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Response of the National Round Table on the Environment and the Economy to its Obligations Under the Kyoto Protocol Implementation Act
July 2008PDF version - 399 Kb Table of ContentsTransmittal Letter from the Chair Appendix A: Analysis and Assessment of Individual Measures with Greater than 1 Tonne of Emissions Reductions in Any Given Year . Transmittal Letter from the Chair
Dear Minister: The National Round Table on the Environment and the Economy (NRTEE) is pleased to submit to you its second response to its obligations under the Kyoto Protocol Implementation Act (KPIA) with respect to the government?s Climate Change Plan and Statement. In carrying out its statutory obligations, the NRTEE had undertaken research, gathered information, and produced a written response as required. This activity focused on addressing Subsections 10(1)(b)(i) and 10(1)(b)(ii) of the Act. As allowed for under Subsection 10(1)(b)(iii), the Round Table has also reviewed and commented upon broader aspects of the Act as it relates to the government?s Plan and Statement. With this document, the NRTEE has fulfilled the filing requirements of Section 10 of the Kyoto Protocol Implementation Act. We wish to thank officials of Environment Canada, Natural Resources Canada, and Transport Canada for their cooperation in providing information that we used in the preparation of this response. Moving forward, the NRTEE has taken the initiative to pursue additional research to respond to key forecasting issues highlighted in its 2007 KPIA Response. The Round Table felt it would be useful to examine how other countries approach similar challenges to those faced by the federal government in emissions forecasting. The results can be found in our report entitled Greenhouse Gas Emissions Forecasting - Learning From International Best Practices submitted along with the NRTEE?s 2008 KPIA Response. We hope these documents will be useful to you and your department in approaching and evaluating expected emissions reductions from federal climate change policies and measures in the future. Yours sincerely,
Robert Page National Round Table on the Environment and the EconomyAbout UsThe National Round Table on the Environment and the Economy (NRTEE) is dedicated to exploring new opportunities to integrate environmental conservation and economic development, in order to sustain Canada?s prosperity and secure its future. Drawing on the wealth of insight and experience represented by our diverse membership, our mission is to generate and promote innovative ways to advance Canada?s environmental and economic interests in combination, rather than in isolation. In this capacity, it examines the environmental and economic implications of priority issues and offers advice on how best to reconcile the sometimes competing interests of economic prosperity and environmental conservation. The NRTEE was created by the government in October 1988. Its independent role and mandate were enshrined in the National Round Table on the Environment and the Economy Act, which was passed by the House of Commons in May 1993. Appointed by Governor in Council, our members are distinguished leaders in business and labour, universities, environmental organizations, Aboriginal communities and municipalities. How We WorkThe NRTEE is structured as a round table in order to facilitate the unfettered exchange of ideas. By offering our members a safe haven for discussion, the NRTEE helps reconcile positions that have traditionally been at odds. The NRTEE is also a coalition builder, reaching out to organizations that share our vision for sustainable development. We believe that affiliation with like-minded partners will spark creativity and generate the momentum needed for success. And finally, the NRTEE acts as an advocate for positive change, raising awareness among Canadians and their governments about the challenges of sustainable development and promoting viable solutions. We also maintain a secretariat, which commissions and analyses the research required by our members in their work. The secretariat furnishes administrative, promotional and communications support to the NRTEE. Our Current ProjectsThe members of the NRTEE meet four times a year to review their research and conduct their deliberations. Our current projects focus on:
For more details on past and current programs, visit our website at http://www.nrtee-trnee.ca. Members of the National Round Table on the Environment and the Economy (NRTEE)
Vice-Chair Janet Benjamin Pauline Browes Elizabeth Brubaker Angus Bruneau David Chernushenko Robert A. Dub Timothy R. Haig Christopher Hilkene Mark Jaccard Don MacKinnon Ken McKinnon Richard W. Prokopanko Wishart Robson Robert Slater Robert Sopuck David McLaughlin
