June 29, 1999
To:Works Committee
From:Commissioner, Works and Emergency Services
Subject:Carbon Emissions Cap
Purpose:
To report on the adoption of a carbon emission cap system to encompass the City of Toronto that would support the City's
goal to reduce global warming and its climate change impact, as recommended by an Environmental Task Force (ETF)
report which was adopted by City Council at its meeting of December 16 and 17, 1998.
Funding Sources, Financial Implications and Impact Statement:
This initiative to be carried out within the recommended 1999 Budget.
Recommendations:
It is recommended that:
(1) Council's action previously taken in establishing a goal to reduce carbon dioxide emissions by 20% relative to 1990
levels by year 2005, be endorsed as a voluntary greenhouse gas emissions cap for the City of Toronto for activities carried
out in the City proper;
(2) the Province of Ontario be requested to:
(i)join the City and establish a goal to reduce CO2 emissions by 20% relative to 1990 levels by the year 2005;
(ii)enact a province-wide carbon dioxide emissions cap system in support of the Kyoto Protocol; and
(3) the appropriate City Officials be authorized and directed to take the necessary actions to give effect thereto.
Council Reference/Background/History:
City Council at its meeting held on April 16, 1998, adopted Clause 10 of Report No. 3 of The Works and Utilities
Committee, and in so doing authorized the engagement of the International Council for Local Environmental Initiatives
(ICLEI) to undertake the design of a Pilot Project for Carbon Emissions Trading.
City Council at its meeting held on July 8, 1998 received for information, Clause 10 embodied in Report No.6 of The
Works and Utilities Committee entitled "Strategic Action Plan to Reduce Carbon Dioxide Emissions in the New City of
Toronto".
City Council at its meeting on December 16 and 17, 1998 adopted Clause 15 embodied in Report No. 26 of The Strategic
Policies and Priorities Committee entitled "Sustainable Energy, Greenspace/Nature and Water Actions", and in so doing
formally committed the new City of Toronto to a carbon dioxide emission reduction goal of 20% relative to 1990 levels by
year 2005, and also requested the investigation of the feasibility of a carbon emission cap system that would complement a
carbon trading program.
City Council at its meeting on April 13, 14, & 15, 1999 amended and adopted Clause 2 embodied in Report No. 4 of The
Works and Utilities Committee entitled "Greenhouse Gas Emissions Reduction Trading" and in so doing authorized the
Commissioner of Works and Emergency Services to enter into negotiations with interested purchasers for the purposes of
trading emissions reduction credits.
Comments and/or Discussion and/or Justification:
1. Why Should the City Consider Having a Carbon Emissions Cap?
City Council at its meeting on December 16 and 17, 1998 adopted Clause 15 embodied in Report No. 26 of The Strategic
Policies and Priorities Committee entitled "Sustainable Energy, Greenspace/Nature and Water Actions", and in so doing
formally committed the new City of Toronto to a carbon dioxide emission reduction goal of 20% relative to 1990 levels by
year 2005. This report also contained a recommendation that a carbon emissions cap system be implemented to encompass
the City of Toronto.
A carbon emission cap system can be considered in several ways, however for the purposes of this report it is being
examined in the following context:
2. Emissions Trading Systems - Cap & Trade vs. Baseline & Credit:
During the development of policies that complement a Domestic Emission Trading System for greenhouse gas emissions,
cap and trade options for the major sources of greenhouse gas emissions are usually combined and evaluated to determine
the economic, environmental and other potential outcomes that may result from a particular program design. In this first
scenario voluntary and/or mandatory requirements are considered, whereby a cap is allocated to the amount of greenhouse
gas emissions that may be produced by a particular sector of the economy or within a specified geographical area.
(a) In a cap and trade system a governing authority establishes a ceiling or cap on total allowable emissions. Allowances
or shares of the total capped target level of emissions are distributed to emitters. Sources emitting less than their allowance
may sell their surplus to other emitters. How and to whom allowances are issued before trading commences are key issues
which must be defined in the development of a greenhouse gas trading market. In a cap and trade system the supply of
emission allowances must be generated by a government trading authority.
(b) Alternatively, emissions reduction trading may follow a "Baseline and Credit" system wherein program or project
specific technical baselines for emissions are established and emission reductions credits represent a verified reduction in
emissions below the specified baseline. With a "Baseline & Credit" system Emissions Reduction Credits may be generated
by individual sources which achieve verifiable reduction below their baseline.
