Armed with binoculars, some people get up at five o’clock in the morning to watch birds. Others stay up late to train their telescopes on celestial bodies thousands of light-years away. Lynda Lukasik’s hobby is a bit different. A resident of Hamilton, she watches the smokestacks of local steel mills — and, more importantly, their unwholesome effluvia. Catching sight of an ominous orange plume on the skyline, she’ll guess how much sunlight it’s blocking, glance away, jot down an estimate, then look again to double-check. Then she’ll take a snapshot using a digital camera.
It’s not a pretty picture. Driving south across the Burlington Bay Skyway, you behold on the right a grim industrial wasteland of stacks comprised of U.S. Steel (formerly Stelco) and Dofasco, now owned by ArcelorMittal, the world’s largest steel company. Some might feel inclined to gaze east; Lake Ontario offers a more pleasant vista.
Lukasik’s odd habit of keeping an eye on the city’s economic centre owes much to her day job at Environment Hamilton, a non-profit organization. She oversees its StackWatch program, which teaches city residents how to monitor local emissions and complain effectively to government. “If the plume is dark enough that you can see colour, then chances are it’s above the 20% opacity threshold,” Lukasik explains. (Ontario rules prohibit plumes that block more than 20% of the light passing through it lasting more than six minutes in a 30-minute period.)
Captured in the throes of ejecting toxic cocktails, no stack tells a happy story. Stacks are monuments to the costs our country pays for scorching the earth’s ores so that they surrender precious minerals, or smashing northern Alberta’s tarsands to cough up its rich plunder of bitumen, or burning coal to generate electricity. Those costs are apparent in landscapes blighted by industrial sprawl, stenches carried far and wide by the winds, and foul air that cuts short the lives of those most vulnerable to it. Behind the plumes, however, lies activity that pushes the economy forward.
Though local air quality is Lukasik’s primary concern, others — governments, businesses and shareholders — could benefit from watching industrial emissions more closely, too. Efforts by government to restrict pollution have waxed and waned over the past half-century. After a long period of relaxed — and often failed — emissions policy, Canada may be entering a period of renewed vigilance. Those companies with the most emissions have already been specifically targeted by regulators; new carbon taxes and talk of cap-and-trade schemes continue to surface. Yet some corporations, seemingly oblivious to the changing environment, are not paying sufficient attention to the potential costs and engineering challenges ahead. Governments may not be sufficiently realistic about the feasibility of meeting their announced targets. And investors need to get a better grip on environmental risk in their portfolios.
In this issue, Canadian Business examines the dirtiest companies operating on our nation’s soil. Delving into databases maintained by the federal government, we look at both greenhouse-gas emissions and the plethora of other pollutants, wastes and toxic byproducts expelled by Canadian industry as it struggles to compete in the global marketplace. Just like Lukasik’s photographs, the picture is not pretty. While progress is evident in some restricted substances, others — particularly greenhouse gases — remain out of control. And the new emissions targets and proposed trading schemes in various stages of development by provincial and federal environment departments suggest a future for which some companies are spectacularly ill-prepared.
Sudbury is home to what could be Canada’s greatest monument to industrial pollution. The “superstack” has towered over the northern Ontario city since 1972, when Inco first erected it nearly 400 metres into the yellow-brown sky to replace a bunch of smaller tailpipes. At the time, it represented the bleeding edge of pollution management: the idea was to hurl pollutants as far into the sky as possible, so that they might settle farther away from the city’s inhabitants. That approach has long since fallen out of favour as a technological solution to civilization’s growing environmental problems, but Inco did achieve a kind of fame for having constructed the world’s tallest. Copper Cliff became recognized as the biggest point source of sulphur emissions on the planet.
The ore smelted in Sudbury is laden with sulphur. Once airborne, sulphur dioxide can mix with water vapour and change into sulphuric acid, which then mixes with moisture in the atmosphere, causing acid rain. That partly explains why, by the time of the superstack’s construction, there was virtually no tree canopy within three kilometres of Inco’s Copper Cliff smelter. Local soils had become so acidified that few organisms could live in them, and fish died off in northern lakes. The area became a kind of ground zero for the dominant environmental concern of the day.
