March 7, 2002
The Honourable David Anderson
Minister of the Environment
Les Terrasses de la Chaudiere
28th Floor
10 Wellington St.
Hull, Quebec
K1A 0H3
Re: EcoLogo's credibility at risk: Proposed changes to guidelines provide consumers with no guarantee of green power.
Dear Minister Anderson:
I am writing to express the Pembina Institute's serious concerns with proposed revisions to the Environmental Choice Program's Renewable Low-impact Electricity Guidelines. We believe that these new proposals, if implemented, will significantly reduce the credibility of the EcoLogo because they fail to provide consumers with any guarantee that their purchase of EcoLogo-certified electricity will lead to the development of new renewable energy facilities in Canada. It is our hope that you will actively participate in this discussion to ensure that the EcoLogo program maintains its integrity.
The Environmental Choice Program guidelines are intended to "encourage the supply of and demand for products and services which have less stress on the environment. By empowering consumers with the tools to make informed choices, it is expected that individuals and companies will choose more environmentally-preferable options." We strongly support this objective and wish to remind you that concrete environmental improvements will only result from increased consumer demand if this demand encourages the development of new supply.
In November 1999, an initial set of draft EcoLogo guidelines were completed for low-impact electricity that largely reflected stakeholder views, including the views of the Pembina Institute. The new version of the guidelines released in December 2001, contained fundamental changes from the original consensus-developed guidelines of 1999. We believe that three proposed changes are unacceptable and threaten the program's success.
Please find below a description of the three proposed changes, an assessment of their potential impact, and some recommended modifications that can help ensure that the EcoLogo guidelines maintain their —integrity.
Ownership of Environmental Attributes
Proposed Change:
Article 12 from the November 1999 guidelines has been removed, and a "Notice of Intent" regarding environmental benefits has been added. More specifically, the former Article 12 stated the following:
"Ownership of any and all environmental benefits (including emission reductions) will be assigned and transferred to the marketers and/or user of electricity that receives ECP-certification. This certification will be retained in any sale and/or transfer of the electricity only if the ownership of any and all environmental benefits is assigned and transferred to the marketer and/or user. ECP-certification will not be retained if this ownership is assigned and/or transferred to a party other than the marketer or user, or is retained by the generator."
The new Notice of Intent in the December 2001 guidelines states that it is, "the intention of the Environmental Choice Program to monitor the developments regarding the ownership and transfer of environmental benefits, including emission reductions arising from the generation of renewable low-impact electricity. Such developments could include a broad range of national and international activities; empirical and scientific research and data; agreements; direct experiences with emission trading systems; pilot programs; and policy directives."
Potential Impact:
The removal of Article 12 means that ECP-certification no longer indicates a commitment to transfer environmental attributes along with the electricity. We define those "attributes" as tangible, environmentally-desirable qualities of renewable energy such as reductions in emissions of greenhouse gases (GHG), and pollutants affecting local air quality, reductions in toxic waste releases, protection of watersheds and wildlife, and any emerging commodities such as greenhouse gas offsets associated with those benefits.
If environmental attributes are not guaranteed to be associated with an energy purchase, then consumers may not be able to clearly identify a green power product worthy of a premium payment in the electricity marketplace. If consumers pay a premium for green power, they need to know that those funds are actually supporting the development of low-impact renewable energy facilities. This cannot be guaranteed without the transfer of environmental attributes.
In addition, if consumers are not purchasing the environmental attributes associated with green power, it is very likely that those environmental attributes will instead be sold to an emitter that is faced with environmental impact reduction requirements. This means that an electricity producer could be paid twice for the same environmental attributes (a premium payment from the consumer and a payment for emission reductions from another emitter). As a result, the premium payment made by a consumer will not actually contribute to environmental improvements. Indeed, if green power is advertised as being more environmentally friendly, which EcoLogo certification would imply, and the environmental attributes are not transferred to the consumer, the consumer is not getting what they paid for. This will discredit the EcoLogo brand among consumers, thereby decreasing participation, and ultimately diminishing the program's objective.
A report produced by Friends of the Earth Canada for the Office of Consumer Affairs Industry Canada in March 2000 surveyed the market for green electricity. This report concludes that customers in Canada purchase renewable electricity for two principal reasons: both for the electricity that is consumed and for the environmental benefits associated with it. More specifically, the Friends of the Earth survey concluded the number one reason cited for participating in green power programs is to reduce air pollution (43%).
At this time, consumer participation rates in green power programs within Canada are hovering at approximately 1% among their consumer base (Pembina Institute study). The ambiguity resulting from the removal of Article 12 will further decrease consumer confidence in premium electricity products and hinder participation.
