an effect appr to reg ghg emissions (apeg bc 2008)

8/13/2019 An Effect Appr to Reg GHG Emissions (APEG BC 2008)

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Intensity

he legal mechanism o regulating

industry by intensity units actually

presents a proven, reliable, eicientand highly cost-eective method

that can be applied to improve air

quality and reduce greenhouse

gases that can be veriied by regu-latory agencies. Intensity units are

ar more likely to also help reduce

local pollution and improve gen-

eral health and help lower health

care costs at a quicker rate thanCO2 trading schemes. Ultimately,

the proper setting o intensity

units will result in an eective capon pollution. Eective govern-

ment enorcement programs uti liz-

ing intensity units as part o their

regulatory arsenal can achieve 60%

to 90% reductions in pollutionrom targeted industries in six to

seven years. Any government that

ignores the signiicant beneits o

implementing intensity unit based

regulations risks losing a tremen-

dous opportunity to reduce CO2

emissions and improve the qualityo the environment a nd protection

o human lie and health.

A Short History LessonIn Canada, one o the oldest, best

known and most durable pieces

o legislation has been the Federal

Fisheries Act, irst promulgated in

1868. he basic anti-pollution sec-tion (now Section 36.3) is essen-

tially a zero discharge statute. Para-

phrased, it reads no person shalldeposit a deleterious substance into

a place where it may enter or does

enter waters requented by ish.

his means that absolutely no del-

eterious material can be dischargedinto our streams, lakes, rivers and

oceans. here are then two basic

concepts by which these quantities

are limited: concentration-based

and intensity-based regulations.

Concentration-based regula-

tions usually limit the maximumconcentration o deleterious mate-

rial that can be in a discharge; the

greater the volume or concentra-

tion, the more deleterious materialthat is discharged. Intensity unit

regulations allow a limited quan-

tity o pollution to be discharged

or every unit o product produced;

the more units produced, the morepollutant that is discharged.

A Canadian Example ofthe Success of IntensityUnitsIn Canada, both approaches have

been highly effective in achieving

over 99% reduction rom pollut-ing industries in very short periods

o time, usually six to seven years.

Some o the best-documented cases

are in the orest sector, particularly

f ea tu re s

An Effective Approachto Regulate Greenhouse

Gas Emissions

28 J A N U A RY / F E B RU A RY 2 0 0 8 I N N O V A T I O N

Peter K Krahn PEng

The debate in Climate Change has generated a policy war between pro-ponents of hard caps versus those who favour intensity unit approachesto regulating discharges of greenhouse gases. Those against intensity unitsfrequently argue that this approach will result in continual increases in car-bon dioxide (CO2) output, however there is insufficient substantive evidence

to support this position.


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Units:

I N N O V A T I O N J A N U A RY / F E B RU A RY 2 0 0 8 2 9

pulp and paper production and

wood preservatives.

In the late 1980s and early 1990s,Canadian pulp and paper mills

came under heavy public and gov-

ernment scrutiny or their harm-

ul liquid effl uent discharges. Aferconsiderable technical and public

debate, these chemicals were regu-

lated both by concentration-based

and intensity unit approaches.hrough the Canadian Environ-

mental Protection Act, the concen-

tration-based approach was applied

to chemicals called dioxins andurans, which accumulated in at

tissue o shellish and other organ-

isms. Strict ultra low concentra-

tion limits required that new tech-nology be installed that virtually

eliminated these chemicals rom

the process. he new regulationsrequired on average $20,000,000

per mill to remove what was intotal no more than a sugar cubes

worth o dioxins and urans rom

millions o litres o daily liquid

eluent discharge. Figure 1 showsa remarkable decline o over 99%

improvement within a span o

about six years.

he intensity-based approachwas applied to the same mills to

deal with the bio-chemical oxygen

demand (BOD) and the total sus-pended solids (SS). BOD woulddeplete oxygen rom the water,

killing o ish, and the SS would

smother the bottoms o oceans

and rivers, killing o shellish andbottom-dwelling organisms. Bio-

chemical oxygen demand inten-

sity was limited to 5 kg o BOD

per tonne o pulp produced. otal

suspended solids intensity was l im-ited to 7.5 kg o SS per tonne o

pulp produced. he graph below

shows a similar 95% reduction or

BOD in roughly the same six-yeartime rame as occurred with the

dioxins and urans. SS, which

was already closer to the regu lated

limit, showed a 50% reduction inthe same ti me period.