1. BackgroundOn June 22, 2007, the Kyoto Protocol Implementation Act (henceforth the KPIA, or C-288), received Royal Assent. The KPIA stipulates that the Government of Canada is obliged to prepare-on an annual basis-a Climate Change Plan describing measures and policies enacted by the government to "ensure that Canada meets its obligations under Article 3, paragraph 1, of the Kyoto Protocol" [Subsection 5(1)]. The first annual plan is to be prepared within 60 days of the KPIA coming into force. The KPIA further provides that "Within 120 days after this Act comes into force, the Minister of the Environment shall prepare a statement setting out the greenhouse gas emission reductions that are reasonably expected to result for each year up to and including 2012 ." as a result of the Climate Change Plan. The provision of a statement is required only for the first year the government publishes its plan. The government?s first Climate Change Plan and Statement were released simultaneously on August 21, 2007, and entitled A Climate Change Plan for the Purposes of the Kyoto Protocol Implementation Act 2007. The NRTEE submitted its response to the Minister of the Environment, entitled Response of the National Round Table on the Environment and the Economy to its Obligations under the Kyoto Protocol Implementation Act, on September 20, 2007. The government?s second Climate Change Plan was released on May 31, 2008. Subsection 10(1) of the Act requires the National Round Table on the Environment and the Economy (NRTEE or Round Table) to, within 60 days of the publication of the Climate Change Plan stipulated in Subsection 5(1), perform the following with respect to the Plan:
This report represents the second response of the National Round Table on the Environment and the Economy to the requirements created by the Kyoto Protocol Implementation Act, and is in direct response to the government?s second Climate Change Plan. In carrying out its statutory obligations, the NRTEE has undertaken and gathered information. This activity has focused on addressing Subsections 10(1)(b)(i) and 10(1)(b)(ii). As allowed for under Subsection 10(1)(b)(iii), the NRTEE has also reviewed and commented upon broader aspects of the KPIA as it relates to the government?s Plan. In accordance with the stipulations of the Act, the report has been provided to the Minister of the Environment. This fulfils the NRTEE?s current obligations under the KPIA. 2. IntroductionIn A Climate Change Plan for the Purposes of the Kyoto Protocol Implementation Act, (henceforth referred to as the 2008 Plan), the government details expected emissions reductions resulting from specific actions to address climate change. It includes a comprehensive modelling analysis that presents the reductions expected to accrue from the suite of policies relative to a Baseline Emissions Pathway. The stated emissions reductions for individual policies outlined in the 2008 Plan are derived from initiative-level evaluations performed by Environment Canada, Natural Resources Canada (NRCan), and Transport Canada, while the aggregate figures are compiled by Environment Canada. The analysis below examines whether the stated emissions reductions attributed to the suite of policies as a whole and to individual policies are likely to achieve the projected incremental emissions reductions we should expect to see as a result of their implementation.[1] By extension, the report also assesses the degree to which the emissions projections reflect reasonable expectations of what will be seen in greenhouse gas (GHG) emissions inventories for the years 2008-2012. The report proceeds as follows. First, it begins with a description of the methodological approach to the evaluation employed by the NRTEE. Next, an overview of key changes in the 2008 Plan from the 2007 Plan is provided. After that, an examination of the emissions reductions proposed by the 2008 Plan?s integrated analysis is presented. Included here is an assessment of how this relates to individual policy measures as well as the overall effect of achieving the Kyoto Protocol targets for Canada. The main report finishes with conclusions and recommendations. 3. MethodologyIn its 2007 Response to its obligations under the KPIA, the NRTEE developed an analytical framework by which to evaluate the likelihood that the proposed measures or regulations would achieve the projected emission reductions in the Plan, and the likelihood that the proposed measures would allow Canada to meet its requirements under the Kyoto Protocol. The NRTEE has used the same methodological approach in its 2008 Response. An initial assessment of the necessary (and available) analytical tools and methodologies led the NRTEE to conclude that the best approach to assessing likelihood was to determine whether the estimates themselves were accurate descriptions of the outcomes that could reasonably be expected from the policies and program initiatives described in the government?s Plan. Given the nature of the mandate and the timelines involved, the presentation of a qualitative sense of predictive accuracy as opposed to a complete modelling of policy outcomes was chosen as the most appropriate. As a result, the NRTEE has derived, where possible, a qualitative conclusion for each policy or measure. The statistical evidence and underlying assumptions suggest one of the following:
To be clear, the NRTEE is not in a position to provide a definitive statement on the emissions reduction level attributable to each policy and measure individually, or in total. Rather, it is providing an assessment-on the basis of what it knows about the underlying assumptions-of whether the measures and policies described in the Plan are likely to result in the suggested emissions reduction levels. All forecasting is, by definition, speculative and cannot be expected to be 100 per cent accurate. Defining the likelihood of achieving a stated emission reduction must in turn be qualified by this assumption. 4. Key Changes in the 2008 Government KPIA Plan from the 2007 PlanThe NRTEE?s starting point in its analysis was to understand any changes between the 2008 Plan and the 2007 Plan. Three main ones appeared. 