The story of how Inco handled this mess is replete with lessons about how companies approach pollution prevention in the real world. In 1970, Ontario’s environment ministry ordered Inco to reduce daily sulphur dioxide emissions from 5,200 tons to just 750 tons by 1978. But Inco refused to invest in pollution controls unless they would pay for themselves through cost efficiencies. “We believe it is important that there is a balance between potential environmental benefits and their economic costs, particularly when related to small improvements in the environment,” an Inco vice-president explained at the time. Behind closed doors, the company lobbied aggressively to persuade government to back off. In 1978, amid considerable outcry from environmentalists, Ontario agreed that Inco could go on belching 3,600 tons of sulphur a day.
This episode earned Inco a reputation as one of the nation’s most callous polluters. “The one puzzling aspect of the story is the firm’s apparent lack of concern for legitimacy,” observed University of Toronto professor Douglas Macdonald in his 2007 book, Business and Environmental Politics in Canada. Over time, Inco fell behind competitors in environmental performance. “Falconbridge was far better in reducing their sulphur dioxide emissions than Inco,” says Quentin Chiotti, senior scientist and director of climate change at environment group Pollution Probe in Toronto. “Inco claimed it was because its production process was different.”
When confronted with calls to reduce emissions, Chiotti says, many companies go through what he calls “the four stages of denial.” First, “they deny there’s a problem,” he says. “They deny that they’re part of the problem. They deny that there’s a technological solution. And then they say that the technological solution is too expensive.” Moreover, violating emissions standards in Canada is usually no big deal. Companies that consistently pump out more than their quota are rarely fined. (Suncor Energy, which in 2006 reported a total of 240 air-quality infractions, paid no regulatory fines that year. ForestEthics, a non-governmental organization, reported this summer that libraries in Calgary and Edmonton levied more fines in aggregate for books returned late than Alberta Environment did against oil companies for exceedences.)
Inco’s dance with the provincial environment ministry was part of a larger regulatory sock hop that had been underway for decades. Prior to the Second World War, governments placed virtually no restrictions on industrial pollution. It wasn’t until the 1960s that the provinces and the federal government started cracking down. Pulp and paper, steel, manufacturing, chemicals, and metals smelting were all targeted. The degree of coerciveness and vigour varied with time — more in the command-and-control climate of the 1980s, less in the deregulation-happy 1990s — but resulted in today’s patchwork of permits, bylaws and regulations that govern how much damage a facility can do. One sign of progress: the controversial permit Inco acquired back in 1978 represented nearly the entire amount of sulphur dioxide released by all reporting emitters in Canada in 2006.
A significant portion of such progress comes directly from the constant drive by business to become more efficient. Emissions, after all, indicate waste and inefficiency; businesses are generally motivated to minimize them to lower costs. Pursuing its hard-nosed approach, Inco spent hundreds of millions of dollars modernizing its facilities. According to the company’s figures, since 1970 sulphur dioxide emitted by the Copper Cliff smelter fell by 90%. Such reductions helped transform Sudbury from a barren moonscape to a green city. At the same time, the company’s senior ranks were being populated with a new breed of executive who was more concerned with improving environmental performance — or, at the very least, who understood the benefits of a greener image.
Yet the war on sulphur dioxide continues. In 2006, Environment Canada ordered base metal smelters to execute new pollution prevention plans that set aggressive new targets for key pollutants. Those included sulphur dioxide, releases of which the government says must drop 74% below where they stood a decade ago — a target to be achieved by 2015.
Though acid rain has largely receded from the public consciousness, it remains a problem. Nevertheless, Canada’s management of sulphur dioxide represents a rare victory when it comes to conquering industrial pollution. Some credit government with setting clear reduction targets. In his job as senior scientist at Pollution Probe, Chiotti participated in the dialogues that resulted in the new federal rules for smelters. Those included a protracted dialogue between industry, government and outside experts about the technologies and options available, and their attendant costs. “My sense is that usually, when you tell industry what you want — even if they may not like it — they’ll usually come under compliance,” he says.
THE GREAT AIR POLLUTION GAME
The costs of air pollution are hotly debated. In August, the Canadian Medical Association published a study that predicted 21,000 Canadians will die this year from exposure to polluted air, and the economic costs will top $8 billion. The Fraser Institute, a Vancouver-based think-tank, claimed that flaws in the CMA’s methodology rendered the results “meaningless.”
