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PP RUEHGA RUEHHA RUEHQU RUEHVC
DE RUEHMT #0826/01 2091928
ZNY CCCCC ZZH
P 281928Z JUL 06
FM AMCONSUL MONTREAL
TO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE PRIORITY
INFO RUEHC/SECSTATE WASHDC PRIORITY 9974

C O N F I D E N T I A L SECTION 01 OF 04 MONTREAL 000826 
 
SIPDIS 
 
DEPT FOR OES 
 
SIPDIS 
 
E.O. 12958: DECL: 07/28/2016 
TAGS: SENV ECON ENRG CA
SUBJECT: QUEBEC GOVERNMENT STRATEGY PURSUES KYOTO TARGETS, 
GREEN VOTERS 
 
REF: A. A MONTREAL 0622 
 
     ¶B. B QUEBEC 0034 
     ¶C. C OTTAWA 1685 
 
Classified By: Gary Sheaffer for reasons 1.4b, d 
 
¶1.  (C/NF)  Summary.  On June 15th, the Quebec Government 
released its Climate Change Strategy, including plans to 
improve public transportation systems, adopt California,s 
fuel-efficiency standards for vehicles and impose a carbon 
tax.  This announcement follows some five months after 
Montreal hosted the COP-11 Climate Change conference, which 
saw then Prime Minister Paul Martin pledging Canadian 
fulfillment of its Kyoto targets.  Quebec,s reliance on 
hydroelectricity gives the province the capacity to adopt 
measures which target carbon-based emissions without taking a 
major economic hit.  These initiatives have been 
well-received by the Quebec public thus far and reflect an 
effort on the part of the Charest government to demonstrate 
its seriousness about an issue Quebeckers feel strongly about 
while distancing itself slightly from the Harper government's 
unpopular position on Kyoto.  It remains to be seen how 
popular this Climate Change Strategy will remain if GHG 
emitting companies pass the costs of a hydrocarbon tax on to 
consumers in the form of higher prices.  It is also unclear 
whether the Federal government will fork over the $328 
million Quebec is counting on a part of the "Green fund" to 
finance its ambitious project.  End summary. 
 
 
--------------------------------------------- ------ 
A good GHG performer, but with room for improvement 
--------------------------------------------- ------ 
 
 
¶2.  (SBU) Quebec has the lowest greenhouse gas (GHG) 
emissions per capita in Canada, primarily due to the 
province,s reliance on hydroelectricity.  Quebec obtains 94% 
of its electric power from hydro, and electricity production 
in Quebec contributes only 1.7% of the province,s GHG 
emissions compared to 18.1% Canada-wide average. Between 1990 
and 2003, Quebec,s manufacturing sector reduced its GHG 
emissions by 6.8% and its industrial process emissions by 
15.1%.  According to Quebec,s Climate Change Strategy, these 
reductions can be attributed to investments in the 
manufacturing sector in innovative technologies that increase 
energy efficiency.  Nevertheless, overall GHG emissions in 
Quebec have increased by 6% between 2000 and 2003 (the most 
current statistics available). The Climate Change Strategy 
attributes these GHG emissions increases to the 
transportation and building sectors, and aims its climate 
change efforts towards these sectors, through actions such as 
placing speed limiters on heavy vehicles to keep them from 
exceeding 105 km/hr. 
 
 
--------------------------------------------- ----- 
Energy efficiency: Hydro, wind, and public transit 
--------------------------------------------- ----- 
 
 
¶3.  (SBU)  In 2003, GHG emissions in Quebec reached 90.9 MT, 
up from 85.3 MT in 1990, of which 72.9% are emissions from 
hydrocarbons and coal (the burning of fossil fuels.)  The 
strategy estimates that Quebec will be able to bring its 
emission below the 1990 level by 1.5 % (not reaching the 6% 
reduction specified within Canada,s Kyoto commitments.) The 
Quebec government notes that companies within countries like 
the US which have not committed themselves to "emissions 
reductions targets" have a competitive advantage over 
companies within countries like Canada that have ratified the 
Kyoto protocol.  Yet, the Climate Change Strategy also states 
that in today,s climate of rising costs of fossil fuels, 
energy efficiency is "not only preferable, but also 
essential, if our companies and economy are to be 
competitive." 
 
