ECONOMIC MODELING TO SUPPORT THE DEVELOPMENT OF CLIMATE CHANGE REGULATIONS Submitted to Saskatchewan Ministry of Environment Prepared by Institute for Energy, Environment and Sustainable Communities University of Regina Project Name: CGE Modeling Services Contract #: RE214416 Disclaimer This report is an impacts analysis of greenhouse gas reduction approaches prepared by Institute for Energy, Environment and Sustainable Communities for Saskatchewan Ministry of Environment. These results and conclusions are those of Institute for Energy, Environment and Sustainable Communities and should not necessarily be interpreted as the policies or programs of the Government of Saskatchewan. Project Name: CGE Modeling Services Contract #: RE214416 i Table of Contents 1. Introduction ............................................................................................................................... 1 2. