This paper assesses the financial liability that could plausibly accrue to the owners or operators of industrial facilities in Canada as a result of the future regulation of greenhouse gas (GHG) emissions. The paper has been prepared to help stakeholders effectively raise the issue of financial liability for GHG emissions in regulatory approval processes.
It is argued that new large industrial facilities in Canada will very likely be subject to a regulated GHG emissions targets-and-trading system for decades to come, in light of (i) the implementation and/or anticipated implementation of such systems not only in Canada but also in the European Union, the United States and elsewhere; and (ii) fundamental international drivers of increasingly severe legal limits on GHG emissions, notably strong scientific concern. By considering a wide range of evidence, it is further argued that over the next 50 years, national emissions targets are likely to become increasingly stringent, that free allocations of emission rights to industrial emitters will correspondingly fall, and that the prices of tradeable GHG emission units are likely to rise.
Six plausible scenarios are constructed for allocations of emission rights and GHG prices between 2008 and 2057, and the resulting financial liabilities are calculated. The results show that the liabilities are potentially very large, and that when evaluating them it is essential to focus on the post-2012 period up to the full extent of a facility's expected operational life.
