US looks to Canadian carbon rules

US looks to Canadian carbon rules
Published: 22 May 2007

Cement makers in the United States are pointing to carbon "intensity" standards recently announced by Canadian officials as a potentially preferable alternative to strict greenhouse gas (GHG) emission caps being proposed in Congress for high-combustion industrial facilities, including those that produce steel, iron, pulp and paper, glass and fertilizer, as well as cement.

The cement industry says the Canadian plan offers a less economically damaging scenario for U.S. industries than cap-and-trade schemes, which critics say would likely increase worldwide GHG emissions by shifting manufacturing operations to developing countries where environmental standards are less strict.

To this point, there has been little discussion in Congress on how to regulate carbon-intense industrial facilities as part of the climate change debate, which has largely focused on power plants and vehicles, sources point out. But the issue of regulating these high carbon dioxide (CO2)-emitting industrial plants is expected to gain considerable traction soon, with special hearings expected to be scheduled by key congressional committees, sources say.

Canada’s environment ministry April 26 announced the implementation of a sweeping GHG emission-reduction program that includes targets for industrial facilities to reduce the GHG intensity of their emissions beginning in 2010. Several compliance paths are offered, including: in-house reductions, such as energy efficiency and investments in carbon capture and storage; contribution to a technology fund; emissions trading, where companies whose emissions are below their target would receive credits that can be banked for future use or sold to companies falling short of targets; and offsets, where companies could acquire credits by purchasing emission reduction from activities not regulated, such as agriculture.

Also under the Canada program, new facilities using cleaner fuels and technologies would have a three-year grace period to meet any intensity-based GHG reduction targets. This is intended to allow new facilities to reach full production and to establish their initial emissions levels.

The Canadian strategy is "an interesting new policy development, a component of which may be appropriate for consideration in the U.S.," says a source with the Portland Cement Association (PCA), the United States’ leading cement-manufacturing trade organization.

PCA is especially interested in the Canadian proposal because it exempts "fixed process emissions" from the GHG-reduction targets, under the assumption that there is no currently available technology that can reduce these types of emissions.

Cement manufacturers are also lobbying California officials, who are required in the coming two years to figure out how to implement a GHG emission-reduction program on several major carbon-intense industry sectors. This may include separate command-and-control regulations, or participation in a cap-and-trade program.

The PCA source says California regulation also threatens to increase worldwide GHG emissions by increasing imports from overseas countries. "There are 11 plants in California, and about 40 percent of the cement consumed in California is currently imported," the source says. "Any near-term cap on emissions will create leakage, mainly from [plants located] in Asia and South America."

The imported cement would almost entirely come from plants that are owned by the same companies that own the plants in the United States. About 80 percent of U.S. cement capacity is owned by multi-national corporations, mainly headquartered in Europe and Asia, the source adds.