Energy and Environment Series

Summary

The purpose of this project was to improve policy at the energy and environment interface by communicating high quality and policy relevant research to decision-makers, policymakers and stakeholders. The research outputs of this project covered topics ranging from the effectiveness of Canadian ethanol fuel policy to cost comparisons of alternative energy sources, analyses of Greenhouse Gas Emission reduction models and pricing and energy consumption regulation studies. A media and public relations campaign accompanied the dissemination of the Energy and Environment Series.

Grant Outputs

The Ethanol Trap: Why Policies to Promote Ethanol as a Fuel Need Rethinking – http://www.cdhowe.org/pdf/commentary_268.pdf

This study examines the goals of Canada’s ethanol policy, evaluates the scientific evidence that is used to justify government support for ethanol production, and determines the costs to government and consumers. The study was inconclusive about whether ethanol fuel significantly decreases energy use or greenhouse gas emissions, but shows that public funds contribute approximately $368 for each tonne of CO2 reduced, roughly seven times greater than the cost of alternative policy measures. Furthermore, while ethanol policy is meant to support rural development, the report shows that it benefits some farmers while harming others. Finally, ethanol fuel policy increases food prices in Canada and internationally directly and indirectly, increasing costs to Canadian consumers by an estimated $400 million annually.

A Question of Parliamentary Power: Criminal Law and the Control of Greenhouse Gas Emissions – http://www.cdhowe.org/pdf/backgrounder_114.pdf

Does the Parliament of Canada have the constitutional authority to regulate greenhouse gas emissions? This project reviews a string of court decisions that have a bearing on the answer. Emphasis is placed on Parliament’s criminal-law power because that is the constitutional basis for the current Canadian Environmental Protection Act, 1999 (CEPA). The government’s Regulatory Framework proposals will likely take the form of amendments to that Act, regulations made under that Act, or both. This report concludes that the proposals of the Government of Canada for the regulation of greenhouse gas emissions in the Regulatory Framework paper are likely to be upheld as constitutional exercises of the federal criminal-law power.

Going Green for Less: Cost-Effective Alternative Energy Sources – http://www.cdhowe.org/pdf/commentary_282.pdf

The federal and provincial governments have numerous renewable energy programs in place to reduce Canadian greenhouse gas (GHG) emissions. This study analyzes the cost effectiveness of these incentive programs and, in doing so, identifies the most and least cost-effective uses of taxpayers’ money for subsidies and incentives to mitigate GHGs. The report finds that overall, governments in Canada are presently over-investing taxpayers’ money in high-cost mitigation technologies and under-investing in low-cost mitigation technologies.

Pricing Greenhouse Gas Emissions: The Impact on Canada’s Competitiveness – http://www.cdhowe.org/pdf/commentary_280.pdf

There is a growing consensus that if serious action is to be taken to reduce greenhouse gas emissions in Canada, a price must be applied to those emissions. There are, however, challenges associated with the political acceptability of carbon pricing. If Canada implements a carbon price on its own, there are worries that Canadian factories will relocate to other countries to avoid the regulation. This study examines a number of scenarios of how Canada’s climate policy might coexist with the rest of the world, how certain sectors are likely to be affected by carbon pricing, and what governments can do about it. Despite finding that the overall competitiveness and leakage impacts associated with climate change policy in Canada are likely to be small, they remain an important concern for policymakers.

Canada’s Nuclear Crossroads: Steps to a Viable Nuclear Energy Industry – http://www.cdhowe.org/pdf/commentary_290.pdf

Policymakers are reconsidering the merits of nuclear power as both a low carbon emitting and low-cost base load electricity source. While nuclear power may look like an attractive option, the industry and government must overcome problems such as the high and uncertain cost of construction, dealing with nuclear waste, reactor licensing and regulation, and the future of Canada’s nuclear reactor builder, Atomic Energy of Canada Limited (AECL), a federal Crown corporation. This report suggests that the future of nuclear power in Canada is positive if policymakers can resolve these key issues.

Quebec’s Green Future: The Lowest-Cost Route to Greenhouse Gas Reductions – http://www.cdhowe.org/pdf/backgrounder%20118_English.pdf

The purpose of this study was to examine the efforts and the limitations of unilaterally lowering greenhouse gas (GHG) emissions in Quebec. The study shows that the possibilities of an effective reduction of GHG emissions through the substitution of one energy source for another are limited in Quebec. The era of low-cost hydroelectric production is finished in the province as low domestic electricity prices favour heavy usage and limit Quebec’s capacity to export clean hydroelectricity. This study suggests that lowering domestic electricity subsidies would allow Quebec to export more clean electricity to take part in global GHG reduction efforts. Further, the study recommends Quebec’s carbon tax, which is currently set at $3 per ton of CO2, should be increased annually by $3 per ton in order to reach a target price of $30 per ton in 2018. Together, these measures would favour a reduction of carbon consumption in Quebec, and a more beneficial involvement for Quebec in any federal or North American cap-and-trade system.

A Clean Canada in a Dirty World: The Cost of Climate-Related Border Measures – http://www.cdhowe.org/pdf/ebrief_90.pdf

The failure of the United Nations Climate Change Conference in Copenhagen to reach a binding global agreement to reduce greenhouse gases (GHGs) raises the prospect of a world with fragmented national climate policies. One potential Canadian response to this issue is to make domestic and foreign producers pay the same amount for carbon emissions, known as a carbon border adjustment. However, this e-brief argues that a carbon border adjustment, often referred to as a carbon tariff, should not be considered as part of Canada’s cap-and-trade proposal. The imposition of a border adjustment would have many drawbacks including facing numerous hurdles for World Trade Organization (WTO) compliance. Canada, with its numerous global-supply-chain producers, would have much to lose from carbon border adjustments and little to gain.

The Price Isn’t Right: The Need for Reform in Consumer Electricity Pricing – http://www.cdhowe.org/pdf/backgrounder_124.pdf

This study argues that Ontario should implement a pricing scheme that encourages energy conservation by consumers, reduces strain on the generation system, and covers the cost of operation. Such a pricing plan would equate the hourly cost of electricity generation, including the environmental cost, with what consumers pay, known as real-time pricing. Ontario is moving in this direction, but should go further by fully linking the cost of operation in periods of high strain on the generation system with the price paid by consumers.

Ontario’s Green Energy “Fee”: The Trouble with Taxation through Regulation – http://www.cdhowe.org/pdf/ebrief_98.pdf

This report explores whether it is more appropriate to characterize a recent Ontario regulation as a levy, a tax or a regulatory fee, and why this characterization is important. In matters of taxation, Canadian government authority is extensive, and legislatures may enact laws imposing a wide range of taxes. However, governments are more limited in what they may do without gaining legislative approval. They may use regulation, which is not approved by a legislature, to set fees to recover the costs of goods or services they provide to the people being charged the fee. They may not, however, use regulation to impose taxes that fund the general activities of government. Taxes require legislative approval. By a recent Order-in-Council, the Ontario government passed Regulation 66/10 to the Ontario Energy Board Act, 1998. This new regulation directs the Ontario Energy Board to assess a special levy on the Independent Electricity System Operator (“IESO”) and distributors, which is assessed in proportion to the amount of electricity they distribute. The levy is designed to deliver to the province $53.7 million in additional revenue, to fund activities of the Ministry of Energy and Infrastructure.