1. Integrated Modelling Approach This year?s Plan incorporates a new, integrated modelling approach that compares forecast emission reductions altogether, and not just individually and added incrementally. This is a significant improvement over last year?s Plan and follows a recommendation for methodological improvement made by the NRTEE in its 2007 Response. Integrated modelling is more accurate because it should correct for the policy-interaction effects and in many cases for the rebound and free-rider effects that leads to double-counting of emission reductions, or additionality.[2] This occurs when the estimated emissions reductions from policy measures are added up individually. The sum of the individual program is a different, higher number of projected emission reductions than if the policies were modelled together (as is now being done), as the interaction of various policy measures can lessen the reductions attributed to individual measures. However, the rebound and free-rider effects can still occur within an integrated modelling approach depending on the modelling assumptions, particularly with respect to how the technology fund and domestic offset purchases are accounted for in the 2008 Plan. The NRTEE analysis has therefore examined the forecast emission reductions both on an integrated and an individual policy basis. 2. New Baseline A significant change in the interpretation of the projected reductions in the 2008 Plan results from the introduction of a new reference scenario, termed the Baseline Emissions Pathway, which reflects the latest GHG inventory. Environment Canada developed this new scenario using its Energy-Economy-Environment Model for Canada, or E3MC. This scenario includes the impacts of all government actions announced up to January 1, 2006, which is the same cut-off date used for the reference case in Environment Canada?s March 2008 document entitled Detailed Emissions and Economic Modelling. However, the Baseline Emissions Pathway set out in the 2008 Plan has a much lower emissions profile than that introduced by Environment Canada in March 2008. This is due to an adjustment made to account for updated emissions inventory data released by Statistics Canada. The NRTEE analysis has had to account for this difference in reference scenarios. 3. New Kyoto Protocol Requirements Updated emissions inventory numbers published by Statistics Canada have led to a change in the Kyoto compliance level for Canada. The new figures place Canada?s 1990 emissions at 594 Mt, updated from previous figures of 598 Mt. Canada?s Kyoto commitment is based on a 6% reduction in emissions relative to 1990 levels. This means that emissions over the 2008 to 2012 period-net of reductions credited through the Kyoto Protocol flexibility mechanisms-must average 558 Mt, compared with the 2007 Plan that was based on a Kyoto target of 563 Mt. These updated figures imply that, in order to be in compliance with the Kyoto Protocol, lower emissions levels than previously estimated will be required. The NRTEE analysis has taken this into account. 5. Analysis and AssessmentThe NRTEE?s analysis and assessment of the 2008 Plan focused first on an evaluation of the integrated modelling results. The lack of integrated modelling was cited in the 2007 NRTEE Response as leading to an overestimate of likely emission reductions contained in the 2007 Plan. Our evaluation objective was to assess whether policy measures would lead to truly incremental or additional emission reductions; specifically, whether concerns about free ridership, additionality, and the rebound effect are taken into account when providing the estimate for the likely emission reduction for the policy measure, both individually and as part of a whole. Another objective of the analysis was to determine the extent to which policy interaction effects had been taken into account in the government?s analysis; that is, had the entire suite of policies been evaluated together in order to assess their combined impact, or had the policies been evaluated only on an individual basis. In the 2008 Plan, the comparison of integrated models executed with and without the policies imposed represents a significantly improved method of forecasting policy impacts. Two issues, however, remain. First, there is concern that the purchase of domestic offsets has not been fully accounted for and critically assessed within the model. This issue is discussed in section 5.1.3. Second, an issue remains with the presentation of individual policy measures and their consistency with the integrated modelling results, as we note in 5.2 below. 5.1 Forecasting Emissions ReductionsA forecast of emissions reductions is actually the result of two forecasts-forecasts of what quantity of emissions are likely to be released with and without the policy in place. The difference between these two forecasts is a measure of the effect of the policy, or the projected emissions reductions. The integrated modelling analysis contained in the 2008 Plan results in two new economy-wide forecasts: a Baseline Emissions Pathway and the KPIA Emissions Pathway. The Baseline Emissions Pathway represents a forecast of what is expected to occur without the intervention of any of the proposed policies or other initiatives. In previous government plans, this was called the reference case or business-as-usual (BAU) scenario. The KPIA Emissions Pathway is a forecast of what will occur with all of the policies in place for the period of the Kyoto Protocol. Policy impacts are tabulated as the difference between the two forecasts, termed the expected emissions reductions resulting from implementing the policies.[3]
