Feds Publish Regulations to Purge Fossil Fuels From Electricity Grid

Environment Minister Steven Guilbeault speaks during the Canada 2020 Net-Zero Leadership Summit in Ottawa on April 19, 2023. The Canadian Press/Sean Kilpatrick

The federal government has made available its draft Clean Energy Regulations that aim to remove hydrocarbons in the production of electricity to achieve a net-zero grid by 2035.

Environment Minister Steven Guilbeault said during the announcement in Toronto on Aug. 10 that the purpose of the new regulations is to tackle climate change, phase out unabated fossil fuel power plants, and to help Canadians spend less money on energy.

His department will be taking feedback on the regulations until Nov. 2, with the final regulations to be made official in 2024.

The enforcement of the new rules themselves is not planned until 2035, with Mr. Guilbeault explaining this is meant to give a heads-up to the industry to begin making investment decisions that will be compliant.

The rules apply to specific electricity generating units, which will allow the federal government to directly target non-compliant utility companies under the Environmental Protection Act.

“Any facility that doesn’t meet the regulatory requirements will be subject to penalties,” said a senior government official speaking on background.

The draft rules state that any unit producing a net export of zero gigawatt hours (GWh) per year must not emit CO2 from the combustion of fossil fuel if it has, on average during that calendar year, an emission intensity of more than 30 tonnes of CO2 emissions/GWh of electricity generated.

Some exemptions apply for the use of carbon capture and storage systems, or for remote communities relying on units not connected to the electric grid, such as generators.

The federal government is setting the threshold for reducing emissions, but the regulations do not prescribe which technology should be used.

Mr. Guilbeault explained this by saying his government doesn’t have a preference for non-emitting technologies. “It’s up to the provinces and territories to decide. Obviously, electricity production will have to conform to the regulations from 2035,” he said.

The minister said this is different from the regulations adopted by the United States, which is more prescriptive about which technologies to use.

The U.S. Environmental Protection Agency released its draft regulations to reduce emissions from fossil-fuel power plants in May.

‘Modest’ Cost Increase

The senior official speaking on background said the regulations will increase costs for consumers, but only slightly.

“We estimate that the incremental costs of the regulations, on top of that enormous baseline of investment, will lead to a fairly modest increase in electricity rates,” he said, adding that on average, the increase would be less than 2 percent across Canada by 2040.

“We’re projecting that national average residential energy bills could increase by $35 to $61 a year, per household,” said the official. “That increase will be, in our view, offset by a reduction in the amount that people need to spend on other forms of energy.”

The cost of fuel will also steadily rise with the yearly increase in carbon tax and the newly adopted Clean Fuel Regulations. The carbon tax currently adds over 14 cents to a litre of gasoline in most provinces and is set to reach over 37 cents in 2030.

The Liberal government says households get more money back from the tax through climate refunds, but the parliamentary budget officer disagrees.

The Conservatives have called for the repeal of the taxes on fuels amid an affordability crisis and have criticized the latest announcement from Mr. Guilbeault.

“This government has already increased the carbon tax and poured billions of dollars of fuel on the inflationary fire. Now they are going to rachet up the cost of the electricity that is a necessity for families and businesses across Canada to, literally, keep the lights on,” said Tory MP and environment critic, Gérard Deltell.

The provinces of Alberta and Saskatchewan, two major oil and gas producers, have also repeatedly signalled opposition to Ottawa’s plan to significantly impact their industry through various policies.

Saskatchewan Premier Scott Moe called the new regulations “unaffordable, unrealistic, and unconstitutional” immediately after they were announced.

Alberta Premier Danielle Smith also said the regulations were “unconstitutional” and said that if implemented in Alberta, they will “endanger the reliability of Alberta’s power grid and cause massive increases in Albertans’ power bills.”