Those wishing to understand the environmental performance of major polluters can turn to several federal databases. The government began tracking an array of industrial pollutants back in the mid-1990s through the National Pollutant Release Inventory (NPRI). It includes everything from familiar metals like lead and mercury you may have encountered in high-school chemistry to more exotic fare emitted by highly specialized companies. The latest reviewed data are from 2006 and tell a story of modest, gradual progress. Industry produces roughly half of Canada’s emissions. Environment Canada examined data from more than 900 facilities that consistently reported releases of 160 substances between 1996 and 2006; it found an 8% decrease in total pollutant releases to air, water and land during that decade.
This is nothing to celebrate. Exploiting the many mature, readily available technological solutions developed over several years, most wealthy countries also reduced emissions during the past few decades. And they generally did a better job. One report by the David Suzuki Foundation, published in 2005, compared Canada’s performance to that of other member countries of the Organisation for Economic Co-operation and Development. Canada consistently emitted volatile organic compounds, carbon monoxide and oxides of sulphur and nitrogen in per capita volumes markedly above average. Moreover, in the years between 1992 and 2002, Canada ranked near the bottom in terms of progress in reducing emissions of those pollutants. In fact, overall, only Belgium and the United States fared worse. World-beaters we are not.
One contributor to Canada’s low performance has been the frequent absence of concrete objectives. According to the David Suzuki Foundation report, Canada managed to reduce its emissions of volatile organic compounds, or VOCs, by only 13% over a 10-year period, compared to an OECD average of 23%. The report blamed this partly on Canada’s failure to set VOC emission-reduction targets.
An analysis of NPRI data shows that Canada’s largest industrial polluters tend to be large players in mining, power generation and oil and gas. These companies are worth paying close attention to. Though they tend to be magnets for criticism, top emitters often turn out to be on the leading edge in reducing emissions — however blunted that edge may be. The Commission for Environmental Cooperation, an organization formed by Canada, Mexico and the U.S. to address North American environmental issues, recently sought to explain a 15% decline in toxic chemicals released into the environment in the U.S. and Canada between 1998 and 2004. It concluded that large emitters were responsible for the decrease, while a broader group of small and medium-sized industrial facilities actually substantially increased emissions.
Near Fort McMurray, Alta., Syncrude Canada tears gaping gashes in the earth in its quest for bitumen, a tarry substance that can be refined into synthetic crude oil. Don Thompson, general manager of regulatory and external affairs, bristles at the suggestion Syncrude pollutes more than other oilsands operators. But the fact is, it does. It’s one of the nation’s largest point sources of benzene, nickel, nitrogen oxides, particulate matter, sulphur dioxide and toluene. Many of its emissions are increasing annually, along with its production. But as Thompson points out, Syncrude also produces more oil than many competitors. Moreover, its operations are highly integrated, including not only a mine but also its own power generation plant and an upgrader. Other facilities that buy power off the public electrical grid, or those that ship unrefined product to upgraders elsewhere, will have a lower emissions profile — but that obscures the reality that the off-site power plants and upgraders also emit pollutants. “Some of the other producers ship product that is heavier and contains more sulphur,” Thompson adds. “Our product is 100% light sweet crude oil. That means we do a lot of work that would otherwise be done at a refinery.”
Behind Syncrude’s touchiness about emissions are its continuing efforts to contain them — efforts that go hand-in-hand with its quest to produce oil more efficiently. Diesel engines that power its fleet of massive long-haul trucks and scoops, for example, release large quantities of nitrogen oxides. Syncrude replaces about a 10th of its fleet every year. Increasingly stringent regulations from the U.S. Environmental Protection Agency, Thompson says, force vehicle manufacturers to build engines that pollute less. “We buy the best product on the market,” he adds. “So, as the efficiency of diesel engines improves, our NOx emissions from our haul trucks will decline.” How Syncrude uses those vehicles also makes a difference. “We don’t want to move one ounce of material one kilometre farther than we have to, because it costs us money,” Thompson says. Sound mine planning can ensure trips are as short as possible; proper road and vehicle maintenance also helps.
Syncrude’s primary concern is meeting regulatory requirements, which are largely set by Alberta’s provincial government. But it has occasionally gone beyond that. Take, for example, sulphur dioxide, released primarily by burning coke in its cokers. Syncrude has managed to cut its per-barrel emissions by half during the past quarter-century — but thanks to increasing production, the total amount is essentially unchanged. It’s currently allowed to release 245 tonnes each day. “We believed we were out of line in terms of the amount of sulphur dioxide and particulate matter we emitted,” Thompson says. Syncrude clearly was; in 2006, it emitted more than double nearby oilsands operator Suncor, itself a major polluter.
