FEDERAL NEWS

Phthalate Control Act (Bill C-307) passed by the House of Commons November 28, 2007

This Act, which originated as a private member's bill, requires that within 12 months after it comes into force:

• regulations respecting cosmetics that contain bis(2-ethylhexyl)phthalate be made under subsection 30(1) of the Food and Drugs Act
• an order be made under section 6 of the Hazardous Products Act to add certain products to Part I of Schedule I to that Act

It also requires the Minister of Health to take steps to regulate the use and labelling of medical devices that contain bis(2-ethylhexyl)phthalate and the Minister of the Environment and the Minister of Health to complete a CEPA, 1999 reassessment of benzyl butyl phthalate and dibutyl phthalate including consideration of their exposure through use of consumer products and cumulative effects on humans.

Bill C-307 deals with three types of phthalates, commonly referred to as plasticizers, which enhance flexibility of plastic compounds. They are in thousands of products, ranging from children's toys to medical devices to cosmetics.

As stated by one member of Parliament: "We are concerned by the multiple exposure to phthalates, which perhaps in isolation may not have the impact which is feared on human health, but in combination can be particularly toxic. These repeated exposures can be enough to cause harm to human health."

The Act specifically incorporates the "precautionary principle" stating that:

"In the administration of this Act, the Government of Canada shall apply the precautionary principle that, where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as the reason for postponing cost-effective measures to prevent adverse health impacts or environmental degradation."

and requires the precautionary principle to be used in considering the timetable and specific recommendations for action under the Act.

http://www2.parl.gc.ca/HousePublications/Publication.aspx?Language=E&Parl=39&Ses=2&Mode=1&Pub=Bill&Doc=C-307_3

Perfluorooctane Sulphonate Virtual Elimination Act (Bill C-298) passed by House of Commons November 29, 2008

This Act was also initiated as a private members bill. It requires the Minister of the Environment and the Minister of Health to make, within nine months after it takes effect, a regulation to add perfluorooctane sulphonate (PFOS) and its salts to the Virtual Elimination List compiled under ss. 65(2) of the CEPA 1999.

PFOS was used in many fabrics as a stain repellent, including in rugs, upholstery, clothing as well as in food packaging, cleaners and in fire-fighting foams. According to statements made before Parliament it was shown subsequently to be a carcinogen and also bioaccumulative.

http://www2.parl.gc.ca/HousePublications/Publication.aspx?Language=E&Parl=39&Ses=2&Mode=1&Pub=Bill&Doc=C-298_3

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New Nuclear Liability and Compensation Act - Bill C-5 Given Second Reading by the House of Commons October 30, 2007

This enactment would establish a liability regime applicable in the event of a nuclear incident that makes operators of nuclear installations absolutely and exclusively liable for damages up to a maximum of $650 million. Operators will be required to hold financial security in respect of their liability. This amount will be reviewed regularly and may be increased by regulation. The enactment also provides for the establishment, in certain circumstances, of an administrative tribunal to hear and decide claims. Also, this enactment would repeal the current Nuclear Liability Act.

http://www2.parl.gc.ca/HousePublications/Publication.aspx?Language=E&Parl=39&Ses=2&Mode=1&Pub=Bill&Doc=C-5_1

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Motor Vehicle Fuel Consumption Standards to be Made

On November 7, 2007 the federal government announced that fuel consumption standards under the Motor Vehicle Fuel Consumptions Standards Act will be established for light-duty road motor vehicles. These standards will come into force following the expiration of the MOU between the auto industry and the government of Canada in 2010 and will be implemented for model year 2011. The new standards will be published by the end of 2008.

http://www.tc.gc.ca/mediaroom/releases/nat/2007/07-h215e.htm

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Federal Government Invests in Canada's Largest Wind Energy Project

The federal government recently announced investment of more than $53 million in funding, over 10 years, for the largest wind energy project in Canada. The Prince Wind Energy Farm, situated on 20,000 acres of land northwest of Sault St. Marie, Ontario, qualified for the 1 cent per kilowatt-hour incentive under the Eco Energy for Renewable Power Initiative. The wind farm's 126 turbines are capable of generating up to 189 megawatts of clean, renewable power, enough to power nearly 40,000 homes. The approximately $400 million project took a little over 12 months to construct and has been operating for about one year. The Prince Wind Energy Farm is owned by Brookfield Power.