Figure 2 illustrates that the inten-

sity-based approach also produced a

highly effective result. At one loca-tion in Port Alberni, BC, nationally

applicable intensity units could still

potentially produce harmul effects,

thereore at this location, intensity

units were lowered indicating theexibility o this approach to deal

with site-specic issues.

Why would IntensityUnits Work Well inthe Greenhouse Gas

Global WarmingRegulatory Debate?o determine this, one needs tolook at the characteristics o regu-

latee behavior and the public and

governments ability to modiy that

behavior through both punitive andreward or carrot and stick poli-

cies. Te rst principle to recognize

is that any population group includ-

ing an industrial sector has at leastthree basic behavioral sub-groups

which can be labeled A Group, B

Group and F Group.Te A Group characteristics con-

sist o management teams that are

leaders, innovators and investors.

Tey are ofen socially conscious

and recognize that pollution is a

result o poor effi ciency and wastedresources, which results in higher

costs and lower prots. Tey also

lead both government and their

own industries in the developmento more effi cient and lower polluting

processes and technologies. Tey

can ofen be ound lobbying govern-

ment to implement stricter controls

in order to level the economic play-

ing eld. I government wants todevelop a regulation, it is usually the

A Group that provides the technical

and legal basis or development o

a regulation. Tis group is usuallyless than 10% o the members o the

overall industrial sector but gener-

ally belong to an industry associa-

tion that looks out or the generalinterests o their membership.

B Group members are character-

istically ollowers who will do what

is necessary and are moderate to

Fig. 1: Comparison of TCDD Loadings Between Fraser Basin Millsand all BC Mills from January 1987 to January 1997

0

20

40

60

80

100

120

140

160

180

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

LOAD

INGS(mg/d)

Regulation

Date

Start

Enforcement

Negotiation

Compliance

Date

B.C. MillsFraser Mills

99%

0

50000

100000

150000

200000

250000

300000

350000

400000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Date (year)

Quantity(kg/d

ay)

BOD

TSS

Fig. 2: Reduction in BOD and TSS Discharged to the Environmentfrom BC Pulp and Paper Mills 1990 to 2001


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high polluters. Tey are moved by

regulation and characteristically

orm 75% to 80% o an industrial

sector and most will join an indus-try membership association.

F Group members are on the

ar side o the scale and when deal-ing with regulators are typically

obstructive and will delay or resistchanges. Tey are ofen the heavi-

est polluters and need regulatory

enorcement to eect change in

behavior. As a group they orm lessthan 10% o the population group

with to 1% needing to be pros-

ecuted to change their behavior.

How do the A Group,Intensity Units andCarbon Trading Impactthe Regulatory Agendaand EconomicPlaying Field?Te ollowing is a classic example o

A Group behavior. Te two graphs

on Figure 4 reect the total green-house gas output and intensity units

claimed by a group o ve mills in

British Columbia that use wood and/

or recycle paper to produce pulp andraw paper. In the 1990s this groups

management team decided on a com-

prehensive program to reduce the

dependency on ossil uels and sig-nicantly reduce unnecessary losses,

which wasted energy and thereore

produced excessive greenhouse gases

and increased production costs.Programs such as replacing ossil

uel with recovered wood waste pro-

duced big changes but also impor-

tant was a program o looking or

small incremental eiciency ac-tors such as repairing compressed

air leaks. Elimination o the leaks

reduced compressor operation,

equipment wear, greenhouse gasproduction and operating costs.