The Syncrude Emissions Reduction Project (SERP) will see flue gas scrubbers retrofitted into Syncrude’s cokers, and other technologies added to a third coker. Now under construction, SERP is expected to reduce Syncrude’s sulphur emissions by 60% in 2011. Particulate matter releases should fall by half. “We wanted to show leadership,” Thompson says. “We did it without being regulated.” The cost: $1.6 billion.
The retrofit is no cakewalk. The process of scrubbing sulphur from flue gas puts pressures on Syncrude’s emissions systems that they were never intended to handle. And Syncrude’s entire facility is already congested with equipment. “We’re basically having to find a way to add $1.6 billion worth of facilities into a very strained plot space,” Thompson says. “It’s a tight squeeze.” Syncrude had to erect what it claims is the world’s largest crane to install the equipment.
For all that, Syncrude remains mired in criticism. Simon Dyer, oilsands program director at Alberta’s Pembina Institute, which grades operators by environmental performance, gives Syncrude little credit for reducing sulphur emissions. He describes the company as a laggard that “hasn’t cleaned up in the past and put in scrubbers as other companies have done.” Pembina awarded Syncrude a score of 18% — the lowest of all current and proposed projects it reviewed.
Matt Price of Environmental Defence Canada is slightly more charitable. He points to the mountains of yellow-green sulphur often photographed at oilsands operations — extracted sulphur that in years past would have gone up the stacks. “Sulphur is a good-news story, if you will, because it’s technically easier” to control than other pollutants, he says.
Back in Sudbury, Vale Inco (so named after Inco’s purchase by Brazilian mining giant Companhia Vale do Rio Doce in early 2007) projects a far different image than it did in the 1970s and ’80s. In its most recent sustainability report, Vale Inco talks of “serving as stewards of our shared environment.” Among other things, the report celebrates the company’s contributions in the battle against acid rain. It also notes reduced annual sulphur dioxide emissions between 2004 and 2006, from 480 kilotonnes to 440 kilotonnes. Much of that improvement comes thanks to a new $115-million facility, completed in mid-2006, which changed the way Inco smelts and refines product in Sudbury. The company even helped to fund a study on acid rain by Pollution Probe, an organization that had criticized Inco’s emissions in the past.
Sometimes, though, crucial facts are lost amid the gloss. In 2006, Vale Inco released more pollutants into Canada’s skies, land and waters than any other company, by a wide margin. By mass, nearly all of it was sulphur dioxide. Vale Inco remains a leading contributor to acid rain. (The company did not return calls inquiring about its pollution prevention methods.)
Vale Inco’s experience reveals the trade-offs that sometimes occur when tackling emissions. “They have a huge assortment of new control technologies and acid plants to pull sulphur out of their emissions stream,” explains Pollution Probe’s Chiotti. But in doing so, he says, Vale Inco reduced the temperature of that stream — which means it doesn’t disperse into the atmosphere as well as it used to. “Because the temperature isn’t hot enough, it’s likely the emissions stream falls closer to the city, faster than it would normally. So then they would wind up out of compliance with local air-quality standards. They burn propane — thereby increasing greenhouse-gas emissions — to heat the emissions stream sufficiently to maximize dispersion.” What one hand gives, the other takes away.
CANADA’S CLIMATE COOK-OFF
However much Canadians lament smog warnings, local air quality has been eclipsed of late by broader concerns. Global climate is changing — and although debate rages over the causes, a growing consensus tells us this phenomenon is strongly influenced by human behaviour. In particular, three gases — carbon dioxide, methane and nitrous oxide — are believed to exacerbate the so-called greenhouse effect. Industry generates about half of Canada’s total GHG emissions.
The federal government tracks many of those releases via Environment Canada’s Greenhouse Gas Emissions Reporting program. Since 2004, the department has demanded facilities meeting certain criteria — in particular, ones generating more than 100,000 tonnes of carbon dioxide and/or equivalents — report their emissions. More than 300 facilities reported in 2006, the most recent year for which statistics are available.