5.1.1 Baseline Emissions PathwayAs shown in Figure 1 above, the Baseline Emissions Pathway predicts emissions under no policy intervention. It is significantly lower than the Environment Canada reference case as presented in the March 2008 document entitled Detailed Emissions and Economic Modelling.[4] It is important to understand why the starting point for the integrated modelling in the KPIA Plan-the Baseline Emissions Pathway-represents a much lower emissions trajectory than has previously been put forward for Canada. The change in the Baseline Emissions Pathway is due to an adjustment made to account for updated emissions inventory data provided to Environment Canada by Statistics Canada. While the March 2008 reference case published by Environment Canada had projected 2006 emissions at 760 Mt, new inventory data from Statistics Canada estimated 2006 emissions inventories at 721 Mt. Given this new information, Environment Canada adjusted its Baseline Emissions Pathway in the 2008 Plan to reflect 2006 emissions inventories-essentially through a downward shift in the reference case forecast. While the KPIA requires the government to use the most recent emissions inventory for Canada as the basis for its forecast in the Plan, shifting the entire forecast down by 40+ Mt on the basis of emissions inventory data for a single year seems unnecessary and inconsistent with previously established reference cases. The NRTEE provides a potential way to address this issue in the Conclusions and Recommendations section of this report.
5.1.2 KPIA Emissions PathwayIn contrast to the Baseline Emissions Pathway, the KPIA Emissions Pathway is to be interpreted as a forecast of what will occur when all the policies proposed in the 2008 Plan are put in place simultaneously. The effects of the policies were simulated using Environment Canada?s E3MC, the same model as was used to calculate the Baseline Emissions Pathway under the same assumptions about growth trends and provincial actions, as illustrated in the Figure 2 above. 5.1.3 Implications of the Pathways and the Technology Fund within the Integrated Modelling AnalysisThe difference between the Baseline Emissions Pathway and the KPIA Emissions Pathway cannot be interpreted as actual emissions reductions.[5] In order to tabulate emissions reductions, it is preferable to compare a forecast of actual emissions with and without the policy, with the difference between the two being the actual reduction in emissions. In the 2008 Plan, the comparison made is between a Baseline Emissions Pathway and the KPIA Emissions Pathway, which includes emissions offset by contributions to the technology fund and by other domestic offsets. The first is a forecast of actual emissions, while the second measures a regulatory quantity, not actual emissions, and so the difference between the two is less informative. A footnote is included to this effect on page 24 of the 2008 Plan, which states that, "actual emissions reductions will depend on the compliance options chosen by firms." The Conclusions and Recommendations section of this report presents a possible approach to addressing this issue and including estimates that are more accurate as the Plan moves forward. Contributions to the technology fund today will be used to finance future emissions reductions. There is no guarantee that the quantity of future emissions reductions will be equivalent to the volume of emissions offset today. In fact, in Detailed Emissions and Economic Modelling (2008), it is clear that emissions reductions are not realized from investments in the fund until 2016, outside the scope of the present Kyoto Protocol period. Even then they are only expected to "account for another 20 megatonnes" per year. While technology fund contributions make up a substantial part of compliance activities, the use of domestic offsets is also an important component. Domestic offset purchases account for 30 Mt of stated emissions reductions over the 2010-2012 period. Offsets effectively involve subcontracting emissions reductions to other firms who can meet established standards to demonstrate achieved emissions reductions. Canada?s Offset System for Greenhouse Gases (2008) stipulates which criteria a project must meet in order to be certified as an offset. In order for offset purchases to represent actual emissions reductions, the abatement activitiesthatgenerate the offset must be incremental to emissions reductions that would have occurred without the offset program. It is likely that the emissions reductions attributed to domestic offset purchases in the 2008 Plan are overestimated. In the KPIA period, it is probable that much of the industrial response to federal climate policy will happen in the form of offsets. Potential offsets in response to industrial regulation could be in landfill gas, no-till farming, afforestation, fugitive emissions, energy efficiency, and fuel switching. Yet the integrated modelling of domestic offsets in the 2008 Plan assumes that only landfill gas offsets will occur. This suggests that the modelling could miss the other offsets, leading to free-rider and rebound effects. Other than the concern with a substantially lower baseline and the method of accounting for technology fund contributions and offsets (a detailed explanation of which is provided in Appendix A), the modelling represents an accurate and reliable overall estimate of the outcomes of the policies. As with any model, some assumptions may be less realistic than others, but these assumptions are clearly stated in the March 2008 Detailed Emissions and Economic Modelling document, which allows the estimates to be interpreted with the assumptions in mind, as we have done. This additional detail and transparency provided by the government in its Plan responds to a recommendation by the NRTEE in its 2007 Response. 