The addition of the Notice of Intent shows that the Environmental Choice Program wants to remain aware of activities involving the ownership and transfer of environmental attributes. The development of domestic and international GHG emission trading systems will have significant impacts on the quantification of some environmental attributes associated with renewable energy. We acknowledge that the guidelines must remain flexible enough to ensure they do not hinder the development of such programs while at the same time protecting consumers and the environment.
Recommendation:
Article 12 should be returned to the guidelines and the new Notice of Intent should be incorporated by rephrasing Article 12.
In order to maintain the required flexibility for the various emerging emission-trading structures that may be developed in the future (the objective behind the new Notice of Intent), Article 12 should be reworded as follows (proposed changes in italics):
"Ownership of any and all environmental benefits (including emission reductions) will be assigned and transferred to the marketers and/or user of electricity that receives ECP-certification. This certification will be retained in any sale and/or transfer of the electricity only if the ownership of any and all environmental benefits is assigned and transferred to the marketer and/or user. ECP-certification will not be retained if this ownership is assigned and/or transferred to a party other than the marketer or user, or is retained by the generator. This provision will remain in place until governments put in place legislated emissions trading systems that include rules on the ownership of environmental attributes. If this occurs, this provision will be updated to reflect these developments".
This rewording will ensure the program remains open to future developments in emission trading while at the same time protecting the intentions of consumers and making the guidelines much more transparent.
Percentage of New Renewable Energy
Change:
The percentage of new renewable energy required for a green power retail offering has been reduced from 80% to 50%. New renewable energy is defined as renewable energy installed post 1991.
Impact:
This change will allow for a significantly larger number of already existing generation sources to be included in retail offerings, thereby decreasing the number of new renewable energy projects that will be brought on line. Consumers who elect to purchase renewable energy will not necessarily be assisting in the development of new facilities, but may simply be receiving power from power plants that are already built and, in some cases, already paid for. As a result, the Eco-Logo would not be reaching its objective of encouraging the supply of and demand for products and services which have less stress on the environment.
This is also an issue of consumer protection. Consumers may not realize that their purchase of a premium electricity product is not facilitating new development. There is even a risk of double payment by the consumer for the environmental attributes of this product — for example, green power offerings may come from existing renewable energy plants that have been developed under government mandated programs and/or voluntary utility programs where the entire consumer base paid for the facilities.
Recommendation:
At a minimum, the guidelines should be returned to the previous requirement of 80% new renewable energy (defined as post 1991). In fact, it would be preferable to make it 100% in order to protect consumers, but some flexibility should be provided to marketers to acquire renewable electricity supplies from existing facilities in the short term while new facilities are under development. In addition, the "post-1991" definition of "new" is arbitrary. In fact, a "new" facility is one that is developed as a result of a marketing effort — thus, should be developed no more than one year prior to the consumer offering.
Consider Additional Criteria at a Later Date to Address a Wider Range of Water-Powered Electricity
Change:
Additional language has been added to the guidelines stating that it is the "intention of the Environmental Choice Program to consider additional criteria which may be developed at some future date to address a wider range of water-powered electricity".
Impact:
The guidelines are being left open to further dispute over what does and does not qualify. The debates will continue to distract stakeholders, send a message to consumers that there are still questions remaining, and ultimately create further concern regarding the program's credibility.
Furthermore, leaving the debate open surrounding one particular technology creates an unfair playing field for other low-impact energy options. Other technology areas have accepted the implementation criteria that have been developed. For example, a wind power project is not eligible if it is placed in the migratory path of a specific bird species. In this scenario, no one would argue that the power is not renewable, however it would be argued that it is not "low-impact", and therefore it would not be certifiable under the EcoLogo Program. The same should be true for water-powered electricity and the standards should not be left open to change.
Recommendations:
Remove the new addition and utilize the criteria on water-powered electricity developed through an extensive stakeholder consultation process which concluded in November, 1999. Stand by the decision that these Eco Logo guidelines are for "Renewable Low-impact Electricity", and as such, they limit the eligibility of any form of renewable energy to those facilities which meet high environmental performance criteria.
We hope you will consider and support our recommendations and hope that the ECP guidelines will be appropriately adjusted to ensure the program is able to maintain its integrity, protect consumers, and increase the of rate of deployment of installed Low-impact Renewable Energy in Canada.
Sincerely,
Robert Hornung
Policy Director
Cc: Hon. Herb Dhaliwal
Minister of Natural Resources
For more information contact:
Robert Hornung
Policy Director, Pembina Institute
Office: 613-235-6288 ext.22
Email: roberth@pembina.org