Combustion is the main source of greenhouse gases. So it comes as no surprise that electrical generation companies — particularly those burning coal — are the climate’s worst enemies. TransAlta Corp. stands out. Its fleet of Canadian power generation plants (with a total capacity of more than 6,800 megawatts) include cogeneration, hydro and wind, but its five coal-fired plants account for a little less than two-thirds of total capacity. Those include Sundance, Western Canada’s largest generating facility — and also the nation’s second-largest point source of GHG emissions. Its six units were built during the 1970s, and combined they burn 250 train cars of coal every day. Even though Ontario Power Generation produces far more electricity, it releases fewer greenhouse gases than TransAlta due to its heavier reliance on hydro and nuclear plants.
Don Wharton, TransAlta’s vice-president of sustainable development, oversees the company’s environmental initiatives. The company has no explicit emissions targets other than those set by government, he says. Rather, for the past eight years it has committed to reducing its emissions intensity every year. “What we’ve found is that an opportunistic, continuous improvement ethic within the company works well for us,” he says. “We see no reason to change that.”
TransAlta’s total GHG emissions at its Canadian facilities fell by about 5% between 2004 and 2006, according to federal data. Changes to the fleet are largely responsible. Since 2002, TransAlta has been retiring units at its Wabamun power plant (built in the 1950s and 60s), 70 kilometres west of Edmonton. The last remaining unit will shut down by 2010. Nearby, a unit under construction at the newer Keephills plant will be 40% more efficient, Wharton says. Meanwhile, the company plans to increase its wind generation capacity from 4% of its total to 10%. TransAlta has three operational wind farms, two more under development, and is scouting Alberta, Ontario, Manitoba and the Maritimes for more potential sites.
As with many other companies, one of TransAlta’s problems is that its facilities are long-lived assets built using the technology of the day. They’re expensive to retrofit. “Only modest emissions reductions are possible today in our own facilities,” Wharton says. “We have very large volumes of flue gas. We don’t just process energy; we burn energy to generate electricity. So the volumes of emissions, including nitrogen, oxygen and everything else that comes out of our stacks, are huge. Capturing those huge volumes is really tricky.” And while Wharton says controlling air pollutants is hard enough, the technologies for managing GHGs are both less mature and more expensive.
TransAlta has high hopes for storing greenhouse gases underground. It announced in early April that it had partnered with Alstom, a power-generation equipment manufacturer, to co-develop a carbon capture and storage facility at a coal plant west of Edmonton. Alstom has developed a process that captures carbon dioxide from flue gas using chilled ammonia. Isolated in a highly concentrated, pressurized form, the carbon dioxide can then be pumped into underground geological formations or used for commercial purposes. Alstom claims that lab tests show this method can capture more than 90% of carbon dioxide emissions, at low cost. The two companies predict the pilot project could reduce TransAlta’s CO2 emissions by as much as a million tonnes each year — or about 1/28th of its total 2006 emissions. Initial engineering, regulatory and other efforts are to begin this year, with testing scheduled for 2012. TransAlta plans to use the lessons learned in deploying CCS across its business, but it’s anyone’s guess how long that will take. TransAlta has not, as yet, even selected a test site.
In the meantime, TransAlta is building a portfolio of carbon offset credits from businesses that have already succeeded in reducing emissions. The company also invests in emissions reduction projects outside its business (such as methane capture from a pig farm in Chile, or soil sequestration projects in Alberta) for which it receives carbon offset credits. Says Wharton: “Offsets are required to bridge emission reductions between now and the middle of the next decade, by which time we hope the technology will be a lot more mature and cost effective.”
Alberta’s oilsands are perhaps the country’s most controversial source of greenhouse gases. Existing operators Syncrude Canada, Suncor and Albian Energy Sands Inc. (controlled by Shell Canada) slashed their emissions intensity (i.e., releases per barrel of oil produced) by more than a quarter during the past decade, according to the Canadian Association of Petroleum Producers. But overall production is skyrocketing, and new projects are at various stages of approval and construction. The breakneck pace of development means that total emissions remain on an upward trajectory. If it continues, this growth alone is projected to drive increases in Canada’s total emissions.
Syncrude vividly demonstrates this. The company emphasizes that its greenhouse-gas emissions intensity has been falling for years. Yet in 2006, its Mildred Lake and Aurora North plant sites emitted 22% more carbon dioxide than they did the previous year, reaching 11.7 million tonnes. Syncrude is also Canada’s leading industrial emitter of methane, by a wide margin.
