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The federal government has proposed a major set of new air pollution regulations to reduce industrial-source air pollution, starting with performance standards for the cement sector and two equipment types: gaseous-fuel-fired non-utility boilers/ heaters and stationary spark-ignition gaseous-fuel-fired engines. The regulations would also achieve modest reductions in greenhouse gas emissions.

According to the regulatory impact statement:

“Issues: Air pollutants negatively affect human health, place a serious burden on the health care system, degrade the environment and have an adverse impact on the economy. While progress has been made in reducing some air pollutant emissions, air quality remains an ongoing issue in Canada.

Actions to manage industrial emissions currently vary across Canada, creating an uneven playing field for Canadian enterprises. Canada lacks a nationally consistent approach to reducing industrial air pollutant emissions, and it is unlikely that a base level of performance standards can be established across Canada in the absence of federal action.

Description: The Multi-sector Air Pollutants Regulations (“proposed Regulations”) would impose mandatory national performance standards on specific sector/equipment groups, in order to establish a nationally consistent emissions “floor.” Within the proposed Regulations, performance standards for the cement sector and two equipment types (i.e. gaseous-fuel-fired non-utility boilers and heaters [“boilers and heaters”], and stationary spark-ignition gaseous-fuel-fired engines [“engines”]) are included. It is expected that requirements for additional sectors/equipment groups would come forward in the near future. The performance standards impose limits on the amount of nitrogen oxides (NOx) and sulphur dioxide (SO2) that can be emitted from cement manufacturing facilities, and limits the amount of NOx that can be emitted from the two equipment types.

Cost-benefit statement: The proposed Regulations are estimated to result in a reduction of approximately 2 065 kilotonnes (kt) of NOx and 96 kt of SO2 over the 2013–2035 period. A cost-benefit analysis was conducted for each sector/ equipment group, and each of these results in net benefits. The net present value of the proposed Regulations is estimated to be $6.5 billion for engines, $1.1 billion for boilers and heaters, and $1.4 billion for cement. The benefit-to-cost ratios are 15:1 for engines, 24:1 for boilers and heaters, and 34:1 for cement.

The present value of the benefits of the proposed Regulations is estimated to be $7.0 billion for engines, $1.2 billion for boilers and heaters, and $1.5 billion for cement. These benefits largely arise from avoided environmental and health impacts (such as premature mortalities and emergency room visits). These benefits occur across Canada, and the largest share of benefits is accrued in the province of Alberta.

The present value of the costs of the proposed Regulations is estimated to be $470 million for engines, $50 million for boilers and heaters, and $43 million for cement. These costs are largely due to the incremental expense of adopting the technologies required to reduce emissions. Due to the provision of flexible compliance options, and differing requirements for new versus existing capital, virtually all capital investments involve “add-on” technologies or the purchase of lower-emitting models at the time of natural capital stock turnover, rather than early retirement of capital stock. Costs are not expected to be directly passed on to consumers given the competitive positions of the affected sectors.

“One-for-One” Rule and small business lens: The proposed Regulations are expected to result in a net increase in administrative burden. However, these costs are small relative to other costs. The requirements associated with each performance standard in the proposed Regulations are estimated to result in an annualized increase in total administrative costs to all businesses subject to the proposed Regulations of approximately $120,075 for engines, $21,135 for boilers and heaters, and $1,237 for cement.

No small businesses would be affected by the performance standards for boilers and heaters or for cement. The small business lens analysis was applied to the performance standards for engines. The application of the small business lens analysis has resulted in an option in the proposed Regulations that decreases both compliance and administrative burden for small businesses by an estimated $19,025 over the period ($1,427 per business, or $68 per business annualized). An exemption for small businesses from the requirements for original engines is being proposed by Environment Canada.

Domestic and international coordination and cooperation: The Government of Canada has extensively engaged provinces and territories during the regulatory development process in order to better understand their perspectives on the proposed Regulations and the relationship with existing actions on the industries in their jurisdiction. Provinces support the implementation of the system, seeing it as a model of effective federal/provincial cooperation where each level of government takes distinct, coordinated actions within their authorities that are mutually reinforcing.

In terms of enforcement as well as monitoring and reporting requirements, efforts have been made to minimize overlap with existing provincial requirements. The federal government remains open to pursuing equivalency agreements with interested provinces.

The proposed Regulations would enable regulatory alignment with the United States under the Canada-United States Regulatory Cooperation Council Joint Action Plan, under which both Canada and the United States will be required to have regulatory approaches in place that address emissions of particulate matter and its precursor pollutants. The proposed Regulations are also important for continued engagement with the United States on transboundary flows of air pollution through the Canada-United States Air Quality Agreement.

The implementation of the proposed Regulations is not expected to affect trade.”

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