http://www.nrcan.gc.ca/media/newsreleases/2007/2007114_e.htm

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Federal Government Moves Towards Regulating GHGs and other Air Pollutants, Orders Industry to Submit Emissions Data for 2006

On December 8, 2007, the Government of Canada issued a notice in the Canada Gazette requiring certain facilities to submit information concerning greenhouse gas ("GHG") emissions and criteria air contaminant ("CAC") emissions for 2006, by May 31, 2008. While many facilities already had reporting requirements under the National Pollutant Release Inventory ("NPRI") and the GHG Emissions Reporting Program, the new notice requires much more information.

To illustrate, under the GHG Emissions Reporting Program for 2006, all facilities emitting 100,000 tonnes CO2 equivalent had to report the total quantity of emissions. Under the new notice, facilities must report not only the total quantity of emissions of GHGs (and the other listed CACs), but also information concerning economic output (e.g. for aluminum facilities, how much aluminum was produced). This will enable the government to draft its intensity-based targets for GHGs (i.e. tonnes of GHGs emitted per widget produced), using the 2006 data as a baseline. The new notice contains 15 sector-specific schedules, setting out the precise reporting requirements for each sector (e.g. cement, chemicals manufacturing, oil sands, potash).

Some facilities will be captured by both the old requirements and the new ones, and indeed the new notice provides that, where there is overlap, the facility can simply refer to previously submitted information. There may well be some facilities that did not have to report under the NPRI or the GHG Emissions Reporting Program that will be captured by the new notice. Even facilities that previously reported under the NPRI or GHG Emissions Reporting Program would need to submit further information under the new notice (e.g. in respect of economic output).

The fundamental difference between the old reporting requirements and the new ones is evident when one considers the disparate statutory authority from which they are derived. The NPRI and the GHG Emissions Reporting Program are rooted in s. 46 of the Canadian Environmental Protection Act, 1999, which allows the government to gather information "for the purpose of conducting research, creating an inventory of data, formulating objectives and codes of practice, issuing guidelines or assessing or reporting on the state of the environment". By contrast, the new notice is rooted in s. 71, which allows the government to gather information "for the purpose of assessing whether a substance is toxic or is capable of becoming toxic, or for the purpose of assessing whether to control, or the manner in which to control, a substance". In other words, the old reporting requirements were meant to enable the government to create an inventory of emissions, but the new ones are meant to enable the government to draft regulations, which are expected some time in 2008.

http://canadagazette.gc.ca/partI/2007/20071208/html/suppl-e.html

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Ontario Environmental Commissioner Releases Annual Report; Warns that Ontario's Plans for Growth and Development are Not Reconciled With Priorities of Preserving and Protecting the Natural Environment

In his 2006/07 Annual Report "Reconciling our Priorities" Gord Miller, Ontario's Environmental Commissioner, advised the Legislature that: "Our growth plan for southern Ontario communities has some laudable features, but in some areas it calls for development that would exceed the ability of the local environment to support it." He also cautioned: "In the north, it is evident that many proposed activities and development are going ahead in the absence of any overall planning mechanism. That's a risky course of action."

The report contains a number of examples of conflicting priorities in Ontario's environmental planning and management. It also explores wetlands, road salts, the Portland's Energy Centre, and sand and gravel operations.

Commissioner Miller looked at wetland protection policies as a measure of the sustainability of the southern Ontario landscape, and found that:

"All is not well. Provincial policies purport to protect wetlands but in reality the policy system is failing. The Ministry of Natural Resources (MNR) is supposed to classify important wetlands, designate the ones that are provincially significant and see that these wetlands are identified and protected in municipal official plans. This is simply not happening to the extent required. Important wetlands continue to be drained and bulldozed."http://www.eco.on.ca/english/newsrel/2007/Remarks-annual-0607.pdf

Specific recommendations made by Ontario's Environmental Commissioner include:

