It appears that British Columbia is also blowing it with the GHG reporting rule that the province announced recently. But the BC and Ontario rules, as proposed, are quite different and blow it in quite different ways. As a starting point, the fact that the two leading provincial members of the Western Climate Initiative clearly cannot agree on a common GHG reporting standard is a pretty bad sign.

The GHG reporting threshold is 10,000 under the BC reporting rule that was announced last week, as well as in the climate change bills under consideration in Congress right now. Under the existing US EPA reporting regulation (which became law last September) there is a general reporting threshold of 25, 000 TCO2e, but all operators have to report all facility GHGs (i.e. there is no threshold) if:

• they have the capacity to generate or co-generate, more than 25 MW of power (regardless what their GHG levels are),

• they are already obliged to report SO2 or NOx emissions under Title VI or Title V of the Clean Air Act (all power generation and industrial sectors), or

• if they are oil refineries, aluminum smelters, produce industrial chemicals or iron and steel.

Note, as well, that affected parties in the US have to count both their production emissions and emissions that will be discharged at the point of consumer end-use of the products they sell—not just the emissions that are released from their plants—to determine whether or not they meet the reporting threshold test.

Finally, the existing US GHG law obliges any entity that imports (but does not domestically produce) any of the regulated carbon intensive energy and commodities to report foreign supply chain GHGs to the US EPA—as if those GHGs occurred within the US boundaries—if the foreign supply chain plus US consumption GHGs arising from the consumption of those imports exceed 25,000 TCO2e/year.

So the GHG reporting thresholds and inventory coverage in the existing US GHG reporting law are much, much, much more stringent than those Ontario recently introduced. For this reason, the US will have a sound legal basis on which to discriminate against any Ontario GHG allowances or credits, and or any Ontario exports of the regulated products, even if Ontario’s cap and trade laws prove entirely consistent with all other aspects of final US cap and trade law.

Before the GHG reporting were made law, every power generation and manufacturing plant that was already covered by Titles VI and V of the US Clean Air Act was obliged to report the following data to the US EPA, which reporting obligation continues:

• fuel consumption, by fuel type, by energy value by combustion unit, industrial process or stack, for every covered plant

• name of manufacturer and date of installation of every unit of emission or energy control technology and all combustion and fuel storage equipment.

If Ontario or any other Canadian province collects only GHG emission data and fails to collect fuel use and equipment data (which the US EPA deems essential for cost-effective verification and enforcement of emission standards), the US EPA will elect not to accept any GHG allowance, offset credit or REC originating in those provinces as compliance units under any US cap and trade rule.

In this regard, the US EPA will operate consistently as it has in respect to Ontario’s NOx and SO2 cap and trade rules for the last 11 years. As you know, Ontario allows Ontario regulated entities to surrender US NOx and SO2 allowances as compliance units under the provincial NOx and SO2 caps, but the US still does not allow US regulated entities to surrender Ontario-issued NOx and SO2 allowances. I would hope that Ontario’s NOx and SO2 market experience to date will inform Ontario’s final GHG reporting rule-making.

To sell Ontario energy and goods, let alone GHG allowances or credits into the US, the US will demand that Ontario collect the same fuel use and operating data.

Also, be very careful to define "reporting facility" and reporting boundaries precisely in any final regulation.  In BC, the pollutant and GHG reports currently filed by three similar coal production operations differ by +/- 200%.  That is because the existing provincial and federal definitions of "reporting facility" and boundaries are either vague or, where they are not vague (in the provincial permitting context) they differ. So the emission reports from these otherwise similar operations are not comparable.  

If/when the US can prove this to be true, they—again—have a sound legal argument for discriminating against our exports and our emission quota instruments.