1. The Canadian Approach To Compiling Emission Projections Marc Deslauriers Environment Canada Pollution Data Division Science and Technology Branch Projections expert panel (PEP) meeting Dublin, Ireland 25th October 2007

2. Page 2 Outline  Explain the emission projections framework used in Canada  Discuss the current application for the emission projections

3. Page 3 Modeling Framework  A modeling framework called E3MC (Energy, Environment, Economy Model for Canada) is currently used for the estimation of future emissions for GHG and air pollutants  The modeling framework was developed during the past 1.5 years and includes two models  An energy demand model called Energy 2020  A macroeconomic model call TIM (The Infometrica Macroeconomic model)  E3MC is used to estimate the Business As Usual Projections (with existing measures and policies) and evaluate various emission reduction strategies up to 2075 and estimate the associated costs

4. Page 4 Energy 2020 Model  Integrated multi-region, multi-sector model for North America  It simulates the supply, the price, and the demands for all fuel types  The model’s main outputs include:  Changes in energy use  Energy prices  Investment costs and potential costs savings resulting from policy changes  GHG and air pollutant emissions as a function of energy use and economic activity (using emission coefficients for each pollutant and industrial sector)

5. Page 5 TIM (Macroeconomic) Model  Examines the consumption, investment, production, and trade decisions for the whole economy  It captures the interaction among industries and the implications for changes in producer prices, relative final prices and income  It also factors in government fiscal balances, monetary flows, interest and exchange rates  It accounts for 133 industries at the provincial and territorial levels  It includes an international component to account for exports and imports, which covers approximately 100 commodities

6. Page 6 TIM (Macroeconomic) Model  This model projects the direct impacts on the economy's final demand, output and employment, price formation, and sectoral income that result from various GHG and air pollutants emission reduction policies  Similarly to other macro economic models, E3MC provides directional guidance with respect to the broad economic consequences that are likely to arise from policy changes  TIM is liked to the energy model to capture the interactions between the energy sector and the economy

7. Page 7 Interaction Between The Two Models DEMAND Residential Commercial Industrial Transportation SUPPLY Electric Utility/IPPs Gas Supply Oil Supply Coal Supply International Supply International Trade THE INFORMETRICA MACROECONOMIC (TIM) MODEL (i) changes to investments in energy using equipment and structures by sector and industry; (ii) changes to energy intensity (energy input per unit of output) by sector, by industry and fuel ENERGY 2020 Outputs Gross output by industry and jurisdictions Personal income Inputs Inflation Taxe rates Exchange rates

8. Page 8 Background On The Framework  Energy2020 has been used for the past 20 years to analyze energy and environment policies in the U.S. (state and federal level) and Canada  It can provide facility level emissions for all power plants in Canada  Informetrica TIM Model has been used for the past 30 years to assess the economic impacts of Canadian and provincial governments’ policy initiatives  Historical emission inventories (1995 to 2006) are used to develop emission coefficients in the framework (for energy and other emission sources)  The framework also uses inputs from other departments (finance, Natural Resources, National Energy Board) and organizations (National Round Table on Energy and the Economy, industry associations)

9. Page 9 Review Of The Emission Projections  Economic and emissions projections are estimated by Environment Canada  They are reviewed by sector experts in Environment Canada  They are then reviewed by the provinces  The comments obtained from the reviewers are discussed and adjustments are applied where necessary  The process is used to obtain agreement (consensus) on the projections which are then published

10. Page 10 Current Uses of The Projections Framework  A new regulatory program (named CARA) to improve air quality and reduce GHG is currently in development in Canada  Emission reduction targets and intensities are being developed for 16 industrial sectors, transportation vehicles, and solvent uses  For the development of the reduction targets different scenarios are proposed and analyzed  E3MC is being used to estimate:  The costs to the industries  The impact on the economy

11. Page 11 Projected Emission Inventories  The emission projections from the E3MC framework are used to prepare future year emission inventories required for air quality modeling (eg. 2015 and 2020)  Facility specific emissions are developed for the each industry sectors taking in consideration:  The future capacity of existing facilities (proposed expansions and possible closures)  Expected capacity of new facilities (based on permit application and environmental assessments information, knowledge of sector experts, information obtained from individual industry and industrial associations)  Process technology changes, changes in control equipment, changes in fuel consumption, etc.  Emission intensities of old and new or modernized facilities

12. Page 12 Cost and Benefit Analyses of Emission Reduction Targets For Air Pollutants 2006 and historical emission Inventories Projected Emissions (by province and sector) Air Quality Model Output - Components of Smog and Acid Rain: O 3, PM 2.5, deposition of acidifying compounds, visibility, critical loads Ecosystem Effect Models Human Health Impact Model E3MC framework Cost Estimates Benefit Estimates 2015 BAU emission inventory 2015 emission inventory with proposed reduction targets

13. Page 13 Next Steps For E3MC  Develop new module to model the emissions by facility for the oil sands industry  Continue to improve the alignment of the sectors in the emissions inventory with those in the projections framework  Automate and accelerate the process to generate detailed emission inventories for 2015 to 2020, which are required for air quality modeling