5.2 Policy-by-Policy Emissions ReductionsThe 2008 Plan provides estimates for emissions reductions expected to occur as a result of specific policies. The NRTEE?s obligations under the KPIA include an evaluation of these policy-by-policy estimates. In support of the 2008 Plan, more documentation and detail on information programs was provided, enabling an analysis of these programs that we were not able to conduct last year. In Appendix A, programs with claimed reductions of greater than 1Mt in any given year are examined to illustrate some general trends and to highlight specific aspects of the analysis. At issue in the policy-by-policy evaluation is that while the integrated modelling has been added to the 2008 Plan, the calculation of the policy-by-policy estimates, required under the Act, has been undertaken in the same way as in the 2007 Plan, although some individual estimates have changed. This leads to a discrepancy between the estimates for emission reductions for the policies as a whole based on the integrated modelling, and the estimates for the individual policy measures. Some of this discrepancy is expected due to policy interaction effects, but further information in the 2008 Plan of how to interpret the two sets of numbers explaining this would have been helpful. Table A below shows the stated emissions reductions associated with specific policies and actions as stated in the 2008 Plan. As the table shows, when added together, the individual policies account for 4 Mt of reductions in 2008 (16 Mt attributed to the Clean Air and Climate Change Trust Fund were not included in this sum), while the modelling output on page 24 of the 2008 Plan predicts only 2 Mt of reductions. The bottom rows of the Table compare the stated reductions to the total reductions estimated by the Environment Canada model for all years. The policy-level estimates lead to a larger estimate of total emissions reductions, likely for the combined reasons outlined above. When these policies are jointly implemented in an appropriately chosen model, free-rider effects, rebound effects, and policy interaction effects are implicitly accounted for in the analysis, and the predicted reductions represent incremental changes resulting from the suite of policies. In order to account correctly for the incremental effects of individual policies, these effects must be approximated in some way. The Conclusions and Recommendations section includes a suggestion for an improved reporting methodology. Table A: Reported GHG Emissions Reductions by Policy (Mt)
While the integrated forecast of all policies represents a substantial improvement over the exclusive policy-by-policy evaluation in the 2007 Plan, some additional context would render this year?s Plan and future plans more complete. The main conclusion of this section is that the impacts of specific programs should be calculated in such a way as to be compatible with the results of the integrated modelling. It is not correct to expect that the incremental effects of each policy will equal the total effect of the suite of policies. However, ensuring that each policy is evaluated under the same assumptions and underlying trends will add to the analysis. In the Conclusions and Recommendations section of this report, the NRTEE offers advice on calculating policy-by-policy figures to align these more directly with the integrated modelling results and allow for easier and more complete evaluation. Policy-level evaluations should be conducted so as to attribute only the incremental emissions reductions that the policies can reliably be expected to generate. Similar to conclusions drawn in the 2007 Response, the NRTEE finds that this standard is not met in the 2008 Plan. In addition to the policy-interaction effects that will be missed when policies are evaluated on an individual basis, free-rider and rebound effect adjustments are omitted from many of the evaluations. As a result of the free-rider effect, the emissions reductions for any given program may be overestimated if at least some portion of the projects financed under an incentive program likely would have occurred without the incentive but are still counted as induced emissions reductions. For example, incentive programs administered under the ecoENERGY for Renewable Power program and the ecoENERGY Retrofit initiative counted all emissions reductions associated with financed projects, rather than only those emissions reductions actually induced by the incentives. While documentation provided by NRCan suggests that reducing free ridership has been considered in the design of the programs, it was not considered in the evaluation of those same programs. The rebound effect occurs when people react to the fact that more-efficient products are cheaper to use (a hybrid car costs less per kilometre driven, while a more efficient washer costs less per load of laundry), resulting in greater use of these products than the less-efficient products they replaced. As such, while there will likely still be emissions reductions, they will likely be smaller than the relative improvement in