Canada Gazette, Part I, Volume 152, Number 43: ORDERS IN COUNCIL

October 27, 2018

DEPARTMENT OF THE ENVIRONMENT

CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999

Order Approving the Interim Order Amending the Ozone-depleting Substances and Halocarbon Alternatives Regulations

P.C. 2018-1297 October 22, 2018

Whereas the Minister of the Environment and the Minister of Health believe that the hydrofluorocarbons listed in Schedule 1 to the Canadian Environmental Protection Act, 1999 footnote a are not adequately regulated and that immediate action is required to deal with a significant danger to the environment or to human life or health;

Whereas the Minister of the Environment, pursuant to subsection 94(1) of that Act, made the Interim Order Amending the Ozone-depleting Substances and Halocarbon Alternatives Regulations on October 9, 2018;

And whereas the Minister of the Environment has

Therefore, Her Excellency the Governor General in Council, pursuant to subsection 94(4) of the Canadian Environmental Protection Act, 1999 footnote a, approves the Interim Order Amending the Ozone-depleting Substances and Halocarbon Alternatives Regulations made by the Minister of the Environment on October 9, 2018.

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

The Interim Order Amending the Ozone-depleting Substances and Halocarbon Alternatives Regulations (the interim order), made pursuant to subsection 94(1) of the Canadian Environmental Protection Act, 1999 (CEPA), corrects the Canadian hydrofluorocarbons (HFC) consumption baseline value to accurately reflect information obtained by Environment and Climate Change Canada (the Department) following the coming into force of the recent amendments to the Ozone-depleting Substances and Halocarbon Alternatives Regulations (the Regulations).

Objective

The objective of the interim order is to deal with a significant danger to the environment by correcting the consumption baseline value that is used to determine the quantities that can enter Canada under the HFC phase-down process starting on January 1, 2019. As the corrected number is lower than the value currently set out in the Regulations, this change avoids at least 10.6 million tonnes of CO2 equivalent of HFC being released into the environment than was previously allowed by the Regulations. This change will further reduce Canadian greenhouse gas (GHG) emissions, in order to help limit increases in global average temperatures. It will also contribute to Canada's international obligations to combat climate change.

Background

HFCs are manufactured chemicals that were introduced on the global market as replacements for ozone-depleting substances, such as chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs). In Canada, HFCs are not manufactured, but are imported in bulk and found in imported and manufactured products, such as domestic appliances, refrigeration and air-conditioning systems, motor vehicle air-conditioning systems, foam products, and aerosols. HFCs enter the environment due to leakage during assembly, usage, and disposal of these products.

HFCs are contributing to a global warming trend that is associated with climate change. HFCs are potent GHGs with global warming potentials hundreds to thousands of times greater than those of CO2.

HFCs are toxic under CEPA because they constitute or may constitute a danger to the environment on which life depends. Using 19 118 651 tonnes of CO2 equivalent as the HFC consumption baseline (this is what is currently in the Regulations) would allow, over the next 18 years, the consumption of approximately 10.6 million additional tonnes of CO2 equivalent of HFC. This would not be adequately protective of the environment, considering climate change constitutes an important environmental challenge internationally, putting populations (and especially vulnerable populations) and ecosystems at risk. Changes in temperature and precipitation can impact natural habitats, agriculture and food supplies, and rising sea levels can threaten coastal communities. HFC emissions are projected to increase at a faster rate than economic growth due to increased use, as they replace ozone-depleting substances that have been phased out.

Most HFCs have relatively short lifespans in the atmosphere compared to CO2 and other longer-lived GHGs. Atmospheric levels of HFCs thus respond relatively quickly to changes in emissions, since HFCs are removed quickly from the atmosphere. As a result of the potency and short lifespan of HFCs, reducing emissions has the potential to bring significant near-term climate benefits.

The Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol) is an international treaty designed to protect the ozone layer. The Montreal Protocol obligates Parties to phase out the manufacture and consumption of those substances known to be responsible for ozone depletion. The phase-out is achieved through a legally binding timetable established by the Parties with the ultimate goal of complete elimination. Given that many ozone-depleting substances are also potent GHGs, the Montreal Protocol has contributed to climate change mitigation by averting the emissions of 135 billion tonnes of CO2 equivalent.

In October 2016, Parties to the Montreal Protocol, including Canada, adopted an HFC phase-down amendment (the Kigali Amendment) wherein developed countries will begin in 2019 to gradually phase down HFCs to 15% of calculated baseline levels by 2036. In November 2017, Canada and 21 other Parties ratified the Kigali Amendment helping to bring the amendment into force on January 1, 2019. As of August 29, 2018, 43 Parties had ratified the Kigali Amendment.

Ratification of the Kigali Amendment obliges Canada to phase down HFCs in accordance with a specific reduction schedule. The HFC phase-down starts on January 1, 2019, and will follow the steps below (Table 1). Other obligations include the establishment of a licensing system and reporting requirements.

Table 1. HFC phase-down steps under the Kigali Amendment to the Montreal Protocol
Year Reduction from Baseline (%)
2019 10
2024 40
2030 70
2034 80
2036 85

Under the Kigali Amendment, the Canadian HFC consumption baseline will be calculated using data that will be provided by Canada in March 2019. In order for Canada to meet its international obligations, the baseline established under the Kigali Amendment must match the baseline included in the domestic regulations that implement the HFC phase-down.

