Comments on the Proposed Regulatory Approach for the Clean Fuel Standard

Ms. Kate Teeple
Director, Carbon Pricing System
Environment and Climate Change Canada
351 St. Joseph Boulevard, 18th Floor
Gatineau, QC K1A 0H3
Via: ec.tarificationducarbonecarbonpricing.ec@canada.ca

August 30, 2019

Dear Ms. Teeple,

The Canadian Nuclear Association (CNA) appreciates this opportunity to provide comments on the discussion paper published on June 28, 2019, titled Carbon Pollution Pricing: Options for a Federal GHG Offset System. The CNA supports the development of a federal offset system in Canada as an additional compliance mechanism with which to meet federal and provincial obligations. However, the design of the system matters. Industrial greenhouse gas emitters require flexibility to shift operations to lower emitting energy sources or to non-emitting electricity.

The CNA is a non-profit organization established in 1960 to represent the nuclear industry in Canada and promote the development and growth of nuclear technologies for peaceful purposes. Our national industry association represents the interests of clean energy generators, mining companies, the medical isotope community and others connected to the nuclear sector across Canada. The design of the offset system, including the eligibility of clean electricity conversions, will significantly impact the interests of CNA members.

The Importance of Nuclear Energy, Globally and in Canada

Nuclear energy provides safe, reliable, clean power around the world. 446 operating nuclear reactors produce 11% of global electricity, which avoids about 2.5 billion tonnes of CO2 emissions annually. In Canada, 19 power reactors generate 16% of the electricity supply, including 63% in Ontario. Canada is the second largest producer of uranium in the world, which supplies the domestic reactors and is also a valuable global export.

All told, the nuclear industry contributes $6 billion to Canada’s annual Gross Domestic Product and is responsible for 60,000 direct and indirect jobs. These jobs are high paying and high skilled. The nuclear sector also makes significant contributions to R&D, medicine, manufacturing, and the mining sectors.

Nuclear energy is necessary to hold the global temperature increase below 2o Celsius. Canada has a home-grown nuclear advantage and must build on this strength as society moves to a lower carbon economy.

Overview

Under the Output Based Pricing System (OBPS) component of the federal carbon pricing system, the compliance obligations of facilities with annual GHG emissions that exceed their emissions limit can be met by one or more of the following options:
• paying the excess emissions charge, set at the same rate as the fuel charge;
• remitting OBPS surplus credits;
• remitting eligible provincial / territorial offset credits (Recognized Units);
• remitting federal GHG Offset credits issued by the Minister, when enabled by regulations.

Compliance options are necessary so that companies can use the most efficient and effective mechanisms to reduce GHG emissions and this must include an offset system that is administratively simple, fosters clean energy electrification, and focusses on projects in Canada.

Complexity

The three levels of government have developed a myriad of policy instruments in support of our national target of a 30% reduction in GHGs by 2030 on 2005 levels. This includes the federal carbon pricing system, the Clean Fuel Standard, sectoral regulations, provincial pricing systems and regulations, and municipal programs and requirements. This complex regulatory landscape creates administrative and operational challenges for GHG-emitting companies.

The Discussion Paper acknowledges that the offset system design should be administratively simple. In CNA’s view, simplicity requires the integration of the various GHG emission reduction efforts across and within jurisdictions. The CNA supports the recognition of credits generated within provincial offset programs and recommends that the system harmonize the credits within the federal carbon pricing system and the Clean Fuel Standard.

Clean Energy Electrification

Multiple IPCCC reports and deep de-carbonization studies conclude that achieving meaningful GHG emission reductions is best achieved by decarbonizing electricity systems and then relying on that electricity as the dominant energy source. Nationally, nuclear energy and hydro power provide an electricity system in Canada that is over 80% non-emitting. Every climate policy tool should be designed to increase the use of non-emitting electricity.

The Offset Protocol should therefore include electrification projects as an offset mechanism with the project requirements to be designed in consultation with industry and other stakeholders. Without such projects, the CNA believes that a $50 per tonne price on carbon will not be sufficient to encourage a meaningful reduction in GHG emissions.

Nuclear Power, Including Small Modular Reactors, Should be Eligible as an Offset

Building off the above: underscoring the federal government’s recognition of the need for rapid decarbonization and the criticality of electrification as a means to achieve this, the inclusion of carbon-free nuclear power generation as eligible for carbon offsets is both essential and intuitive to maximizing the flexibility of regulated emitters to achieving least-cost compliance. This is especially so in remote and northern regions where a dearth of energy infrastructure pigeonholes industrial and community reliance on diesel, and renewable solutions are highly limited in their ability to displace this diesel reliance. Indeed, in such situations, small modular nuclear reactors present the opportunity for a “leap-frog” effect, whereby total decarbonization can occur without the capital cost and timelines associated with large scale energy infrastructure buildouts.

Further, Canada is an internationally recognized world leader in nuclear energy with a respected and effective regulatory regime, and a world class up- and down-stream extraction, refining, processing and power generation industry supply chain. The exclusion of nuclear power from eligibility for offset credit generation would unnecessarily and unscientifically increase compliance costs, orphan substantial emissions reduction opportunities, while simultaneously marginalizing a known and proven carbon free technology that is increasingly recognized as essential for achieving any meaningful low-carbon transition.

Staying Engaged

The CNA and its members have a very significant interest in the design and implementation of the Offset Protocol and will remain engaged in all stakeholder engagement opportunities that Environment and Climate Change Canada provides. The CNA asks that the Government include it on all relevant mailing lists and working groups going forward.

The CNA again thanks the Government for providing this opportunity to comment and looks forward to staying engaged on this highly impactful issue going forward. If you have any questions or wish to discuss our comments, please contact Steve Coupland at couplands@cna.ca.

Sincerely,

Steve Coupland
Director of Regulatory and Environmental Affairs
Canadian Nuclear Association