efficiency. Emissions reductions attributed to regulatory changes have not accounted for the rebound effect. However, it is important to point out that both the integrated modelling and the evaluation of some policies do account for these issues. Newly provided information in this year?s Plan made it possible for the NRTEE to examine a sample of the various information and voluntary reduction programs proposed in the 2008 Plan. Such an analysis was not conducted in the 2007 Response. This report examines three such programs-the only programs claiming significant (>1 Mt in any year) emissions reductions. In all cases examined, the programs likely overestimate emissions reductions. For example, the ecoFREIGHT initiative counts emissions reductions that likely would have occurred anyway as a result of U.S. regulations, while the ecoENERGY for Buildings and Houses and the ecoMOBILITY programs count reductions associated with significant regulatory changes, even though these are only information and voluntary reduction programs. 5.3 Effectiveness of Measures and Regulations in Meeting Canada?s Kyoto Protocol ObligationsThe Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) commits developed country signatories to emissions reductions based on individual commitments. In order to be considered in compliance with the Kyoto Protocol in terms of total emissions, Canada?s emissions must not exceed its total assigned commitment, except where this is offset through the use of approved flexibility mechanisms. These are emissions trading, Joint Implementation (JI), and the Clean Development Mechanism (CDM). Penalties for non-compliance under the Kyoto Protocol lead to more stringent compliance requirements in future commitment periods (i.e., after 2012). Canada?s Kyoto commitment is based on a 6% reduction in emissions relative to 1990 levels. As noted earlier, updated emissions inventory numbers published by Statistics Canada have led to a change in the Kyoto compliance level for Canada. The new figures place Canada?s 1990 emissions at 594 Mt, updated from previous figures of 598 Mt. This means that Canada?s emissions net of reductions credited through the Kyoto Protocol flexibility mechanisms over the 2008 to 2012 period must average 558 Mt, while the 2007 Plan was based on a Kyoto target of 563 Mt. These updated figures imply that, in order to be in compliance with the Kyoto Protocol, slightly lower emissions levels than previously estimated will be required. Statements and information contained in the government?s Plan and elsewhere indicate that the Government of Canada is not pursuing a policy objective of meeting the Kyoto Protocol emissions reductions targets. As set out in the table below, the projected emissions profile described in the 2008 Plan would leave Canada in non-compliance with the Kyoto Protocol. Based on this year?s Plan, Canadian emissions would exceed our allowable units by 31.4%, with average excess emissions of 189 Mt/year. As is stated in the government?s Plan, the final, actual number cannot be calculated and will not be known until the end of the Kyoto Protocol period. Table B: Annual Allowable Units, Projected Emissions, and Implied Excess Emissions over the First Commitment Period (2008-2012) Under the Kyoto Protocol
6. Conclusions and RecommendationsOverall, the NRTEE finds the 2008 Plan a more transparent and accurate representation of projected emission reductions compared with last year?s Plan. This year?s Plan has been improved by providing integrated modelling results. More detail and information on the assumptions behind its forecasts and policy measures has also been provided. This has made it easier to evaluate the likelihood of projected emission reductions being achieved. This too marks a notable improvement over last year?s Plan. Much of this was recommended by the NRTEE in its 2007 Response. While there is a likelihood that an overestimation of emission reductions is still present, the methodological approach used in the estimation of emissions reductions from policies and measures in the 2008 Plan is an improvement from the 2007 Plan, especially through the inclusion of integrated modelling projections. Similar to last year, the NRTEE notes the problem with how emission reductions attributed to the technology fund are accounted for and presented in the KPIA period. There will be emission reductions from this measure but they will occur for the most part outside the 2007-2012 forecast period. To properly evaluate them as forecast emission reductions, these should therefore be accounted for in the year when they will likely occur and not in the year when the contribution is made to the technology fund. The NRTEE would also like to draw attention to the issue that the integrated modelling assumes that the only domestic offsets to be credited will be from landfill gas offsets, missing all of the other offsets (e.g., afforestation, fuel switching) that will likely have free-rider and rebound effects. Several of the individual policy evaluations in the 2008 Plan were improved in response to suggestions set out in last year?s NRTEE Response, and while room for increased precision remains, this progress should be recognized. Nevertheless, some problems persist with how individual policy measures are calculated and with their projected emission reductions. Insufficient attention has been paid to the free-ridership and rebound effects for several of the information and incentive measures leading to concerns about additionality and hence, a likely overestimate of emission reductions. Further, estimates of information and voluntary reduction programs are approximated by supposing stringent regulations. While the integrated modelling now addresses some of these effects in the end, the individual policy measures continue to be presented without these sources of overestimation adequately being taken into account. The challenge of evaluating precise emission reductions from provincial and territorial policies not within the control or accountability of the federal government is also present in the Climate Change Trust Fund.