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Canada Has A Plan For Coal: Clean Up Or Shut Down

September 7th, 2010 by Fereidoon Sioshansi, EEnergy Informer

Two neighbors, contrasting policies. The fate of coal and the potential cost of carbon emissions in the US remain ambiguous at best, which means that if you are in the coal business, you are in limbo. Canada, on the other hand, is intent on either cleaning up its dirty old coal-fired plants or, failing that, shut them down. At least that is the plan, and if you are in coal business in Canada, you know what the game plan is, even if you do not like it.

Following prior hints that some sort of cap and close regulation would be imminent, in June 2010 the federal Environment Minister Jim Prentice announced that older coal-fired plants would have to either meet a new ultra-low emission standard or they would be shut down. The new regulation applies to all plants approaching their 45-year life, or the end of their power purchase agreements (PPA), if that occurred later.

In deference to the powerful Alberta coal lobby, the use of coal is not specifically ruled out, but the new emissions standards are set to be comparable to those from modern natural gas combined cycle plants – not a realistic option for conventional coal unless it employs carbon capture and storage (CCS) technology. British Columbia and California are the only other major North American jurisdictions with similar power plant emission restrictions – where future use of coal is not specifically banned, but merely made impossible without the CCS option.

In making the announcement, Mr. Prentice was emphatic. Older plants would have to meet the new standards or shut down. “No trading, no offsets, no credits, no exceptions,” he has repeatedly stated.

Ottawa’s scheme is different in spirit from that of the Province of Ontario, which has vowed to phase out all coal-fired generation by end of 2014, affecting 4 remaining coal plants currently providing roughly 10% of the province’s electricity generation – a percentage that has been on the decline in recent years.

The federal government’s plan would affect 21 large coal-fired plants consisting of 51 units currently generate roughly 19% of the country’s electricity and emitting 13% of nation’s GHG emissions. Of these, 33 will reach the end of their 45-year life by 2025, hence become affected by the proposed plan.

Despite the rhetoric, the actual impact of the plan is stretched over a period of time, allowing for alternatives to make up the gap created by the coal shut down. If all goes according to the plan, Canada’s GHG emissions will drop by 17% relative to 2005 levels by 2020 – more than many other countries can say.

As shown below in the bar chart of the electricity mix, the federal plan does not change the game plan in Ontario – which has its own 2014 coal phase out plan – nor will it have much of an impact in hydro-rich Quebec or British Columbia. But in coal-rich Alberta and, to a lesser degree in Saskatchewan, the new requirements will pose more of a challenge. Canada’s sparsely populated maritime provinces will also be affected, but there is little industry or commerce, hence the overall effect will be relatively minor.

The environmental community is broadly supportive of the government’s plan, not only for health reasons but also for climate change reasons. But some critics point out that what the country ultimately needs is a more coherent carbon policy instead of what amounts to a narrowly focused coal policy.

Compared to the US, which currently has neither, however, Canada seems one step ahead.

F.P. Shioshansi

This post is extracted from EEnergy Informer, September 2010 issue.

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