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Industry’s approach to climate control could offer business opportunities

CANADA’S AVERAGE temperatures have increased by one full degree over the past 100 years. Robert Slater said that Canada’s climate models, “among the best in the world,” indicate that over the next 100…

CANADA’S AVERAGE temperatures have increased by one full degree over the past 100 years. Robert Slater said that Canada’s climate models, “among the best in the world,” indicate that over the next 100 years temperatures in southern Canada could increase anywhere from 3 to 5 and those in the north by “as much as 10.”

Slater is the senior assistant deputy minister, Environment Canada. He was speaking at the Open Forum on Climate Change sponsored by CPPA and PAPTAC.

These projections are based on models that foresee a doubling of the level of carbon dioxide over the period. Many doubt the projections. But what if it’s right? Slater asked.

Amongst other things, Vancouver will get more rain than ever, especially in winter, and the Prairies will become so dry that southern Alberta and Saskatchewan “will be completely unsuitable for wheat and other crops.”

Under the doubled CO2 environment, the boreal forest would move several hundred kilometres northward.

Between 1990 and 1997, Slater said, forest sector production rose by 6% while emissions decreased by 14%. He noted that several pulp and paper companies have already reached the gold or silver levels in the Voluntary Challenge Registry. Reducing greenhouse gas (GHG) emissions “is not a burden; it is an opportunity to increase productivity, increase competitiveness, while improving environmental performance.”

Slater cited initiatives by other countries. The US is spending $10.6 billion on technology innovation and renewable energy. The UK will impose a climate change levy on business use of energy. Australia will spend $1 billion on voluntary measures, pilot projects and research. The Netherlands will reward energy efficiency programs. France has a 96-point program to achieve its Kyoto objectives, including a carbon tax.

“Canada accounts for only 2% of the world’s GHG emissions,” Slater said, but we are still number eight over-all. Adding up all the countries emitting 2% or less gives 95% of the world’s countries, “and a staggering 40% of global emissions.”

Achieving our Kyoto target will require action on all fronts, said Slater. A national implementation strategy is to be addressed this year and there are international meetings due.

Ian McGregor, deputy head of the federal government’s climate change secretariat, said it wasn’t true that industry will be targeted because it created so much emission. “It accounts for about one-third of the total and we are all in it together,” he said.

McGregor showed how Canada’s Kyoto commitment is accounted for: In 1990, the emissions totalled 601 million tonnes of carbon dioxide equivalent (MtCO2 eq) and were about 682 Mt in 1998 when the Protocol was initiated. After reaching 694 MtCO2 eq by 2000, if nothing were done, the emissions would be 764 MtCO2 eq by 2010. Canada said it would reduce its emissions by 6% below the 1990 level by 2010, that is, to 565 Mt. However, that means we have to overcome a 25% increase in emissions rather than just 6% to reach the target 565 Mt.

The government started baseline protection discussions in January this year. As things stand, business has no assurance that early reductions will be recognized if future policy allocates reduction targets on the basis of emissions at a future time. However, baseline protection removes this disincentive and allows businesses to reconstruct their emissions baselines to reflect action taken since January 1, 1990. “It protects reductions that are real, measurable and verifiable,” said McGregor. The protection should be in place by spring 2000.

Bob Eamer, Domtar’s senior vice-president, research and technological development, pointed out that in 1996, industry accounted for 30% of Canada’s energy consumption and the forest products sector accounted for 40% of that. In 1997, he said, industry’s CO2 emissions were 33% of Canada’s total with pulp and paper being 12%. “The pulp and paper industry has kept rigorous stats for years and we have good confidence in the figures presented,” he said.

Eamer’s slides indicated that since 1972 the industry’s purchased energy profile had changed so that the use of coal and related fuels had dropped by 75%, and fuel oil use had dropped by 78%. Electrical use was up 18% and natural gas by 13%. By 1998, the pulp and paper industry was using biomass as 54% of its energy source with fossil fuel at 24%, purchased electricity at 19% and other at 3%.

According to Eamer’s calculations, “we need to trim 4.2 MtCO2 eq by 2010. “Progress in the 1990s came through modernization,” he said. “The challenge will be to find the capital to continue.” The industry will need to adopt energy efficiency measures, improve maintenance and adopt process thermal integration using methods such as pinch technology. He also advocated fuel-switching measures such as biomass, black liquor gasification (to replace recovery boilers) and cogeneration.

Eamer highlighted the need to increase carbon reserves. “The challenge is to increase productivity in the Canadian forests. We can increase the amount of biomass in a hectare of land by changing (the patterns of) human activity there.” He said, “it is tragic” that the government does not consider this as an investment. We need to understand the carbon fluxes and expand the carbon knowledge base.

Carbon storage should be optimized through techniques such as juvenile spacing, commercial thinning, better pest and fire control, and optimizing the wood products side: “It’s not rocket science.”

It could be win-win instead of being punished through taxation, said Eamer. He supports voluntary initiatives, credit for early action and the concept of emissions trading… which came up next.

Corinne Boone, Ontario Power Generation Inc. (OPG), described emissions reduction credits (ERC) and their trading (ERT). It is still in its infancy in Canada and OPG is one of the few experienced practitioners, said Boone. “The seller makes some money. The buyer saves some money,” she said. “It’s an efficient risk management tool.”

The Kyoto protocol makes provision for such trading. Up to now, OPG has made between 25 and 30 trades involving CO2, NOx, CO and VOCs. For example, three trades involved the purchase of CO2 ERCs from hydroelectric facilities — two in the US and one in Canada. It is doing trades over seas as well.

Boone highlighted some of the things OPG had learned from ERT. The source of ERCs must be acceptable to both parties and prices must be considered in light of cost control. The ownership and credibility of the real nature of ERCs are key aspects to any trade. For international trades, close attention should be paid to reporting practices. “Keep it simple,” she said. “Industry must play a significant role” in its implementation.

Robert Hornung, the next speaker, said the pulp and paper industry has recognized climate change more than many others. “Looking at the numbers, you guys look like a real success.” But, he continued, most of the actions were ones that should have been taken any way. “Climate change needs an enhanced strategy.” He urged his listeners to integrate climate change into their business plans.

Hornung is director, climate change, at the Pembina Institute, and he said there are clear business risks. Climate change threatens the natural resource industries and there is a lack of clarity in the Kyoto protocol as well as concerns expressed by the environmental non-governmental organizations: As well, other countries provide incentives for action to address climate change and he said Canada must do the same.

Hornung warned the industry not to go too slowly (whereas Eamer had said, don’t go too fast). Amongst the tools he recommended were ERCs and life cycle value assessment.

Ralph Feeney, environment manager for BP Amoco, related how his company approached emissions trading. He said that in 1998 BP set a goal of reducing its GHG emissions by 10% from a 1990 baseline over the period to 2010. Since then, BP has merged with Amoco and the target has now become a reduction of 30 million tonnes.

One of the steps is to set-up an emissions trading system within the
company. Feeney said it is the first-ever global GHG emissions trading system. The trades are in CO2 equivalent units and include both CO2 and methane (1 tonne of methane is equivalent to 21 tonnes of CO2 in its GHG effect). He noted that the Kyoto Protocol allows for trading mechanisms but rules are yet to be developed.