Who pays for Kyoto? And who benefits?

On 16 February 2005, the Kyoto protocol will formally take effect. This means, on paper at least, that Canada will be responsible for reducing its greenhouse gas emissions to 94 percent of 1990 levels by 2012. Like many other major Canadian emitters of greenhouse gases, Nova Scotia Power will be looking for ways to reduce its carbon dioxide emissions, the best known of the six anthropogenic greenhouse gases.

Electrical utilities such as NSPI can reduce their emissions in a number of ways; for example, by generating less electricity, changing to less carbon-intensive fuels, capturing and storing carbon dioxide, or obtaining emissions credits. With little time left until the 2012 Kyoto compliance deadline and no significant emissions reduction programme in place, all signs indicate that NSPI will be forced to take the emissions credits option.

An emissions credit is a certificate that signifies that someone, somewhere, has done something to remove or stop a given amount of carbon dioxide being emitted into the atmosphere. Activities that qualify for certification include planting trees to sequester carbon dioxide, generating "green" electricity (from sources such as biomass, solar, or wind), and the installation of clean generation facilities in developing countries (referred to as the Clean Development Mechanism). Certificates are tradable and have a value (presently between $5 and $10 per tonne of carbon dioxide, although this is projected to increase to $100 per tonne over the next decade). They also have a lifespan, in that some, like green electricity, can be applied only to the year in which the electricity is generated, while others, such as the Clean Development Mechanism last as long as the facilities are in use.

Between 1990 and 2002, Canada's greenhouse gas emissions grew from 609 million to 731 million tonnes. In Nova Scotia, emissions increased by about 1.1 million to 20.4 million tonnes; the increase was caused primarily by carbon dioxide from electrical generation and growth in the transportation sector. To help meet Canada.s overall greenhouse gas emission reduction target, Nova Scotia would need to reduce its emissions by about 2.3 million tonnes.

If Nova Scotia were to allocate reduction targets by the amount of emissions a specific sector or industry contributed, NSPI would have to reduce its emissions by about 1 million tonnes of carbon dioxide. If this target were to be met by purchasing credits, it could cost anywhere from a few million to tens of millions of dollars.

The question is, who should pay for these credits?

Some will argue that the Federal government should pay for emissions credits as it was the Federal government who signed the Kyoto protocol. Others will argue that the Federal government should not subsidize the emissions practices of companies such as NSPI with taxpayers' money. Based on its track record, NSPI could be expected to argue that Nova Scotians should pay for the emissions, since fossil fuels must be burnt in order to meet the province's electricity demand. Regardless of how the credits are paid, it represents a major loss to Nova Scotia and Canada, both in terms of wealth and employment opportunities.

Many governments in the developed world have recognized the folly of relying on emissions credits and have introduced legislation that requires electrical utilities to purchase increasing amounts of energy produced from renewable sources, such as biomass and wind. In some cases, utilities face stiff penalties for failing to meet annual targets. One of the benefits of such actions has been the growth of renewable energy sectors and with it, new employment opportunities.

Sadly, Premier Hamm has shown little leadership on this issue. In 2002, he sided with Premier Klein of Alberta, objecting to Canada's ratification of the Kyoto protocol, claiming it would hurt Nova Scotia because of the province's reliance on fossil fuels. Even the recently enacted Electricity Act does little to address the issue of carbon dioxide emissions: the renewable energy goals are modest (well short of that of other, more progressive governments) and there are no penalties associated with failing to meet the targets.

It is inevitable that Canada will have to rely on emissions credits to meet some of its Kyoto obligations. Fortunately, there is still time for Nova Scotia to embark on a path which will ensure that some of the money used to pay for emissions credits will remain in the province in the form of new industries and new employment.

Published in Daily News - 10 February 2005