• the MNR significantly speed up the process of wetland identification and evaluation and ensure that Provincially Significant Wetlands are incorporated into municipal official plans;
• the Ministry of Municipal Affairs and Housing amend the Provincial Policy Statement to prohibit new infrastructure such as highways in provincially significant wetlands unless there are no reasonable alternatives and it has been demonstrated that there will be no negative impacts on their ecological functions;
• the provincial government reconcile its conflicting priorities between aggregate extraction and environmental protection; specifically the province should develop a new mechanism within the aggregate resources approvals process that screens out, at an early stage, proposals conflicting with identified natural heritage or source water protection values;
• reforms be made to the Mining Act "to reflect land use priorities of Ontarians today, including ecological values";
• reform occur to the Public Lands Act to create a planning system that provides MNR with the tools to better protect ecological values on all Crown lands;
• MOE develop a comprehensive, mandatory, province-wide road salts management strategy to ensure aquatic and terrestrial ecosystems are protected from chlorides;
• MNR improve the rehabilitation rates of Ontario pits and quarries by introducing stronger legislation and strengthening the industry's field capacity for inspections;
• relevant ministries develop quality standards that support land application of stable "pathogen-free" sewage biosolids;
• where new emitters are seeking entry into heavily burdened air sheds, MOE implement measures to minimize cumulative effects, for example, by obtaining emission off-sets and speeding up the process of updating older C of A's in that air shed."
  Annual Report, pages 206-207
  http://www.eco.on.ca/english/newsrel/2007/Annual_report-0607-FINAL-EN.pdf

Ontario Announces Program to Reduce Environmental Toxics

In November 2007 the provincial government announced further measures to clean up toxics and tackle environmental causes of illness. The intended program will:

• work with Cancer Care Ontario and the Ontario Medical Association to identify, target and reduce the number of cancer-causing agents released into the environment
• create a new toxic-reduction law that requires companies to reduce toxic emissions
• ban the cosmetic use of pesticides across the province
• set standards for an additional 14 toxic and cancer-causing chemicals
• introduce province-wide regulatory requirements to protect children from exposure to elevated lead levels which may be present in the plumbing of older neighbourhoods, schools and day cares
  http://www.ene.gov.on.ca/en/news/2007/112001.php

Ontario Government Announces Funding to Help Farmers, Property Owners and Businesses in Rural Ontario Learn About the Clean Water Act and Implement Measures to Protect Municipal Drinking Water Supplies

Ontario will immediately make available $4 million to farmers, rural property owners and small/medium sized businesses located within a 100 metre radius of a municipal well head and/or a 200 metre radius of a municipal surface water intake for the following purposes:

• decommissioning abandoned wells and upgrading existing drinking water wells
• repairing, upgrading or replacing faulty or malfunctioning septic systems
• constructing and/or restoring buffer strips and riparian zones to protect municipal drinking water sources from run-off contamination and soil erosion
• pollution prevention reviews of small and medium sized businesses that manufacture, handle, store and dispose materials to identify threats to sources of municipal drinking water and how they can be reduced or eliminated
• land conservation measures to protect municipal well head and water intake areas [December 3^rd News Release]

An additional $21 million will also be invested over the next three years to allow for outreach, education and early action to protect drinking water sources across the province.
http://www.ene.gov.on.ca/en/news/2007/120301.php

Proposed Final Built Boundary Technical Paper for the Growth Plan for the Greater Golden Horseshoe 2006 Released

A Technical Paper released by the Ministry of Public Infrastructure Renewal November 20, 2007 includes the final methodology to delineate the built boundary and maps of the proposed final built boundary for each upper and single tier municipality in the Greater Golden Horseshoe. A final built boundary as well as the full methodology will be published once all necessary refinements are complete. Once issued, the final built boundary must be used in implementing the Growth Plan under the Places to Grow Act, 2005.

Environmental Registry 010-1537

Recent Prosecutions and Fines in Ontario

The Ontario Ministry of the Environment has released information regarding recent prosecutions in November-December, 2007, which include:

• Nova Chemicals (Canada) Ltd. Fined $550,000 for contaminant discharge to the air
• City of Guelph fined $40,000 for discharging odours
• Clean Harbors Canada Inc. fined $42,500 for operating vehicles that are not leak proof
• D. Crupi & Sons Ltd. fined $50,000 for diesel fuel spill
• Teresa Silva fined $15,000 for submitting false information to the Ministry of the Environment
• Ron Carter and Quinte-Eco Consultants Inc. fined $84,000 for submitting false information to the Ministry of the Environment.

