Canada: Federal Government Introduces Regulations To Progressively Phase-Out Coal Plants

On September 5^th, the federal environment minister announced final regulations designed to reduce emissions from coal-fired electricity facilities. The objective of the Reduction of Carbon Dioxide Emissions from Coal-Fired Generation of Electricity Regulations is to phase out high-emitting coal-fired generation and promote a transition towards lower or non-emitting types of generation.

The regulations will set performance standards for new coal-fired units and those that have reached the end of their useful life. Under the regulations, new units are those that start producing electricity on or after July 1, 2015. Units at the end of their useful life are those that have produced electricity for 50 years. Transitional rules apply to plants built before 1986. Performance standards will come into effect on July 1, 2015. However, regulated entities will be required to begin reporting emission levels two years in advance of that date.

The regulations will effectively prohibit building new units without carbon capture and storage (CCS) equipment. Additionally, units reaching the end of their useful life will be forced to close unless retrofitted with the CCS equipment. This is significant because the government speculates 75% of coal plants will reach the end of their useful life by 2025 and 80% by 2030.

Over the first 21 years of its enactment, the government expects that a cumulative effect of these regulations will be a reduction of 214 megatons of greenhouse gas emissions. However, the true effect of these regulations is open to debate. The first coal plant closure resulting from these regulations will not likely occur before 2020. Furthermore, Ontario has already committed to shutting down its coal-fired electricity facilities.  Alberta, Saskatchewan and Nova Scotia are the provinces most dependent on coal. But in an era of comparatively low-emitting gas facilities combined with relatively cheap gas supply, it is unlikely that these provinces will have incentives to build new coal-fired plants or invest further in aging existing units. Essentially, any reduction of carbon emissions from coal-fired plants is likely market driven and may not be the result of these regulations.

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