On October 18, 2017, the Government of Canada published the Regulations Amending the Ozone-depleting Substances and Halocarbon Alternatives Regulations (the Amendments) to implement Canada's obligation to phase down HFCs in accordance with the Kigali Amendment to the Montreal Protocol. The Amendments came into force on April 16, 2018, and established the HFC phase-down system and set the Canadian HFC consumption baseline at 19 118 651 tonnes of CO2 equivalent.

The Canadian HFC consumption baseline was calculated based on data received from companies who responded to mandatory surveys issued under section 71 of CEPA. footnote 1, footnote 2, footnote 3 The surveys gathered import, manufacture and export information, which was used to calculate the total amounts of HFCs, in CO2 equivalent, consumed in Canada between 2011 and 2015.

Rationale

On May 1, 2018, following the coming into force of the Amendments, consumption allowance estimates were sent to companies who were entitled to a 2019 consumption allowance according to the data received by the Department. Consumption is defined as the sum of quantities manufactured and imported minus quantities exported. The allowance estimates were determined in accordance with the Regulations. First, the base consumption for each company was calculated in accordance with subsection 65.06(2), as follows:

Base consumption = C/D x E

where

C =
the company's average HFC consumption for 2014 and 2015 (expressed as tonnes of CO2 equivalent)
D =
the average total Canadian HFC consumption for 2014 and 2015 (expressed as tonnes of CO2 equivalent)
E =
the Canadian HFC baseline value, which is 19 118 651 tonnes of CO2 equivalent

Subsequently, each base consumption value was reduced by 10% to reflect the first step in the HFC phase-down that commences on January 1, 2019. The allowance estimates correspond to the amount of new bulk HFCs a company would be allowed to consume (import + manufacture −export) during a calendar year starting on January 1, 2019.

Following the distribution of these estimates, some companies confirmed that they failed to respond, or submitted incorrect data in response to the three mandatory notices on HFCs. The incorrect data has therefore resulted in the Regulations containing the incorrect Canadian HFC consumption baseline value.

After corrections were made to the data, it is clear that Canada's baseline is significantly lower than the numerical baseline value set out in the Regulations, and, as a result, HFCs are not adequately regulated. There is a significant danger to the environment if the Canadian HFC consumption baseline value is not corrected.

With the use of the correct lower baseline value, significant HFC consumption and subsequent emissions would be avoided when compared to the use of the existing number in the Regulations, thereby reducing the potential negative effects of the additional emissions that can contribute to climate change.

Implications

It is anticipated that the interim order would have a positive impact on the environmental outcomes of the Regulations by correcting the Canadian HFC consumption baseline to 18 008 795 instead of 19 118 651 tonnes of CO2 equivalent currently in the Regulations. Using the 19 118 651 tonnes of CO2 equivalent baseline included in the Regulations would allocate an excess of approximately 10.6 million tonnes of CO2 equivalent to Canadian allowance holders and would not be adequately protective of the environment, as this may impact climate more than what the correct baseline would allow. By publishing an interim order, Canada would be taking an immediate action to deal with a significant danger to the environment in protecting the environment by implementing the first step of the HFC phase-down starting January 1, 2019.

The interim order temporarily modifies the operation of the Regulations, with respect to granting HFC consumption allowances for 2019 and the following years, by establishing a correct Canadian HFC consumption baseline, and allows Canada to maintain its international commitment to phase down HFCs starting January 1, 2019, with a 10% reduction from the calculated baseline.

Action is required to correct the Canadian HFC consumption baseline value so that consumption allowances can be issued to qualifying companies. The 2019 allowances are needed well in advance to facilitate business certainty and supply chain continuity. Companies also need regulatory certainty to make informed decisions as soon as possible for the next year. The development of an amendment to regulations made under section 93 of CEPA can take at least two years, and it would not be possible for the final amendment to be in force before the end of 2018. Therefore, an interim order was deemed the most appropriate instrument to take immediate action.

Consultations

The issue being addressed by this interim order was first communicated to the Department by industry representatives through emails, letters and phone conversations following the distribution of the allowance estimates on May 1, 2018. A number of companies identified errors in their data, which enabled the Department to make necessary corrections and determine the correct HFC consumption allowances for 2019.

On July 5, 2018, companies received a letter notifying them that their final allowance will be available by November 1, 2018, and that it is expected to be lower by 3.0% to 3.5% than the original estimate provided on May 1, 2018. The companies did not express concerns about this reduction, even if they may have to slightly increase efforts to either reduce HFC consumption or move towards other types of HFCs that have a lower global warming potential. They also received a new estimate on September 10, 2018, after the corrections to the numbers were made. Communication with the approximately 20 impacted companies from the chemicals, foams, refrigeration and air conditioning, and aerosols sectors continues on an as-needed basis.

Contact

Nicole Folliet
Director
Chemicals Production Division
Environment and Climate Change Canada
351 Saint-Joseph Boulevard, 19th Floor
Gatineau, Quebec
K1A 0H3
Telephone: 819-938-4228
Email: ec.gestionhalocarbures-halocarbonsmanagement.ec@canada.ca