Nova Scotia agrees to cap-and-trade; Canadian coal phase-out underway

Catherine McKenna, Canada’s Minister of Environment and Climate Change, announced Nov. 21 that the governments of Canada and Nova Scotia have agreed on an approach to price carbon pollution, and that they have committed to working together to negotiate a new equivalency agreement on an accelerated coal phase-out program.

This would mostly affect Nova Scotia Power, which has several units fired by coal and petroleum coke.

Nova Scotia will implement a cap-and-trade system that aligns with Canada’s pan-Canadian approach, announced earlier this year, to pricing carbon pollution. Nova Scotia will also adopt a province-wide target that meets or exceeds Canada’s target of reducing emissions by 30% from 2005 levels by 2030.

The government of Canada has also announced plans to accelerate the phase-out of traditional coal-fired electricity units. ‎This plan will involve accelerating the timelines in the existing regulation under the Canadian Environmental Protection Act of 1999 (CEPA). Nova Scotia is expressing interest in entering into an updated equivalency agreement with the government of Canada under section 10 of CEPA, for these new requirements. This initiative builds on the leadership Nova Scotia has demonstrated in the transition from coal-fired electricity to renewable power, said the federal government.

The federal government is working closely with provinces and territories, and Indigenous peoples, to finalize the plan at the First Ministers’ Meeting in December, to meet or exceed its climate-change target, grow the economy, and build resilience to a changing climate.

McKenna said: “We are extremely pleased that the province of Nova Scotia intends to implement a cap-and-trade system as its approach to pricing carbon pollution. Their proposed approach ensures that Nova Scotia will remain a leader in contributing to Canada’s international emissions-reduction target under the Paris Agreement. We will be working on an updated equivalency agreement on the accelerated coal phase-out in order to recognize Nova Scotia’s strong action on reducing GHG emissions.”

Under Canada’s plan, each province and territory has the flexibility to choose an approach: they can put a direct price on carbon pollution or they can adopt a cap-and-trade system. A common and broad set of greenhouse gas emission sources will be covered in all provinces and territories.

An equivalency agreement already exists between the government of Canada and Nova Scotia, which recognizes that Nova Scotia’s Environment Act and its Greenhouse Gas Emissions Regulations are equivalent to the current CEPA regulations relating to coal-fired electricity generation. A new equivalency agreement will be developed building on this agreement.

Nova Scotia’s cap-and-trade system will place declining caps on emissions from its electricity sector and from other sources of carbon-fuel combustion. It will provide for trading of emission reductions within the province, allowing emitters to reduce emissions at the least cost and ensuring that all revenues from the system remain within the province.

Ambition is to get rid of uncontrolled coal emissions by 2030

McKenna on Nov. 21 separately announced the acceleration of the transition from traditional coal power to clean energy by 2030. Traditional coal-fired electricity does not use carbon capture and storage to trap carbon dioxide and store it. The Canadian province of Ontario led by the way by shutting or switching to biomass its last coal plants earlier this decade.

The federal government of Canada will support this transition by using the Canada Infrastructure Bank to finance projects such as commercially viable clean energy and modern electricity systems between provinces and territories. These regulatory actions will put Canada on a path to move from 80% towards 90% non-emitting sources by 2030. The government said it will also work with provinces and territories to set performance standards for natural gas-fired electricity.

The government of Canada will work with provinces and labor organizations to ensure workers affected by the accelerated phase-out of traditional coal power are involved in a successful transition to the low-carbon economy of the future. It was in part a worker backlash against job losses in the coal and power industries due to clean air/climate change standards that is credited with giving Republican Donald Trump a win in the U.S. presidential election earlier this month.

“Taking traditional coal power out of our energy mix and replacing it with cleaner technologies will significantly reduce our greenhouse gas emissions, improve the health of Canadians, and benefit generations for years to come. It sends a clear signal to the world that Canada is a great place to invest in clean energy,” said McKenna.

“Clean power is healthy power. Phasing out coal-fired electricity will translate into cleaner, more breathable air for Canadians and lower rates of respiratory illness. Today’s announcement is a significant step in our plan to build a healthier, more prosperous Canada,” said Jane Philpott, Minister of Health.

Coal-fired electricity is responsible for close to three quarters of the greenhouse gas (GHG) emissions from Canada’s electricity sector and over 8% of Canada’s total GHG emissions. Accelerating the phase-out of traditional coal units that do not use carbon capture and storage will result in more than five megatonnes of reductions in GHG emissions, in 2030.

This fall, the government of Canada announced an additional C$21.9 billion over 11 years for green infrastructure and the Canada Infrastructure Bank. Together, this investment could support the attraction of the capital investments necessary to transition Canada’s electricity system towards 90% non-emitting by 2030.

TransAlta Corp. (TSX: TA) (NYSE: TAC), a major operator of coal-fired power plants in Alberta, issued a Nov. 21 statement about the national coal phase-out plan. “Today’s announcement by the federal government is aligned with the Alberta Climate Leadership Plan for coal retirements by 2030. More importantly, this announcement provides clarity and a regulatory framework to allow the conversion of our coal fleet to gas,” said Dawn Farrell, President and Chief Executive Officer. “We have been public about the benefits of these conversions. These are low-cost investments that could lengthen the average life of our coal fleet by up to 15 years, and allow our existing coal fleet to be transformed to the lowest cost source of capacity in the Alberta market.”

TransAlta’s net capacity ownership of coal-fired generation in Alberta totals about 3,600 MW, of which approximately 2,900 MW was set to retire before 2030 under the federal 50-year rule. Under the newly-announced federal regulation, some of these coal plants could be converted to gas-fired and would be allowed to run for a 15-year period or until 2045, whichever comes first.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.