http://www.ene.gov.on.ca/en/news/convictions/2007/index.php

Montreal Climate Exchange Tables Proposed Market Rules for C02 Equivalents

Overview

On October 5, 2007, the Montréal Exchange Inc. ("MX") announced that it had filed for regulatory approval of market rules designed to govern the trading of Montréal Climate Exchange ("MceX") environmental products on its electronic trading platform, SOLA®, namely futures contracts on Canadian carbon dioxide equivalent units ("CO₂e"). The rules were filed with Québec's regulator of financial markets the Autorité des marchés financiers (Québec) (the "AMF")¹. The regulatory process provides for an initial 30-day period of public consultation (now expired) and will be followed by the standard approval procedure of the MX.

The new market rules are introduced by way of additions to or amendments to existing rules. The object of these changes is to permit the listing and trading of futures contracts in CO2e on the MceX. The MceX will initially focus on greenhouse gas ("GHG") emissions and the implementation of a trading system to meet the needs of GHG emitters for reductions in GHGs, which the federal government is expected to impose eventually.

If and when these mandatory reductions targets are imposed, the MceX will provide:

• A price discovery process that can generate the price signal;
• Price risk management facilities through futures contracts;
• A known and respected environment, which is likely to attract liquidity.

The system proposed by the federal government is described as a "baseline and credit system" and is based on the allocation of units to a company for exceeding its intensity based reductions target (1 credit = right to emit one tonne of CO₂e). At the end of each compliance year, the emissions of the regulated emitters will be verified. Each regulated emitter must then offset its actual emissions against its established target. Where it has failed to meet its target, the deficit may be offset by, among other things, the purchase of credits on the domestic market.

As part of the federal government's plan published in April 2007², key industrial emitters will be able to choose from one of the three following ways of complying with their GHG emissions reductions obligations in Canada:

1. Buying one of two kinds of units on the domestic market:
   • Regulated Emitter's Credits, which are credits that will be issued by government authorities at the end of a compliance year to regulated emitters that reach or exceed their GHG emissions reductions targets. These credits can be sold or kept and used to ensure compliance in subsequent years.
   • Offset Credits, which are credits that will be attributed to companies that are not regulated emitters but that are involved in voluntary projects to reduce their GHG emissions.
2. Contributing to a technology fund up to a percentage of the emitter's compliance requirements (70% to begin, and reducing after 2011 until abolition in 2018);
3. Buying international units, such as certified emission reductions ("CER") under the Kyoto Protocol's Clean Development Mechanism ("CDM") (limited to 10% of the regulated emitter's target).

Although the suggested regulatory framework is viewed by the MX as being less than ideal, it has indicated its intention to proceed with the launch of the carbon market in early 2008.

Detailed Analysis

GHG intensity reductions

According to the federal government's plan, regulated emitters' existing facilities will be subject to an annual mandatory reduction of 6% of the intensity of their GHG emissions from 2007 to 2010, compared to 2006 levels, and an annual decrease of 2% from 2011 to 2020.

New facilities (2004 and after) will not be required to show a reduction for the first three years of operations, but will have to show an annual reduction after that of 2% per annum until 2020 (intensity based).

Two sources of domestic credits

Domestic (Canadian) credits will stem from 2 sources: regulated emitter's credits and offset credits. The federal government anticipates perfect fungibility between these two types of credits, which will form a unique trading and delivery currency and the CO₂e futures contracts that the MX intends to list will be based on this unit. Other items to note are that:

• It is also anticipated that CO2e will be transferable from year to year;
• Offset credits will be generated from the moment a project provides verified GHG emissions reductions; and
• Kyoto credits will not be part of the domestic market and will have a separate currency and price.

National Registry

The federal government has announced its intention to set up a national registry (the "Registry") to account for delivered, held, transferred and cancelled units. This Registry will only electronically process cash transactions and will not recognise futures transactions. As a result, although a futures contract could be traded prior to the establishment of the Registry, it must be in place at contract maturity to facilitate physical delivery.