Utilizing both large and small-scale

changes rom 1990 to 2000, the pro-

gram reduced the total hydrocarbonbased greenhouse gas output by up

to a million tonnes per year over the

starting year. Over the same period,

the intensity units dropped rom600 kilograms o CO2 per tonneo pulp to about 200 kg o CO 2per

tonne. Tis 66% decline in inten-

sity unit was achieved by a ocused


1,500,000

1,000,000

500,000

1990 1995 2000 2006 1990 1995 2000 2006

600

400

200

Total Green House Gas Output

10 Years

Intensity Units for Pulp & Paper

kg of CO2 / tonnes of Pulptonnes of CO2

(equivalent / year)

Fig. 4: Combined Data or 5 Pulp and Paper Mills in BC owned by one Corporation

1990 0 = Base Year

1991 10,000

1992 20,000

1993 250,000

1994 500,000

1995 700,000

1996 500,000

1997 800,000

1998 1,000,000

1999 1,100,000

2000 1,100,000

2001 1,200,000

2002 1,100,000

2003 1,100,000

2004 1,100,000

2005 1.100,000

2006 1,000,000

11,580,000 tonnes CO2 (eq)

Total Carbon Credits Available to this

Company =

1,500,000

1,000,000

500,000

1990 1995 2000 2006

10 Years

Fig. 5: Estimate o otal Greenhouse Gas Output,onnes o CO2 (equivalent / year)

A Group

Characteristics

-Leaders

-Innovators-Investors- Low Polluters-Dont need

regulations

F Group

Characteristics

- Obstruct

- Delay- Resist- Need

regulations- Heavy

Polluters

B Group

Characteristics

- Followers

- Will do whats necessary- Moderate polluters- Moved by Regulations

< 10%

< to 1% need tobe prosecuted

< 10% 75% to 80%

Population Bell Curve

Fig. 3: Tree Basic Behavioural Groups

f ea tu re s


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management decision in the absence o any regulatory

requirement. Tese two graphs show typical and impor-

tant eatures.

Te graph on the lef shows that signicant reduc-tions in CO2 o over 66% can be achieved within aperiod o less than 10 years. In this case, the majority

o reduction occurred in seven years. What is equallyimportant is that the rate o reduction hit a signicant

plateau with virtually no reductions afer a 66% declinehad been achieved.

Te graph on the right is an identical trend but

expressed as a reduction in intensity units , which shows

very l ittle change can be achieved afer the 66% decline.Tis graph is important in that it represents the com-

bined reduction rom ve mills that have varying pulp

and paper making processes including recycled paper.

Tis gives a reasonable indication that the industry asa whole, could likely achieve a 66% reduction in CO2

emissions. Tis is an important estimate in perormance

and would suggest that a regulation speciying a 200 kg

CO2 per tonne o pulp intensity unit would likely be

possible, and that setting such a limit could reasonablybe achieved in seven to 10 years.

Wont Intensity Units Simply AllowEmissions to Increase as ProductionIncreases?Critics claim that intensity units will simply allow

emissions to increase with increased production but

rarely i ever provide any substantive evidence to theirposition. heir claims suggest indeinite increases

in production and pollution without seeming to

consider the market orces at play. In contrast to these

assumptions, the previous industry examples suggest

a signiicantly dierent outcome.

When these industries were required either by law

or by management decision to implement best manage-ment practices they achieved 66% to 99% reduction

in CO2or other pollutant discharges. What critics o

intensity unit based regulation ail to recognize is t hatit would have required a 66% to 99% increase in pro-

duction to generate the same quantity o pollutants aswere produced beore the improvements were made,

let alone exceed those levels. While industrialists in

developed countries would likely relish the thought

o such high percentage increases in market demand,these are unli kely to occur given their stable to declin-

ing population trends.

What About Cap and Trade Markets?Under current Canadian ederal regulatory propos-

als, a company that made the early improvements and

reduced its emissions would likely suer signiicant

inancial penalties or showing early environmen-tal stewardship. his is because currently proposed

ederal regulations would allow a maximum o only

15,000,000 tonnes o CO2 early credits or all com-

panies in all industry sectors in Canada combined. It

would be urther detrimental in that only 5,000,000tonnes per year would be allowed to be claimed and

examination o the ollowing case example chart (Fig-

ure 5) shows why.

he proposed Canadian ederal regulations wouldset 2006 as the base year by which to calculate reduc-

tions in CO2. he data on the right is the annual amount

o tonnes o CO2avoided by making the improvements

I N N O V A T I O N J A N U A RY / F E B RU A RY 2 0 0 8 3 1

Tel: 604-270-4466

Fax: 604-270-8355

Toll Free: 1-888-385-446 6

390 Howard Avenue

Burnaby, B.C.