Syncrude has no explicit plans to reduce GHG emissions; rather, the company’s approach is to make its operations as efficient as possible. “Our targets are driven by sound business sense,” Thompson explains. “We would rather invest money in making our processes more energy and production efficient than in going outside Alberta to buy credits and the like. Our primary efforts have been in making our plant as efficient as it can be from an energy point of view. That obviously translates into a reduction in greenhouse-gas emissions on a per unit basis.”
This approach doesn’t satisfy environmental groups. “From our perspective, particularly on the greenhouse-gas side, [oilsands] companies are not doing everything in their power to reduce emissions,” says Pembina’s Dyer. He’s especially annoyed that they rarely set voluntary emissions reductions targets. “That gives you some idea of the seriousness with which companies are taking this,” he adds.
A lone exception, Dyer notes, is Albian Sands Energy (majority owned by Shell Canada). When it started up the Muskeg River Mine in 2002, Albian vowed to slash CO2 emissions by half by 2010. “They’ve done that through a really aggressive efficiency process and the purchase of offsets,” says Dyer. “That stands out as the only reasonable attempt in the oilsands sector to deal with greenhouse-gas emissions.” He notes, however, that Albian’s planned expansion has no such target. “The expansion project is set to perform worse than the existing project, which is a very sad state of affairs.”
The same could be said of Canada’s overall performance on GHGs. Canada was among the first countries to press for action on climate change. As a signatory of the Kyoto Protocol in 1998, Canada vowed to cut GHG emissions to 6% below 1990 levels, beginning this year and ending in 2012. As is commonly known, however, there has been a considerable gulf between promises made by Canadian politicians and actual results. Even as the prognosis for global warming became increasingly grim, Canada increased emissions virtually every year since 1990 as our resource-based economy expanded. In 2006, emissions were 22% above 1990 levels, and more than 29% above its Kyoto target. Although other countries also performed poorly, Canada ranks near the bottom. According to a recent Statistics Canada report, only the United States and Australia come off worse.
Industry has traditionally resisted greenhouse gas restrictions through lobbying, arguing instead for voluntary measures or intensity-based targets. These efforts failed to prevent Kyoto’s ratification by then–prime minister Jean Chrétien, but the federal government’s subsequent inability to implement effective policies rendered the ratification virtually irrelevant. Canada has not yet officially repudiated its Kyoto obligations, but it would need to slash emissions by about one-third between now and 2012 to meet them.
One federal study, produced last year, claimed that the only way Canada could meet its Kyoto obligations would be to introduce a massive carbon tax. “Many businesses would have no choice but to cut production and lay off workers, leading to a major recession and increased unemployment,” the study predicted. Prices of electricity, gasoline and natural gas would skyrocket by 50% or more, it claimed, and a typical nuclear family would see its disposable income plunge by $4,000. National GDP would drop by more than 6.5%. In other words, some in Ottawa believe that meeting Kyoto targets would spark the most painful recession since the early 1980s.
Industry is also apparently in no hurry. Every two years, Statistics Canada surveys businesses in 16 industries about their capital and operating spending on reducing greenhouse gas emissions. The most recent results available found that industry spent just $955 million on reduction technologies in 2004. This represented a 25% drop from the previous survey in 2002.
For an energy- and commodity-driven economy like Canada’s, which produces an estimated 2% of global GHG emissions, curbing them will be particularly challenging. In fact, the path of least resistance leads to further increases. The OECD predicts that unless developed countries like Canada introduce new policies, their emissions will increase an additional 26% between now and 2050. Meanwhile, emissions from the rapidly industrializing countries of Brazil, Russia, India and China would grow by 63% during the same period. Reluctant to participate in multilateral reduction efforts, many of these countries point to the lack of leadership displayed by developed countries like Canada. But even as Canada charges in the wrong direction, Kyoto is widely regarded as merely a tentative first step. The more extreme estimates suggest that industrialized countries must reduce GHG emissions by as much as 90% below current levels to avoid potentially catastrophic climate change.
Some critics believe the lack of concrete emissions targets has contributed significantly to Canada’s policy failure in managing GHGs. And some predict that policy will continue to drift as disputes continue about the pace of development of Alberta’s tarsands. “Expansion of the oilsands is apparently influencing federal regulations on what we’re going to do,” says Dyer. “It is, in effect, holding the country back in aggressively dealing with greenhouse-gas pollution.”
A NEW ERA?