[6] Environment Canada?s Detailed Emissions and Economic Modelling document attributes a wedge to provincial actions-actions that are in part financed by the trust fund. This is not replicated in the 2008 Plan and should be. A potential improvement for the future government KPIA Plans would see the constituent programs in this wedge broken down into those financed amnd not financed through the trust fun, and the effect of the trust fund reported as the incremental effect ot the former. Providing more transparency and detail as to which provincial programs contribute to emissions reductions, and by how much, will add to the reliability of this estimate going forward. The NRTEE recognizes this is not fully within the federal government?s control or consistent with provincial and territorial accountabilities for expenditures of trust fund monies, but believes governments at both levels should strive to improve transparency on this front and, as a broad goal, generate better information to inform decision makers in their public policy choices for effective climate policy. The NRTEE?s companion report, Greenhouse Gas Emissions Forecasting - Learning from International Best Practices, might be useful for decision makers in this respect. The presentation of new, economy-wide emissions forecasts, particularly the addition of a new Baseline Emissions Pathway, created a challenge for the NRTEE in determining the precise and best reference case from which to conduct an evaluation. It is not clear that a separate baseline is required for the government?s KPIA plan. The forecasting work contained in Environment Canada?s Detailed Emissions and Economic Modelling released in March 2008 reflects the most up-to-date information available in a forecast of Canada?s likely emissions profile. It contains reliable and up-to-date assumptions and growth trajectories. Shifting this 2008 baseline forecast downward by 40 Mt, on the basis of new emissions inventory data for a single year to create a new baseline pathway for the purposes of the 2008 Plan as the KPIA requires, leads to questions of discrepancy. While the Kyoto time frame extends only to 2012, the NRTEE has consistently emphasized that climate change mitigation through emissions reductions is really a long-term problem. Viewing and evaluating forecast emission reductions solely during this short five-year period can be misleading as to their longer-term effect. Including forecasts that go beyond this period, possibly to 2020 (the government?s medium-term time frame) and measuring results based on established emission milestones, would allow for a more complete picture of the effectiveness of climate policy measures. RecommendationsThe NRTEE acknowledges the improvements in forecasting and methodology and additional transparency provided by the government in the 2008 Plan. These allow for a more effective evaluation. To ensure that future iteractions of the KPIA Emissions Pathway reflects the best available estimate of what will be catalogued in future emissions inventories, address remaining inconsistencies between integrated modelling forecasts and individual policy measure projections, and provide greater transparency in forecasting presentation, the NRTEE recommends:
Endnotes1 Incremental emissions reductions are those that occur over and above what could reasonably have been expected to occur without the policies or actions. 2 In its 2007 KPIA Response, the NRTEE identified four accounting issues that led the Round Table to conclude the government had overestimated the likely emissions reductions as laid out in its Plan. Please refer to Appendix B for a discussion of additionality, free ridership, rebound effect, and policy interaction effects. 3 Basing and evaluating climate policy on accurate emissions forecasts is vital. In support of this, the NRTEE has prepared a companion document entitled Greenhouse Gas Emissions Forecasting - Learning from International Best Practices. This document reviews how other countries approach emissions forecasting, both from methodological and governance perspectives. It offers lessons for Canada to further improve our GHG forecasting capabilities. 4 To calculate the reference case, the emissions levels represented on the top line of the wedge diagram on page 7 of Turning the Corner (2007) and the Reference Path given on page 3 of Detailed Emissions and Economic Modelling were interpolated from the provided diagrams. In the first case, the top line in the wedge diagram is be taken to represent expected emissions with no provincial or territorial actions, without a clean electricity regulation, and with no federal actions. 5 Please refer to Appendix B for a detailed evaluation and comparison of the Baseline Emissions Pathway and the KPIA Emissions Pathway. 6 Please refer to Section 10 in Appendix A for a detailed discussion of this fund.
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