Background: France. Figure 1. Canada’s primary energy supply

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Last updated: June 20, 2019

Background: In 2014,Canada was the 16th country in terms of CO2 emissions percapita with the emission of 15.1 metric tons of CO2 per capita 1.

Canada was also the 10th CO2 emitter country in the worldin that year by emitting 537,193 kt of CO2 1.Figure1shows Canada’s primary energy supply by source in 2014. As it can be seen, more than70% of primary energy supply in Canada is from fossil fuels (Coal, Natural gas,Oil, and NGLs). Figure 2shows the percentage of electricitygeneration from different sources in different provinces in Canada. As it canbe seen in the figure, renewable energy has a noticeable share in electricitygeneration in Canada. Generation from renewable sources consists of 64% of the generation which is first among the G7countries.

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Generation from non-GHG emitting sources also consists of 80% of thegeneration which is second among the G7countries after France. Figure 1. Canada’s primary energy supply  by source, 2014 2                                                                                                                                                                              Figure 2. Percentage of electricity generation in Canada by source, 2014 2 Figure3shows the Percentage of electricity generation in each province by source in 2014.

As it can be seen in thefigure, in British Columbia and Quebec, more than 85% and 95% of electricity is generated from renewable sources,respectively. In Ontario, more than 80%of electricity generation has been from emission-free sources (hydro andnuclear).Figure 3. Percentage of electricitygeneration in each province by source, 2014Considerations: KnowingCanada’s energy landscape and its potential, one of the solutions for reducingGHG emissions in Canada is using the emission-freeand renewable energy resources in the electricitysector to replace fossil fuels used inthe overall energy system. Renewable sources, however, are of higher cost compared to conventional fuels.

Conventional fuels have also other advantages such as ease of transport andstorage. The vast use of conventionalfuels worldwide has caused serious challenges. The National Climate Assessmentreleased in 2012 in draft form by the U.S. Global Change Research Program 3,states that temperatures are increasing, precipitation patterns are changing,and the frequency and intensity of storms have been altered as the result ofincreases in GHG concentrations. The assessment claims that impacts and damagesare already being felt throughout the country, especially from extreme weatherevents made more frequent and, in many respects, more intense because of globalwarming. The assessment also states that heat waves and droughts are becomingmore likely and will be even worse in the future if global warming continues.

The most intense Category 4 and 5 hurricanes have become more frequent andintense rains have become more common 3.Despite these effects, the GHGemissions have increased each year which means that increases in atmosphericconcentrations are actually accelerating, not stabilizing 4.These issues show the emergencefor implementing a carbon control policy to stabilize and reduce the level of GHG emissions. Cap-and-trade and carbon tax aretwo carbon pricing mechanisms to reduce the GHG emissions and promote thedevelopment of renewable energies. A carbon tax directly establishes a price onGHG emissions, whereas a cap-and-trade program establishes the price indirectlyby limiting total emissions and issuing tradable emissions permits 5.While both mechanisms make conventional fuels more expensive and provideincentives for the development of emission reduction technologies, they havedifferent characteristics which lead usto choose cap-and-trade over carbon taxas the carbon pricing policy.

The most important difference ofcap-and-trade and a carbon tax is that acap-and-trade mechanism has volatility in carbon price but provides certaintyin the amount of GHG emissions reductionwhile a carbon tax has uncertainty in the amountof GHG reduction but provides a certain price for GHG emission. In order to stop the effects ofclimate change, the accumulated amount of emissions to the atmosphere should becontrolled because it is the accumulated emission that determines the magnitude of climate change. In this sense, the cap-and-trade mechanism is a better option thancarbon tax as it creates certain emission reductions each year and theaccumulated emissions over a specific numberof years can be controlled based on the thresholds announced by climatestudies. The other advantage of cap-and-trade over a carbon tax is the successful pas experience in implementingcap-and-trade systems. Two of these successful pastexperiences are explained in the following.1.

Us cap-and-trade on acid rain: The Acid Rain Program (ARP)starting in 1995, established requires major emission reductions of sulfurdioxide (SO2) and nitrogen oxides (NOx), the primaryprecursors of acid rain, from the power sector. The SO2 programset a permanent cap on the total amount of SO2 that is emittedby electric generating units in the UnitedStates. The program was phased in, with the final 2010 SO2 capset at 8.95 million tons, a level of about one-half of the emissions from thepower sector in 1980.

NOx reductions under the ARP are achievedthrough a program applied to some coal-fired plants and is closer to atraditional, rate-based regulatory system 6.The Acid Rain Program (ARP) and Cross-State Air Pollution Rule (CSAPR) programswere successfully implemented and significantly reduced SO?, annual NO?, andozone season NO? emissions from power plants 7. 

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