Energy Probe
February 25, 2000

This is a summary of Energy Probe’s concerns over the Ontario Emission Reduction Trading (ERT) program announced in January. The government’s ERT program fails to meet the objectives of its November 1997 White Paper on electricity reform and should be substantially revised to achieve environmental improvement.

The ERT program does not cover all fossil generators but should. Only former Ontario Hydro coal- and oil-fired stations are covered. Gas-fired generators already cause significant NOX emissions. Both gas-fired generation and the associated air pollution are expected to increase in the new market.

The ERT program does not cover non-electricity sources of emissions but should. Artificial distinctions between electricity-derived air emissions vs. emissions from other sources such as industrial or transportation emissions have no environmental justification. As energy sectors converge, particularly through cogeneration, identifying what emissions relate to electricity generation and what emissions relate to production of steel, cement, chemicals or paper will become increasingly difficult.

The ERT program does not mandate declining emissions. The long political cycle to get environmental rules changed increases the need to include a schedule of emission reductions over time in the current changes. The last change in Ontario’s air emission rules was 14 years ago. The last change included a schedule for progress in the future. The Ontario government claims to be trying to achieve a 45% reduction in NOX by 2015 but the ERT program appears to have given up on this objective.

The ERT program does not cover air toxics or particulates like PM 10 and PM 2.5. Air toxics and particulates are very harmful to health and should be controlled.

The ERT program contemplates banking of emissions, a practice that could exacerbate time and location sensitive environmental problems, particularly smog. No banking of NOX emissions should be allowed to increase emissions in smog season. Other kinds of banking should be subject to significant clawbacks or overall limits should be cut if banking is allowed.

For the same reasons that banking of NOX emissions that might increase emissions in smog season should not be allowed, trading of NOX emission credits should provide for a spot market for NOX, not just a long market. The spot market should be designed to generate high prices for NOX at times when air quality conditions are particularly sensitive.

Energy Probe recommends replacement of the proposed ERT program with a cap and trade program on the design of the proposal of the MDC.