A bit like Tolstoy’s unhappy families (see Anna Karenina), every regulation has its own story, and its own set of lessons.
Coal-Fired Electricity – a Regulatory Case Study, in a Narrative of Canada-US Harmonization tells the story of Canada’s first federal regulations targeting greenhouse gas (GHG) emissions from stationary sources. As well as being the first, these regulations are notable for their unusual design, and for the policy context in which they evolved.
Some of the lessons that emerge from the coal-fired electricity story are as follows:
- Policy and regulatory development is a long and winding road. Canada’s policy approach in fall 2008 was one of moving forward with comprehensive emission intensity regulations, on a unilateral basis if necessary. It transitioned to seeking a North American cap-and-trade system, and from that to matching any regulation the US might bring in. Still under the same government, it evolved into implementing an electricity regulation ahead of US action, with a regulatory design that the US would propose to adopt in part. Canada’s regulation has now been law for almost seven years, and has been enhanced under a new government; the US has still not regulated GHG emissions from existing power plants.
- Harmonization can take different forms, and does not necessarily mean like-to-like. US regulations on air pollutant, mercury and air toxics emissions from coal plants, together with the decline in natural gas prices resulting from the shale gas revolution, have in practice driven significant early closure of US coal plants even in the absence of US GHG regulation. To some extent, therefore, there has been de facto partial harmonization of coal generation policy with the US, even in the absence of a US GHG regulation on the sector; there has certainly been harmonization of outcomes.
- A specific regulatory design is not inevitable (or, there is more than one way to skin the cat).
- Was it inevitable that the government would regulate GHG emissions from electricity? Electricity was the third-largest sector in terms of GHG emissions; the largest, transportation, was being regulated; and the second-largest, oil and gas, arguably raised more issues in terms of competitive pressures.
- Was it inevitable that this particular regulatory design would be chosen? Not at all. In the space of about 18 months from fall 2008 to spring 2010, the same government changed its preferred regulatory approach from an emission-intensity approach to cap-and-trade to a capital stock turnover approach.
- Simple doesn’t mean stupid – this was a very basic regulation but with lots of tailored provisions
- Flexibilities can be built into and around any metric, in this case the length of time a facility has to operate. As per the initial commitment of then Environment Minister Jim Prentice, the regulation did not include emissions trading, but it did allow trading of operating time among units in a given company.
- A simple, targeted regulation can achieve a lot. The estimated emission reductions are significant and relatively certain to occur, being based on mandated plant closures.
I hope you will read further. Happily, nobody throws themselves under a train in this story.