V5B 3P8 Canada


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to the ive A Group mills. he

chart shows that since 1990 these

ive mills had accumulated over

11,500,000 tonnes o CO2 reduc-

tions and would be hard pressedto achieve signiicant reductions

i the base year is the year 2000or later. A urther disincentive to

making improvements is that theseive mills would have to compete

or a split o the annual allotment

o 5,000,000 tonnes with all other

acilities in Canada. Whereas otherB Group and F Group mills that

have continued to discharge CO2

at much greater levels during the

previous 16 years would stand togain large CO2 credit balances by

making changes ater the year 2006

and showing signi icant reductions

ater that date.

Intensity Units are farMore Likely to ProtectLocal Health thanCarbon TradingPollutants, particularly the dis-

charge o small particles and ground

level ozone are at their highest con-

centrations closest to the source andthereore have the highest impact

on local populations, be they plant,

animal or human. Properly set

intensity units require that a acil-ity reduce its emissions to the lowest

level technically possible, thereore

providing the local population

the greatest possible protection.

he British Columbia pulp and

paper industry is a well-documentedexample wherein 1,000 square kilo-

meters o ocean was re-opened to

shellish harvesting several yearsater the rigorous liquid eluent

standards were imposed. Had thesemills been able to purchase pollu-

tion credits these areas might still

be closed, or at best, have remained

closed or years longer, depriving thelocal community o the benets o

the ocean resources. Te cost o car-

bon credit trading systems should

thereore include an additional ac-tor to account or health costs.

Intensity Units Related toGreenhouse Gases areMuch Easier and Cost-effective to EnforceTe other issues that are rarely i

ever discussed in the intensity unit

versus cap and trade debate is thecost to enorce and the reliability to

val idate. Tese are perhaps the most

important o all issues to examine.

he parameters or a tradedunit usually involve up to ive par-

ties in the transaction. he irst is

the seller, which in our example

would be one o the ive mil ls, usu-ally selling to a broker (which in

the case o the European emission

trading market is requently

a bank). he broker has toregister with a third party,

the regulator, and then sell

to a ourth party (usually

another broker who then

issues the credit to the ithparty, the purchaser.

It is ar more complex or

the regulator to irst veriy

that the seller has actuallycreated credits and conirm

that all the transactions

between the multiple par-

ties occur. Prosecution orraudulent t ransactions will

most likely be extremely

complex as the regula-

tor in the jurisdiction othe seller will most likely

have little or no legal juris-

diction in the country o

the purchaser.

Regulatory actions related to

intensity units are much simpler

and thereore, likely to be much

less costly to enorce. he param-eters needed or the intensity unit

can be calculated rom data that is

already available, is easy to collectand easy or the local regulator toveri y. A loca l inspector can read-

ily veriy any uel consumption and

production records and the green-

house gas output can be ca lculatedusing combustion equations that

are well established. his makes

it cost-eective or the regulator

to veriy perormance and, i nec-

essary, respond to violations in alocal jurisdiction over which it has

legal authority.

he key to achieving actual

reductions in pollution, includ-ing greenhouse gases is to have an

effective legislative basis that allows

a regulating agency the ability to

veri y results. Intensity units are aneffective tool or measuring peror-

mance in reducing pollution and

ensuring that the public interest is

protected. Carbon trading schemescan ollow as a secondary approach,

as the country that implements the

lowest intensity units will enjoy the

greatest benet to human lie and

health, and have the largest balanceo credits to trade.

One unknown actor remains

will the growing corporate popu-

larity o environmental issues causethe industry compliance behavior

curve to shif naturally to the right,

resulting in more A Group mem-

bers? Or, will signicant enorce-ment effort be required to promote

such a shif? History suggests that

strong enorcement measures will

still be required.

Peter Krahn PEng is a chemical/envi-

ronmental engineer with over 24 years

experience in toxic chemicals manage-ment and regulatory development. He

has researched, designed and imple-

mented numerous provincial and

national environmental enforcementprograms and provided both material

and expert witness testimony in pro-

vincial and supreme courts and before

the National Parliamentary StandingCommittee on Environment.v


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