Cap and trade
Nova Scotia plans to reduce greenhouse gas (GHG) emissions by 45 to 50% below 2005 levels by 2030, a target significantly higher than the federal target of 30%. In 2017, Nova Scotia amended the Environment Act to allow the provincial government to create a cap-and-trade program, followed by the implementation of the Cap-and-Trade Program Regulations in 2018. In January 2019, the cap-and-trade program came into effect.
Nova Scotia’s cap-and-trade program sets annual limits on the total amount of GHG emissions allowed in the province for the years 2019–2022. It covers around 80% of provincial GHG emissions. Every year, the province creates a set number of emission allowances that can be put in circulation equal to that year’s cap. The following emission allowance caps are in place:
- 13,683,000 in 2019
- 12,725,000 in 2020
- 12,258,000 in 2021
- 12,148,000 in 2022
While caps are set annually, the province allows for a four-year compliance period (2019–2022) to provide year-to-year flexibility for mandatory participants.
The largest number of emission allowances that a participant can hold at any one time (the holding limit) is 500,000. If two or more mandatory participants in the program are related — for example, if one is a subsidiary of another — they are considered a single mandatory participant for the purpose of the holding limit. In such circumstances, the related participants must share the 500,000 limit and disclose to the provincial government how the limit will be divided among the subsidiaries. Certain exemptions from the holding limit are available.
The province distributes most of the emission allowances free of charge to mandatory participants. Some allowances are sold through auction and some are reserved for sale through a government-held reserve. Mandatory participants can also buy emission allowances on the secondary market from other participants.
The following thresholds determine mandatory participation:
- Facilities generating 50,000 tonnes or more of GHG emissions annually from sources that are covered by the Quantification, Reporting and Verification Regulations.
- Petroleum product suppliers that first place 200 litres of fuel or more per year on the Nova Scotia market for consumption in the province. Petroleum products include automotive gasoline, diesels, light fuel oils, heavy fuel oils and propane.
- Natural gas distributors that deliver natural gas for consumption in Nova Scotia that, when combusted, produces 10,000 tonnes or more of GHG emissions annually.
- Electricity importers that import electricity into Nova Scotia for consumption in the province and whose GHG emission from the generation of the electricity imported is greater than 10,000 tonnes annually.
No voluntary participation is currently allowed in the cap-and-trade program. Companies that fall below the aforementioned thresholds are not required to quantify, report and verify their GHG emissions. Likewise, they are not required or eligible to acquire emission allowances.
While mandatory participants can trade emission allowances with one another, only emission allowances created by the province are recognized under the Nova Scotia cap-and-trade program. Mandatory participants cannot trade their emission allowances with participants in other jurisdictions.
Petroleum Products Pricing Regulation
In Nova Scotia, the price of automotive gasoline and diesel is regulated under the Petroleum Products Pricing Regulations. For these fuels, the province allows the Utility and Review Board to include the compliance cost of the cap-and-trade program when determining the wholesale selling price for automotive gasoline and diesel.
For other fuels that are not price regulated, the way in which the price of carbon is included is determined by the market.
Carbon offset credits are issued for projects that either reduce GHG emissions or sequester GHG emissions over the long term from GHG sources not covered by the cap. Nova Scotia’s cap-and-trade legislation includes the ability to develop an offset system. However, regulations and protocols related to offset credits and offset projects are not yet available.
On May 26, 2014, Nova Scotia and the federal government signed the Canada-Nova Scotia equivalency agreement for the period 2015–2019, thus allowing Nova Scotia to be exempt from the federal requirement to phase out coal by 2030.
The province and the federal government have reached a renewed equivalency agreement for the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations (the Agreement). The Agreement will be in effect from January 1, 2020, to December 31, 2024. Like its predecessor, the Agreement allows the province to keep its coal-fired electricity plants open beyond the 2030 federal deadline. In exchange, Nova Scotia will be required to achieve deeper emission reduction targets in order to meet the equivalent of closing all coal plants by 2030.
In 2015, the provincial government released Our Electricity Future – Nova Scotia’s Electricity Plan 2015-2040 to guide the province away from carbon-intense electricity generation and towards greater use of renewable energy sources.
Additionally, Nova Scotia enacted the Renewable Electricity Regulations (the Regulations). As per the Regulations, as of 2020, each load-serving entity will have to supply its customers with renewable electricity in an amount equal to or greater than 40% of the total annual amount of electricity supplied to its customers.