Futures contracts

The two types of futures contracts envisioned are:

1. Futures contracts with physical settlement; and,
2. Futures contracts with cash settlement.

Common to both these contracts is the carbon dioxide equivalent CO2e, which will be treated by the MX as a commodity. The size of both contracts will be 100 units. Some other characteristics of the contracts are identified below:

1. Futures contracts with physical settlement:
   • Will allow regulated emitters to physically obtain units for complying with the Canadian regulatory framework;
   • Expiry of contracts will coincide with the compliance period imposed by the Canadian regulatory framework;
   • A national registry must be set up to allow for the transfer of units from the seller to the buyer via a clearing corporation;
   • Exchange for Physical transactions ("EFP"), Exchange for Risk transactions ("EFR"), Substitution of OTC derivative instruments for futures contracts transactions (Substitution), block trades, pre-arranged transactions and cross transactions will be permitted.
   • An alternative delivery procedure will be established in CDCC's rules;
   • A position limit as well as a minimum position reporting threshold will be set by the MX;
   • CDCC will establish rules in the event of unit shortage;
   • A special cash settlement based on a final settlement price to be determined by the MX in the event the federal regulatory project is abandoned (Force Majeure);
2. Futures contracts with cash settlement
   • Adapted to the needs of financial stakeholders interested in participation in the carbon market without physical delivery of the underlying unit;
   • Coordination of the expiry of the contracts so as to give flexibility (daily, monthly, quarterly and annually);
   • Upon expiry, all open positions will be settled in cash at a final settlement price based on a method reflecting the market price of the CO2e cash instrument;
   • Exchange for Physical transactions ("EFP"), Exchange for Risk transactions ("EFR"), Substitution of OTC derivative instruments for Futures Contracts transactions (Substitution), block trades, pre-arranged transactions and cross transactions will be permitted;
   • Same force majeure procedure applies as for the futures contracts with physical settlement.

Proposed Regulatory Changes

The proposed rules changes (some of which have already been submitted to the AMF for approval) include:

• The addition of Rule 6815B regarding the substitution of OTC derivative instruments for futures contracts;
• The amendment of the list of permissible OTC financial instruments with respect to Article 6815A;
• The procedure for the execution and reporting of exchange for physical transactions and exchange for risk transactions;
• The exchange for physical and exchange for risk reporting form;
• The procedures for the execution of block trades;
• The procedures applicable to the execution of cross transactions and the execution of prearranged transactions;
• The procedure for alternative delivery of a CO₂e futures contract with physical settlement;
• The procedure to determine the daily settlement price;
• The procedure for position limit reporting (any total position exceeding 250 CO₂e futures contracts (for a contract of 100 t) or above any other lesser reporting threshold that will be determined by the MX from time to time)

It should also be noted that margins will be subject to the same practices as the ones applicable to all other futures contracts. The MX also wants the Rule regarding position limits to be worded in such a way as to allow it the flexibility to adjust the limits according to the size of the underlying markets.

For more information on this subject, please contact Douglas Clarke of our National Climate Change Group at 514-392-9518 or at douglas.clarke@gowlings.com

Motion of the Quebec National Assembly Supporting Kyoto

On November 28, 2OO7, the Québec National Assembly unanimously adopted the motion made by the Minister of Sustainable Development, Environment and Parks, Line Beauchamp, expressing its disapproval of the position maintained by the federal government in respect to climate change and reiterating its support of the Kyoto Protocol and its implementation. The motion further states that the post-Kyoto negotiation process must proceed under the auspices of the United Nations, imply set GHG reduction or limitation targets and mobilize all countries in the fight against climate change.

Annual Duty Payable to the Quebec Green Fund Now Established

On November 28, 2007, the Quebec government made the Regulation respecting the annual duty payable to the Green Fund pursuant to the Act respecting the Régie de lénergie (the "Act"). The order in council that establishes the annual duty to be paid into the Green Fund, or carbon tax as it has been popularly labelled, was published in the Gazette officielle du Québec on November 29, 2007 and will come into effect on December 14, 2007.

