Solar panels near Drumheller, Alta.Jeff McIntosh/The Canadian Press
Ottawa is pressing ahead with its contentious new rules to limit greenhouse-gas emissions from provinces’ electricity grids, although they have been softened from its original proposal.
The final version of the federal Clean Electricity Regulations – which are effectively aimed at restricting the use of natural gas for power generation starting in 2035, unless accompanied by carbon-capture technology – were released by Environment Minister Steven Guilbeault on Tuesday.
The regulations have been billed by the federal government as a key component of Canada’s path to net-zero emissions by 2050, as the electrification of transportation, buildings and industry is projected to at least double power consumption.
First put forward in 2023, the rules prompted strong pushback from the governments of provinces that currently rely significantly on fossil fuels for power generation – particularly Alberta, Saskatchewan and Ontario, which warned of potential power shortages and escalating costs.
Ottawa sought to address those concerns with a series of changes to the draft regulations aimed at greater compliance flexibility. That includes increasing the maximum level of pollution for large generation facilities to remain operational past 2035, to 65 tonnes of emissions per gigawatt hour from 30 t/GWh.
The government has shifted away from an initial plan to require the closure of any facilities that exceed that threshold, now allowing them to operate each year until they reach a cumulative emissions limit. It will also allow the purchase of carbon offsets by utilities that continue to operate above that limit. And it will enable utilities with multiple generating facilities to pool emissions from those sites, effectively meaning that limits will apply across fleets, somewhat reducing the chances of individual ones being forced to close.
Another tweak is to the regulations’ grandfathering provisions. Existing power plants will now be exempt from the rules for 25 years from the date they were first commissioned, up from 20 years initially. And new plants will be eligible for grandfathering if operational by 2028, rather than 2025.
As well, cogeneration – in which industrial sites use gas to produce both heat and electricity – will now be exempted from the regulations, although that will apply only to power those sites consume themselves, not any they sell into the electricity grid.
Mr. Guilbeault said in an interview Tuesday that, after “probably some of the most extensive consultations we’ve ever done on any regulations,” he believes the government has landed on a sweet spot in which “those who absolutely need natural gas will be able to use it,” while others are disincentivized from doing so.
Along the way, Ottawa has scaled back its expectations for the regulations’ impact. It’s now projecting they will prevent 181 megatonnes of cumulative emissions by 2050, down from an initial forecast of 342 megatonnes.
Scott MacDougall, director of the electricity program at the Pembina Institute, an environmental think tank, said Tuesday the flexibility will allow provinces and electricity operators to tailor power systems to their individual needs.
The regulations also signal that Canada is serious about attracting investment in the low-carbon electricity sector, as global markets shift in that direction, he said.
Nevertheless, the added flexibility did not go as far as industry and some provinces demanded.
For instance, Electricity Canada – the association representing power utilities across the country – had sought a performance standard above 120 tonnes of emissions per GWh, roughly double where the government landed. It also wanted the grandfathering provision to be 30 years.
“A ‘Canadian’ electricity regulation must be achievable in all provinces,” Electricity Canada president Francis Bradley said in a statement responding to Tuesday’s release. “The final Clean Electricity Regulations announced today do not meet this test.”
Meanwhile, Alberta’s government expressed opposition to the rules in principle. Premier Danielle Smith, in a joint statement with Utilities Minister Nathan Neudorf and Environment Minister Rebecca Schulz, called the regulations unconstitutional and vowed to launch a court challenge.
Ontario Energy Minister Stephen Lecce also struck a sharp tone, saying the regulations “will drive up costs on families and harm grid reliability.”
Hanging over the announcement, made one day after the federal government was rocked by Chrystia Freeland’s resignation as finance minister, is uncertainty about whether the regulations will even remain in place after the next election, which is scheduled to take place by October, 2025.
That uncertainty is also affecting some of Ottawa’s incentives for provinces to build non-emitting power, which are supposed to work in tandem with the new rules to shift investment decisions. While several federal clean-technology investment tax credits have recently entered law, Parliament has not yet passed a 15-per-cent refundable credit geared toward public utilities investing in energy sources such as wind, solar, hydroelectricity, nuclear and energy storage.
Mr. Guilbeault expressed optimism that some opposition parties, particularly the New Democrats and Bloc Quebecois, will co-operate to get that measure in place before the election.
“We will do everything we can do ensure that those last tax credits that need to be adopted will be adopted as rapidly as possible,” he said.