Ada Lockridge knows more than the average person about what’s in the air around her. A resident of the Aamjiwnaang First Nation reserve near Sarnia, Ont., she can rhyme off a dozen industrial facilities within a few kilometers. “We’re surrounded,” she says. “To the west of me, I see the Detroit Edison plant. And to the north of me is Suncor. And TransAlta. Imperial Oil. Cabot. All those guys.”
Much of Canada’s chemical industry is clustered around Sarnia. Imperial Oil’s Sarnia Refinery ranks among one of Ontario’s most polluting facilities, but it simply can’t compare to the sheer quantity of toxins expelled by a major mine or a coal-fired power plant like Ontario Power Generation’s Lambton station, located nearby. According to a recent report by Ecojustice, an environmental-law activist group, a total of 62 facilities on both sides of the nearby Canada-U.S. border release contaminants into the area, making it “Ontario’s worst air pollution hotspot.”
Lockridge is a member of the Aamjiwnaang Bucket Brigade, a group of volunteers that’s keeping track of local air quality. A year ago, a San Francisco–area environmental group called Global Community Monitor trained a dozen volunteers to collect air samples using a bucket-and-bag apparatus that acts something like a bellows. Lockridge says that she has learned a lot about industrial pollution since she first became concerned about the issue a few years ago. Yet she still remains bewildered about what’s in the air she breathes. “I couldn’t say for sure who’s the worst,” she says, “or where anything comes from.”
On Jan. 15, Lockridge got a chance to put her training into action. Her daughter phoned, notifying her of a stench at a nearby roadway. Lockridge picked up fellow Brigade member Wilson Plain and drove to the area to sniff around. At first the duo couldn’t find the odour. But then they saw another driver fanning his hand in front of his face. Lockridge stopped her car, got out and took an air sample. She sent it by courier to a lab in California. Test results arrived a few weeks later. The lab detected chloromethane, benzene, chlorobenzene, ethylbenzene and isoprene at levels above those permitted by U.S. air standards.
Lockridge intends to keep watching. “Industry and government always say there’s no off-site impact from industries,” she says. “We can see it, we can smell it. We don’t believe them.”
The modern corporation spills much ink describing its environmental performance. But when it comes to emissions, further reductions are seemingly low on the list of priorities. The NPRI encourages facilities to report any pollution prevention initiatives they’ve undertaken — anything from training to concrete changes in equipment and processes. In 2006, less than one-third of facilities claimed any such activities.
Douglas Macdonald, the University of Toronto professor and author, warns that Canadians cannot rely on corporations to voluntarily reduce emissions. “Business does genuinely want to do the right thing,” he wrote. But “it has worked very hard to convince itself and all of its external audiences that the proper definition of ‘the right thing’ is increased efficiency and little more.” Companies will go beyond improved efficiency only when sufficient pressure is applied by society and government, he says.
If all hope truly rests with regulation, those pressures are mounting. Last year, the federal government unveiled its new emissions strategy, dubbed “Turning the Corner.” It included cap emissions of specific industrial pollutants, some of which are aggressive: 40% below 2006 levels for nitrogen oxides, 55% for sulphur oxides, 45% for volatile organic compounds and 20% for particulate matter. It claims that these caps could reduce the pollutants that cause smog and acid rain by more than half, by as early as 2012. Companies won’t necessarily have to reduce their emissions, though. The feds plan to allow them to trade emissions credits for sulphur oxides and nitrous oxides across Canada.
Meanwhile, the government is also changing the way it regulates other toxic chemicals. When the Canadian Environmental Protection Act (CEPA) was refurbished in 1999, the government committed to identify tens of thousands of chemical substances. In late 2006, it published a list of 200 it vowed to ban unless industrial users, producers and importers provided arguments sufficiently convincing to persuade it otherwise. Since then, the government has been dealing with between 10 and 20 of those substances every three months. The program is expected to continue for another two years.
And at long last, governments are gradually tackling climate change. Policy-makers watched with interest this year as British Columbia instituted Canada’s first carbon tax on gasoline, and the province also vows to implement a cap-and-trade scheme. The Turning the Corner plan also included what the federal government billed as “tough” new rules for industry. These compel facilities to cut their GHG emissions 18% for each unit of production between 2007 and 2010, plus a further 2% every year after that. These targets can be achieved through actual reductions, through payments to a federally administered technology fund, or through trading emissions credits and offsets. Among other things, the federal government claims that these targets will effectively ban the construction of dirty coal plants, and require new oilsands operations to implement carbon capture and storage.