 
¶4.  (C/NF) The Climate Change Strategy emphasizes that Quebec 
will continue to rely on and develop hydroelectric energy 
sources (drawing on the provincial government,s 
recently-released energy strategy).  The Climate Change 
Strategy reaffirmed the Quebec government,s commitment to 
the development of wind power alongside hydropower, 
specifically to produce 4000 MW of wind-generated 
electricity.  The report states that a combination of new 
hydroelectric developments, wind power, and energy efficiency 
can save the province a combined total of 10.9 MT of GHG 
emissions.  A Hydro Quebec official privately noted in a 
recent meeting with EconMinCouns and EconOff that Quebeckers 
 
MONTREAL 00000826  002 OF 004 
 
 
have unrealistic hopes about the contribution of wind power 
to Quebec's overall energy portfolio. (see ref A). The 
development of wind power nonetheless remains an important 
part of Hydro Quebec's strategy for the future. 
 
 
¶5.  (SBU)  The Quebec government also promises to finance 
projects to increase energy efficiency, in a program designed 
for individuals, corporations, and small and medium-sized 
enterprises.  The Quebec government states that it will bring 
its building construction standards (currently over 20 years 
old) up to new levels of energy efficiency.  In its 2006-07 
budget, the Quebec government laid out plans for investing C$ 
1.5 billion in the public transportation sector and the 
creation of a program in which employers can deduct 100-200% 
of the cost of public transit passes provided to their 
employees.  The program also includes a provision to refund 
provincial sales tax to those who purchase hybrid vehicles, 
additional registration charges for high-cylinder vehicles, 
and a series of vehicle inspection requirements designed to 
require road transporters to improve maintenance on their 
vehicles. 
 
 
----------------------------------- 
Adopting stricter vehicle standards 
----------------------------------- 
 
 
¶6.  (SBU)  The Climate Change Strategy also plans to apply 
California,s standards for GHG emissions limitations to 
vehicles sold in Quebec.  A representative from Paccar, the 
largest truck manufacturer in Quebec, told Econoff that the 
new, strict standards would not have any impact on its 
manufacturing procedures, since the company is already "ahead 
of the current legislation."  It remains unclear how these 
new standards would impact the availability and price of 
vehicles in Quebec, since the cars purchased in Quebec are 
currently manufactured in either Ontario or the U.S. and not 
all manufactured cars currently meet California's strict 
standards.  The Quebec Government also aims to make gas 
distributors include a minimum of 5% ethanol in their fuel 
sales by 2012 and to encourage the local production of 
ethanol from forest biomass.  The Quebec Government also 
plans to discourage solo commuting by encouraging carpooling 
and car sharing, as well as constructing bike paths from 
residential areas to the downtown cores and industrial parks. 
 
 
 
------------------------------------- 
Voluntary GHG reductions for industry 
------------------------------------- 
 
 
¶7.  (SBU)  The aluminum, pulp and paper, petroleum refining, 
metals, cement, and chemicals industries contribute the most 
GHG emissions in Quebec,s industrial sector.  Although this 
sector has reduced its emissions from 1990 and 2003 by 6.8%, 
it is still responsible for 31% of the province,s GHG 
emissions.  Quebec,s current Climate Change Strategy relies 
on voluntary actions by large companies and industrial 
associations to reduce GHG emissions according to their 
"financial capacity, available technology, and 
competitiveness on Canadian and international levels."  The 
Quebec government states its intention to "adopt a regulation 
requiring major emitters to declare their GHG emissions and 
other contaminants."  The provincial government,s Strategy 
also tackles the emission of methane (biogas) from landfills; 
methane is 21 times more powerful as a source of GHG than 
CO2.  Larger landfills in Quebec already manage the biogas 
they generate according to legislation passed in 2005, but 
the Strategy will allow smaller landfills, not subject to the 
regulation, to install equipment capable of capturing biogas, 
at government expense. 
 
