February 26, 2008 / 10:57 PM / in 10 years

Canada earmarks C$815 mln for emissions plans

OTTAWA (Reuters) - Canada’s Conservative government threw more than C$815 million ($830 million) in its budget to initiatives aimed at curbing global warming, including carbon capture, storage and trading, as well as investments in public transit.

<p>Canada's Finance Minister Jim Flaherty (R) receives a standing ovation from Health Minister Tony Clement while speaking during Question Period in the House of Commons on Parliament Hill in Ottawa, February 14, 2008. REUTERS/Chris Wattie</p>

But it stopped well short of tightening its commitments to reduce emissions.

Among the measures, the government said it will spend C$250 million on carbon capture and storage technology, most of it on projects in Saskatchewan. It also earmarked C$66 million over two years for setting up a carbon trading system.

The Pembina Institute, an environmental think-tank, panned the government’s plans for not going far enough.

“It’s a missed opportunity ... I think Canadians will be disappointed,” Clare Demerse, senior policy analyst with the group, said.

Demerse said spending C$66 million to set up a carbon market will do little unless the government of Prime Minister Stephen Harper also drops its opposition to mandatory caps on emissions, which are needed to set prices.

British Columbia and Manitoba are working with a coalition of U.S. states to set up a regional system with mandatory caps.

Finance Minister Jim Flaherty said in the budget that to help with public- and private-sector plans to ship carbon dioxide emissions to storage sites from major industrial plants, Ottawa will reduce the capital cost allowance rate for pipelines and compression gear that would be needed.

An official with an industry group planning such networks said such a move is an example what will be needed to get projects under way in a new market.

“It’s very encouraging to see government specifically putting CO2 capture and storage at the front of the list of a budget where they didn’t allocate a lot of new initiatives,” said Stephen Kaufman, steering committee chairman for Integrated CO2 Network, which includes such firms as Agrium Inc, Canadian Natural Resources Ltd, Suncor Energy Inc and TransAlta Corp.

“It think it very definitely recognizes the enormous potential that (capture and storage) represents for Canada.”

Meanwhile, C$500 million will go to transport projects in major cities, including the Evergreen Light Rapid Transit System in Vancouver, re-establishment of a rail link between Toronto and Peterborough, Ontario, as well as upgrades to rapid transit routes in Montreal.

Canada and its biggest greenhouse-gas emitting province, Alberta, have staked much on carbon capture and storage for reducing emissions, saying developing the technology will be key to meeting commitments.

Ottawa has said regulations for cutting emissions come into force in 2010, but Alberta’s government has said its carbon levels will rise at least through 2020 amid rapid development of the massive oil sands deposits.

Projects in Saskatchewan will account for C$240 million of the money targeted at capture and storage and the Prairie province will match the funds and establish partnerships with industry, the government said.

Another C$5 million will go to studying the geology in Nova Scotia for carbon storage.

Flaherty said money for a carbon market envisions an electronic tracking system for units traded, a reporting system for industry, offsets to finance emission reduction in non-regulated sectors, and better air-quality modeling.

($1=$0.98 Canadian)

Reporting by Ka Yan Ng, Jeffrey Jones and Allan Dowd

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