3. Cap on the Carbon Content of Fossil Fuels
A carbon emission cap system can also be considered in the context of the imposition of a cap on the carbon content of
fossil fuels used by a particular sector of the economy or used within a specified geographical area. This scenario could
involve the importers and producers of fossil fuels whereby they are required by regulation to hold allowances equal to the
carbon content of their products which are sold locally. Other major sources of greenhouse gas emissions could also be
required to hold allowances that are equal to their actual emissions. These allowances would ensure that point source
emitters conduct their operations with due regard for the emissions limits that they must adhere to. In all of the above
scenarios, the environmental and economic implications are usually explored in a attempt to identify actions that would
promote economic development and environmental preservation.
In consultation with the City Solicitor we have determined that the City does not have the jurisdictional legislative
authority to impose a mandatory emissions cap. However as an interim measure we are recommending a voluntary
greenhouse gas emissions cap for activities carried out in the City proper. This voluntary cap will be based on actions
previously taken by Council to establish and reduce CO2 emissions by 20% relative to 1990 level by year 2005.
It is being recommended that City Council request the Ontario Provincial Government to enact a province-wide CO2
emissions cap system in support of the Kyoto Protocol as part of the regulations made under the amendments to the
Environmental Protection Act contained in Bill 35, the Electricity Act. Such a cap system could include a cap on the
carbon content of fossil fuels as well as a cap on targeted sectors and major energy producers and end users.
A separate report on the proposed Emissions Reduction Caps for Ontario's Electrical Sector is being submitted to your
Committee.
4. The Kyoto Protocol
The United Nations Conference of the Parties of the Framework Convention on Climate Change, at its third meeting held
in Kyoto, Japan on December 12, 1997, gave final approval to the Kyoto Protocol. The Kyoto Protocol proposes legally
binding targets and timetables for greenhouse gas emission reductions for participating nations. The Protocol will come
into effect when 55 national governments ratify the agreement. The Canadian government has yet to ratify the agreement.
Of interest to the City is that the Protocol establishes the basis for an international greenhouse gas trading system, one that
would allow buyers and sellers to trade Greenhouse Gas Emissions Reduction Credits.
In consideration of the Kyoto Protocol, it may be in the interest of municipal governments to undertake an analysis of the
potential economic and environmental impacts of a mandatory i.e. legislated requirement that may eventually impact
directly or indirectly, certain municipal/public, non-profit and private sector activities locally, to achieve a national
greenhouse gas emissions reduction target of 6% by 2008-2012. An important component of proposed future regulations
could involve an emissions cap system.
5. Pilot Emissions Reduction Trading Project (PERT)
The Pilot Emission Reduction Trading (PERT) project is an industry-led, multi-stakeholder initiative formed to evaluate
the potential environmental and economic benefits of open-market emissions reduction trading in Ontario and is the forum
in which Ontario's protocols and rules for trading are being developed. At the present time the PERT Protocol is the only
recognized authoritative venue for emissions trading by a corporate entity resident in Ontario. The Pilot Emission
Reduction Trading project model offers the promise of an integrated system for qualifying and brokering measures that
create Emissions Reduction Credits for both air pollutants and greenhouse gases.
6. The National Round Table on the Environment and the Economy (NRTEE)
The National Round Table on the Environment and the Economy (NRTEE) recently published a report entitled "Canada's
Options for a Domestic Greenhouse Gas Emissions Trading Program". It could be concluded from a review of the NTREE
Report that a successful voluntary domestic cap system that compliments a domestic trading program for greenhouse gas
emissions could be instrumental in creating opportunities for early reductions and in defining the design considerations for
future National programs.
Conclusions:
Council's action previously taken in establishing a goal to reduce carbon dioxide emission by 20% relative to 1990 levels
by year 2005, could be viewed as a voluntary greenhouse gas emission limit or "cap" for the City of Toronto. Should this
option become Council's method, the 1990 carbon dioxide emissions inventory would have to be quantified and referenced
within the context of any emissions trading undertaken by the City.
In consideration of the foregoing, City Council should request the Government of Ontario to enact a province-wide CO2
emissions cap system in support of the Kyoto Protocol.
The Commissioner of Works and Emergency Services will continue to consult with the City Solicitor and the Medical
Officer of Health regarding the foregoing recommendations.
Contact Name and Telephone Number:
Richard Morris, Manager, Energy Efficiency Office
Environmental Services
Technical Services Division
Works and Emergency Services
Phone: (416) 392-1452
Fax: (416) 392-1456
E-mail "rmorris@toronto.ca"
Tom Denes, P. Eng.
Executive Director
Technical Services Division
Barry H. Gutteridge
Commissioner
Works and Emergency Services
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