The duty to be paid by a "distributor" is determined by multiplying the applicable rate indicated in the schedule to the Regulation by the quantity of carbon dioxide ("CO₂") emissions attributable to a distributor. The applicable rate, calculated in dollars per tonne of CO₂ emissions, is determined each year by dividing the annual financial investment in the Green Fund by the total quantity of CO₂ emissions from natural gas, gasoline, diesel fuel, light heating oil, heavy heating oil, propane, petroleum coke, anthracite coal, Canadian bituminous coal and American bituminous coal. According to the schedule, the "CO₂ emissions coefficient" is the mass in grams of CO₂ generated by the combustion of one unit of natural gas or fuel per cubic meter, per litre or per unit of petroleum coke or coal mass in kilograms. The quantity of CO₂ emissions attributable to a distributor will thus be obtained by multiplying the CO₂ emission coefficients listed in the schedule by the respective volumes of natural gas or aforementioned fuels attributable to the distributor. According to the schedule, the coefficient for natural gas has been set at 1,891,g/m³, for gasoline at 2,360 g/l, diesel fuel at 2,730 g/l, light heating oil at 2,830 g/l, heavy heating oil at 3,090 g/l, propane at 1,500 g/l, petroleum coke at 3,190 g/kg, anthracite coal at 2,390 g/kg, Canadian bituminous coal at 2,249 g/kg and American bituminous coal at 2,343 g/kg.

The annual duty is payable by a distributor in four equal instalments on 31 December, 31 March, 30 June and 30 September of each year. The Regulation should be read together with the provisions of Chapter VI.3 of the Act entitled "Financing of Measures to Reduce Greenhouse Gas Emissions and Adapt to Climate Change". The chapter and the regulation apply to natural gas distributors, legal persons or partnerships that bring fuel into Québec for a purpose other than resale, and distributors of fuel. The term "fuel distributor" means a person (1) that refines, manufactures, mixes, prepares or distils fuels in Québec, (2) that brings or causes to be brought into Québec fuel contained in one or more receptacles with a total capacity of over 200 litres, except fuel contained in a fuel tank installed as standard equipment to supply the engine of a vehicle, and (3) that, in Québec, exchanges fuel with a person described in (1).

According to section 85.37 of the Act, a distributor must file with the Régie de l'énergie a statement specifying the volume of natural gas it distributed or the volume of sales of fuel intended for consumption in Québec that was refined in Québec or brought into Québec during its preceding fiscal year and, where applicable, the volume of gasoline, diesel fuel, heating oil, propane, petroleum coke or coal acquired during its preceding fiscal year. The first instalment of the annual duty for the period extending from October 1^st, 2007 to September 30, 2008 will be payable on December 31, 2007.

Code of Practice for the Concrete and Concrete Products Industry - Waste Discharge Regulation

On November 5, 2007 a Code of Practice for the concrete and concrete products industry under the Waste Discharge Regulation was made. Among other things, the Code, together with the Waste Discharge Regulation, regulates the amount of waste that may be discharged into water and air from these types of establishments and provides for effluent sampling and analysis, record keeping, the requirement to take remedial measures and to notify a Ministry Director in the event that a particulate control system or effluent treatment system becomes inoperative for any reason. [The B.C. Gazette, Part II, November 6, 2007, Volume 15, No.22, B.C. Reg. 329/2007]

Report on Bali UN Climate Change Convention Conference

Editor's note:

Laura Zizzo, an articling student in Gowlings' Toronto office, attended the conference in Bali as member of the Canadian Youth Delegation and was able to sit in on many negotiation sessions and side events. Laura has a degree in Environmental Studies from the University of Waterloo and focused in the areas of International and Environmental Law at The University of Toronto, Faculty of Law. Her summary and personal views of events follows.

This year's UN Climate Change Convention was held in Nusa Dua, Bali, Indonesia from December 3-14, 2007. Over 180 countries were represented and approximately 11,000 participants were registered from various governments and organizations. The conference focused on creating a "Bali Roadmap" which would set out the framework to negotiate a new agreement to be completed in 2009, giving enough time for ratification and coming into force before the end of the first commitment period of the Kyoto Protocol in 2012. The Bali Conference was successful in creating this roadmap which sets out the timeframe and details for consideration for the negotiations leading up to an agreement being completed at the 15th Conference of the Parties to the UN Framework Convention on Climate Change in Copenhagen in 2009 (COP 15).

