Ottawa is pressing ahead with its contentious new rules to limit greenhouse gas emissions from provinces’ electricity grids, although they have have been softened from its original proposal.
The final version of the federal Clean Electricity Regulations - which are effectively aimed at restricting the use of natural gas for power generation starting in 2035, unless accompanied by carbon-capture technology - were released by Environment Minister Steven Guilbeault on Tuesday.
The regulations have been billed by the federal government as a key component of Canada’s path to net-zero emissions by 2050, as the electrification of transportation, building and industry is projected to at least double power consumption.
But they have prompted strong pushback from the governments of provinces that currently rely significantly on fossil fuels for power generation - particularly Alberta, Saskatchewan and Ontario, which have warned of potential power shortages and escalating costs.
Ottawa has sought to address those concerns with a series of changes to the draft regulations that were first put forward in 2023, aimed at greater compliance flexibility.
Among them are a change to the regulations’ emissions performance standard, which sets a maximum level of pollution for large generation facilities to remain operational past 2035. While that limit was originally proposed at 30 tonnes of emissions per gigawatt hour, it has instead now been set at 65 t/GWh).
The government has also shifted from an initial plan to require the closure of any facilities that exceed that threshold, to allowing them to operate each year until they reach a cumulative annual emissions limit. It will also allow the purchase of carbon offsets by utilities that continue to operate above that limit, up to a certain level. And it will enable utilities with multiple generating facilities to pool the emissions from those sites, effectively meaning that limits will apply across fleets, somewhat reducing the chances of individual ones being forced to close.
Another tweak is to the regulations’ grandfathering provisions. Existing power plants will now be exempt from the rules for 25 years from the date they were first commissioned, up from 20 years initially. And new plants will be eligible for grandfathering if operational by 2028, rather than 2025.
As well, cogeneration - in which industrial sites use gas to produce both heat and electricity - will now be exempted from the regulations, although that will apply only to power those sites consume themselves, not any that they sell into the electricity grid.
In an interview on Wednesday, Mr. Guilbeault said that - following what he described as “probably some of the most extensive consultations we’ve ever done on any regulations” - he believes the government has landed on a “sweet spot,” in which “those who absolutely need natural gas will be able to use it,” while others are disincentivized from doing so.
Along the way, Ottawa has scaled back its expectations for the regulations’ emissions-reduction impact. The government is now projecting that it will cumulatively prevent 181 megatonnes of emissions by 2050, down from an initial forecast of 342 megatonnes.
Nevertheless, the added flexibility still does not go as far industry and some provinces had demanded.
For instance, Electricity Canada - the association representing power utilities across the country - had sought a performance standard above 120 tonnes of emissions per gigawatt hour, roughly double where the government landed. It also wanted the grandfathering provision to be 30 years.
In a statement, Electricity Canada President Francis Bradley responded to Tuesday’s release by saying that the government was still not responsive enough to the industry’s message during the consultations.
“A ‘Canadian’ electricity regulation must be achievable in all provinces,” Mr. Bradley said. “The final Clean Electricity Regulations announced today do not meet this test.”
Hanging over the announcement, which was made one day after the government was rocked by Finance Minister Chrystia Freeland’s resignation, is uncertainty about whether the regulations will remain in place after a federal election scheduled for 2025.
That uncertainty is also affecting some of Ottawa’s incentives for provinces to build non-emitting power, which are supposed to work in tandem with the new rules to shift investment decisions. While several federal clean-technology investment tax credits have recently entered law, Parliament has not yet passed a 15-per-cent refundable credit geared toward public utilities investing in power sources such as wind, solar, hydroelectricity, nuclear, and energy storage, and it is unclear whether it will do so before the election.
Mr. Guilbeault acknowledged that anxiety, but expressed optimism that some opposition parties – particularly the New Democrats and Bloc Quebecois - will work with the government to get that measure in place. “We will do everything we can do ensure that those last tax credits that need to be adopted will be adopted as rapidly as possible,” he said.