Federal Environment Minister John Baird was eager to seem tough on industry when he elaborated on new emissions regulations in March. “From the oil industry to chemical companies, from smelters to pulp and paper mills, all big industry will have to do their part,” he said. Yet government’s use of so-called intensity targets, rather than absolute reductions, is widely maligned by environmental groups, because rapidly expanding industries such as the oilsands could meet their targets and still push Canada’s total emissions higher. This, in fact, is what the government predicts will happen. According to current official projections, Canada’s greenhouse gas emissions won’t peak until between 2010 and 2012.
Some doubt it will happen so soon. In his 2007 book Hot Air, journalist Jeffrey Simpson claimed that the “fine print” of the government’s new plan provides large emitters “provisions that might more accurately be described as loopholes.” He predicts these provisions will allow many emitters to make only limited in-house reductions. For that and other reasons, Simpson doubts the government’s absolute targets will be met. “The more likely outcome is that emissions, far from declining, will actually continue to rise,” Simpson predicted.
Having participated in the largely successful regulatory effort to control sulphur dioxide emissions from smelters, Pollution Probe’s senior scientist, Quentin Chiotti, also has doubts. He believes the federal government has simply not done enough research to know whether its new emissions targets can be achieved in all industries covered by the sweeping new rules. “We’re in agreement that maybe some of the sectoral targets were in fact unreasonable,” he says.
Chiotti also wonders whether the federal government fully appreciates the significance of its actions. By imposing national targets, he says, the proposed new rules move responsibility for emissions oversight from provincial environment departments and places it on the shoulders of Environment Canada. “There’s the concern that they just don’t have the expertise to regulate, monitor and enforce those emissions at the facility level,” he says.
Whatever the merits of Canada’s emerging regulatory environment, a growing chorus suggests that industrial emitters face a new era of regulation. Many executives expect further climate-change regulation in the next several years, including technical standards, carbon taxes and cap-and-trade schemes. “The need to run climate through your business today is comparable to what running the Internet through your business was a few years ago,” says the Conference Board of Canada.
South of the border, schemes to reduce CO2 emissions are under consideration at the federal and state levels. Some believe that while the form and timing of such regulations remain uncertain, new rules are sure to arrive in the U.S. — and will target carbon-intensive businesses like power generation. Canadians should watch those initiatives closely. Canada, seldom a leader in environmental policy, often takes its cues from America.
Investors may also want to pay closer attention to what companies reveal about their approach to reducing emissions. Many companies are not forthcoming. The Ontario Securities Commission recently reviewed the environmental reporting of 35 issuers. It found four that failed to mention environmental risks in their annual information forms, despite “being in an industry where environmental risks appear to be relevant.” Others offered boilerplate language.
Some institutional investors are becoming increasingly wary of “carbon-intensive” investments and attendant financial risks. They’re demanding — and sometimes receiving — more detailed environmental disclosures. And they’re filing more shareholder resolutions relating to climate change. Smart investors may want to keep an eye on federal emissions data — if not for the purposes of finding “ethical” investments, then at least to get a better understanding of environmental and regulatory risks in their portfolio.
TransAlta reassures its shareholders that it had been preparing for new greenhouse-gas restrictions since the turn of the century. “The increased costs of doing business that new legislation represents have been incorporated into our long-range planning models,” the company claimed in a sustainability report. It predicts that it will have little difficulty meeting Alberta’s new rules.
Not everyone is doing this. A survey of global executives by McKinsey & Co. found more than one-third say their companies seldom, if ever, consider climate change when devising strategies. Some appear to be simply waiting for further instructions from regulators.
Nova Scotia Power (owned by Emera Inc.) runs a fleet of electrical generation facilities with a combined total output of nearly 2,300 megawatts. Among other things, it pumps out enough greenhouse gases to make Hamilton’s steelworkers seem like a hemp-clad gang of tree-hugging Prius drivers. Citing regulatory uncertainty, Nova Scotia Power, a major emitter of both pollutants and greenhouse gases, declined to discuss its pollution prevention initiatives with Canadian Business. “Many key pieces remain in play due to the ongoing discussions with various levels of government,” explained spokeswoman Margaret Murphy. “We’re working hard to understand how the various strains of regulation will affect our operations.”
Given the paltry disclosure offered by the company, Emera shareholders had better hope those efforts are strenuous indeed. The surest way to miss a target is to forgo aiming.