Parties created an ambitious timetable to get a new agreement finalized by 2009. UNFCCC Executive Secretary Yvo de Boer implored business to actively engage in the development of this agreement. Those involved in climate change are realizing that business will have a key role to play in developing a workable agreement and in ensuring it can be satisfactorily implemented. Calling out to international business, Mr. de Boer stated: "If Bali will do what I hope it will do, we are facing the enormous challenge of shaping a post 2012 climate change deal in only two years time. Your input is indispensable to frame a deal that is not only effective in terms of emission reductions, but also makes economic sense".

While a new global deal is envisioned for 2013, countries also agreed on a number of steps to be taken immediately to further implement the existing commitments of Parties to the UNFCCC.

Parties agreed to recognize the Fourth Assessment Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC) as the most comprehensive and authoritative assessment of climate change to date. The scientific findings will continue to inform the international climate change process.

Governments decided that funding for adaptation projects in developing countries, financed by the Kyoto Protocol's clean development mechanism (CDM), would begin under the management of the Global Environment Facility (GEF) as secretariat. The World Bank will serve as trustee of the adaptation fund. The fund will be administered by an "Adaptation Fund Board" which will be composed of 16 members (all representatives of parties to the UNFCCC), representing a range of regional and socio-economic groups. The Adaptation Fund Board will administer the fund which is filled by means of a 2% levy on CDM projects. Currently the fund is worth about 54 million USD. Considering the amount of CDM projects in the pipeline, this figure will rapidly increase in the period of 2008-2012. The decision in Bali allows entities that meet certain criteria to gain access to this fund to finance approved adaptation projects. Governments decided to impose regular reviews of the process, however, there is currently no structure to review individual decisions made by the Adaptation Fund Board. With so little money available for so many adaptation needs this may present significant challenges in the future.

The governments could not agree on additional practical adaptation measures, such as how to integrate adaptation into national policies. This issue will be on the agenda of the next meeting of the Subsidiary Body for Scientific and Technical Advice (a body under the UNFCCC).

In regards to technology, the governments agreed to kick start a strategic programme to scale up the level of investment for the transfer of both mitigation and adaptation technologies to developing countries. The aim of the programme is to give an extra push to concrete demonstration projects, to create more attractive environments for investment, as well as to provide incentives to the private sector for technology transfer. The GEF will start setting up this programme together with international financial institutions and representatives of the private financial sector.

The governments also agreed that action was needed to reduce emissions from deforestation in developing countries and made a decision to encourage parties to support capacity building and to undertake efforts to address the drivers of deforestation. Deforestation is regarded as an important component of a future climate change regime post 2012, in both mitigation and adaptation strategies.

Parties agreed to double the limit in size of small-scale afforestation/reforestation project activities to 16 kilotonnes of CO2 equivalent per year. This move will expand the number and geographical reach of the CDM to countries that have thus far been unable to take part.

Parties also discussed the inclusion of carbon capture and storage (CCS) in geological formations as a CDM project activity. They established a work plan for 2008 to consider this issue, which will be further considered in Poznan next year at COP 14.

Canada had a special role in this years conference, and was subject to substantial criticism as a "blocker" in many instances. The government of Canada was adamant that it would only sign an agreement that included all major emitters, and in the end was able to agree that commitments for developing nations were necessary, and that work developing the new agreement would be guided by the requirement for Annex 1 parties as a group to reduce emissions in a range of 25-40 per cent below 1990 levels by 2020. Canada will have a lot of work to do to fulfill our commitments under Kyoto and beyond. The Bali conference reminded us of the importance of getting started immediately.

The Bali conference demonstrated the commitment of the nations of the world to respond to the threat of climate change. It also demonstrated that there is less than unanimity on the issue of where the burden is to fall to reduce GHG levels to achieve temperature stability for the planet. Canada advanced a position that was not popular at the conference, and the compromise to which it conceded will present significant challenges for acceptance and implementation domestically. How Canada's position in the climate change negotiations may affect the country's relationships with other nations, which saw Canada adopt what was a surprisingly hard position against the prevailing international position, remains to be seen.

What's Happening

David Estrin recently spoke to the University of Ottawa Law Faculty's Environmental Law Clinic and Environmental Law Students' Association on the topic Experiences in Practicing Environmental Law

Mark Madras will be speaking at a Federated Press conference on Emissions Trading to be held in Toronto on April 21 and 22. Mark's topic will be Canadian government Regulations for Emissions Trading.

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