms of energy.

Atomic Energy Canada Limited will receive $300 million to develop its next generation CANDU nuclear reactor technology and to maintain safe and reliable operations at its Chalk River Laboratories.

This funding, coupled with the recent decisions to fast track the regulatory approvals processes of the Canadian Nuclear Safety Commission (See companion GLOBE-Net article (Canada's Nuclear Future)) are clear signals of the government's longer term intent to expand the nation's nuclear capacity.

A proven technology that has been in use in Canada for four decades, nuclear energy is seen by the federal government as one way to ensure long term energy needs are being met while at the same time reducing greenhouse gas emissions.

Similar optimism is evidenced in the federal government's interest in continuing to use Canada's vast coal resources to meet domestic energy needs. Budget 2008 provides $240 million to be placed in trust for a full-scale commercial demonstration of carbon capture and storage in the coal-fired electricity sector. These funds are to be matched by the province of Saskatchewan and be used in partnership with industry.

According to the Budget Summary 'Coal-fired power plants can reduce air pollutants and produce a CO2 emissions stream that is more readily captured by introducing clean coal technologies. Reducing the carbon emitted from these facilities will make a significant contribution to achieving Canada's greenhouse gas emission reduction objectives.'

The results of this demonstration project for clean coal technology will be made available to the federal government, other provinces and to industry to diffuse this important technology.

Carbon capture and storage is touted in the Budget documents as an opportunity for Canada to develop world-leading technology than can significantly reduce greenhouse gas emissions.

A recent GLOBE-Net article (Is Carbon Capture and Storage coming to Canada?), noted that despite the progress that has been achieved to date - notably at the test facility in Weyburn Saskatchewan being undertaken by Encana Energy - carbon sequestration technology is still in its infancy. Major retrofitting of existing coal plants and oil operations will be required before it can be deployed extensively.

Budget 2008 acknowledges this fact and cites the report of the Canada-Alberta ecoENERGY Carbon Capture and Storage Task Force which was released in January 2008. It identified a number of regulatory, economic, and technological issues that need to be resolved to accelerate deployment of carbon capture and storage technologies.

To that end Budget 2008 provides $5 million to the Institute for Sustainable Energy, Environment and Economy at the University of Calgary to work with a broad range of stakeholders on these outstanding issues.

Also, while geological formations in the Western Sedimentary Basin have been extensively studied and are ideal for the storage of CO2, less is known about storage in other parts of Canada. The Budget provides $5 million - to be matched by the Government of Nova Scotia - to support geological research on the potential for carbon storage in that province.

Fiscal Measures

Budget 2008 also proposes to expand GST/HST relief currently available for land leased to explore for or exploit mineral, peat, forestry, water or fishery resources, to include land leased on or after February 26, 2008 to situate wind or solar power equipment for electricity production.

The budget also proposes to expand eligibility for accelerated Canadian Certificate of Approval to several additional applications:

  • Ground source heat pump systems used for space heating and hot water.
  • Biogas production systems that use animal waste and sewage treatment residue as inputs and those that produce biogas for commercial sale.
  • Electrical or thermal generating systems that use purchased biogas.
  • Systems that produce bio-oil, or heat from specified waste sources, where the system output is sold to a third party.

Similar fiscal incentives are proposed with respect to CCA modifications that better reflect the useful life of CO2 pipelines, which are expected to be the primary means of transporting CO2 from industrial facilities to geological storage locations:

  • The CCA rate for CO2 pipelines will be increased to 8 per cent from 4 per cent; and
  • The CCA rate for pumping and compression equipment on CO2 pipelines will be set at 15 per cent.

Transportation

Public transit will receive up to $500 million for new transit infrastructure, to be allocated on a per capita basis. The government stated much of this money is already spoken for in three specific projects in Vancouver, Toronto and Montreal.

Ottawa also increased the capital cost allowance rate on rail equipment to 30 per cent from 15%. The Railway Association of Canada said the move could lead to as much as $300 million in investment by the industry over the next five years and as many as 6,000 jobs throughout the supply and service sector.

'The government's change in its tax policy will encourage the acquisition of more fuel-efficient locomotives that is good for the environment by reducing greenhouse gas emissions and good for society by helping to reduce congestion,' said Cliff Mackay, president and CEO of the rail lobby group.

In addition, the Government is introducing a new $250-million program to support research and development projects in the automotive sector for greener and more fuel-efficient vehicles.

The Budget will provide $10 million for scientific research and analysis on biofuels emissions to support the development of regulations, and demonstration projects to verify that new blended renewable diesel is safe and effective for the Canadian climate and conditions.

Other Environment Related Measures

A number of provisions in Budget 2008 which were not billed as environmental initiatives, nonetheless have the potential of delivering significant downstream environmental benefits. These include:

  • Making the Gas Tax Fund, which will be worth $2 billion in 2009-10, a permanent measure, allowing municipalities to better plan and finance their long-term infrastructure needs;
  • Establishing a Crown corporation, PPP Canada Inc., to work with the public and private sectors to support public-private partnerships;
  • Providing $10 million over two years to enable repairs and environmental cleanup to permit the transfer of more small craft harbours across Canada from the federal government to interested parties;
  • Providing $25 million over two years to provide Canadians with better information on the links between environmental contaminants and illness.
  • Providing $250 million over five years to support strategic, large-scale research and development projects in the automotive sector in developing innovative, greener and more fuel-efficient vehicles; and
  • Investing over $330 million to extend the Government's Plan of Action for Drinking Water in First Nations Communities, and initiating consultations on a regulatory regime to oversee water quality on reserves.

The Bottom Line

To many environmentalists 2008 budget may seem like a disappointment, with very little funding being allocated directly to the environment and very little mention of climate change issues. Political pundits have already noted a Tory Blue tinge to the otherwise Green Budget.

However, combined with measures already announced in Budgets 2006 and 2007, the federal government has invested over $9 billion in environmental initiatives, including renewable energy technology incentives and funding foe cleaner transportation.

This year it seems the government is looking at ways to use Canada's existing energy infrastructure to help achieve environmental goals and to set the stage for a truly green budget sometime in the future.

'Canadians demand and expect that action is being taken to reduce harmful emissions and to crack down on polluters,' Finance Minister Jim Flaherty said in a prepared speech to the House of Commons. 'Today we are taking action to fulfill our commitments to a cleaner, healthier environment.'

The rhetoric is strong, but the jury is still out as to how effective the measures announced by the federal government in Budget 2008 will be in terms of stimulating the development and commercialization of the technologies we will need in order to cope with the inevitable impacts of climate change.

John D. Wiebe
President and CEO
GLOBE Foundation of Canada

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