 
--------------------------------------------- ------------ 
Funding the plan: Hydrocarbon royalties, and federal cash 
--------------------------------------------- ------------ 
 
 
¶8.  (C/NF)  The Quebec government's strategy would, in 
theory, be financed via a "Green Fund" comprised of 
"hydrocarbon royalties applied to GHG producing business in 
the energy sector" and managed by Quebec,s Ministry of 
Environment and Sustainable Development. Royalty levels, 
according to the report, would be set at levels determined by 
the Quebec Energy Board and will amount to roughly C$200 
million/year over the next six years, based on a "polluter 
 
MONTREAL 00000826  003 OF 004 
 
 
pays" principle.  One representative from a large petroleum 
refining company with a significant share of the Quebec 
market told Econoff that he was "very surprised" at the final 
content of this financing measure.  Noting that his company 
had been in consultations with employees at the Quebec 
Ministry of the Environment for more than two years on the 
issue of climate change, he stated that his company had been 
clear in its willingness to implement programs to change 
consumer habits with regard to gas consumption.  He also 
stated that the Strategy does not clarify how the government 
will allocate what percentage of the Green Fun would be 
contributed by which company or energy-producing industry, 
and if it will apply to jet fuel as well as automobile fuel. 
 
¶9.  (C/NF) He maintained that although the action of 
individuals driving their cars releases the bulk of GHG 
emission in Quebec, petroleum refining itself does not 
contribute significantly to GHG emissions, and therefore the 
Quebec government's attempt to call its financing plan a 
"polluter pays" strategy was in fact a misnomer.  The Quebec 
government has voiced its hope that energy-producing 
companies will simply absorb the costs of contributing the 
"Green Fund".  "How can (the government) think we would 
swallow these costs?" the oil executive added, pointing out 
that the Climate Change Strategy would require an estimated 
$150 million annual contribution from the oil industry in 
Quebec, an amount roughly equal to his company's net annual 
profit. It is far more likely that companies required to 
contribute to the "Green Fund" will transfer the cost of 
their contribution to gas consumers, to the tune of 1 cent 
per liter.  Quebec, while acknowledging the steps it will 
take to mitigate climate change, calls on the Federal 
Government to adopt GHG reducing actions, and provide $328 
million towards Quebec,s Green fund.  It also wants the 
Federal Government to acknowledge the contributions of GHG 
reductions by Quebec,s largest industrial GHG emitters as 
well as Quebec's reliance on hydroelectricity to Canada's 
overall GHG reduction efforts by taking such actions into 
account when designing any Climate Change Strategy at the 
Federal level. 
 
 
------- 
Comment 
------- 
 
 
¶10.  (C/NF) Quebec,s Ministry of Environment had previously 
expressed disappointment with the then Liberal Federal 
government,s Kyoto strategy that would not take into account 
Quebec,s voluntary GHG emissions reduction efforts (see 
reftel B).  The climate change issue remains an extremely 
popular one in Quebec, whose citizens have been shown to be 
continually supportive of the Kyoto protocol, and where the 
Charest government earlier this year found itself being 
slammed for its decision to convert a portion of a provincial 
park, Mont Orford, into a real estate development.  The Parti 
Quebecois, Quebec's separatist party, has been trying to use 
the issue of commitment to environmental protection, and 
specifically Kyoto targets, as one of the attractions of a 
sovereign Quebec.  For the Charest government, announcing 
this comprehensive climate change strategy reflects an effort 
to bring the environmental issue into the Liberal agenda and 
win public support as Quebec approaches a potential 
provincial election as early as Fall 2006. It also offers 
Charest a painless way to highlight one issue where Quebec 
and the Harper government, who have been marching in lockstep 
on many fronts, have diverging views. 
 
 
¶11.  (C/NF) Initial public reaction to the strategy, 
according to a survey of editorials in Quebec periodicals and 
conversations with contacts, has been positive.  But for the 
informed Quebec environmental policy watchers, this climate 
change strategy is a purely political maneuver, too late in 
the game. One of Quebec,s most prolific and respected 
francophone environmental journalists commented in confidence 
to Consulate officers: "The government doesn't do anything 
for three years except selling part of Mont Orford, and 
suddenly we have a strategy.  It's a good one, but it's a bit 
late."  The Climate Change Strategy itself offers an overview 
of lofty aspirations on the part of government, but it 
remains unclear how the implementation of the Strategy will 
play out on a practical level, and if consumers will remain 
as positive about it when it begins to hit them in the 
wallet.  It also remains unclear exactly how the Green Fund 
will raise the necessary C $200 million annually, and whether 
the Conservative Federal government, which has shown itself 
to be far less Kyoto-enthused than the Martin administration, 
will be willing to contribute the C$328 million of federal 
 
MONTREAL 00000826  004 OF 004 
 
 
funds which the Quebec government has factored into its 
"Green Fund" coffer. 
SHEAFFER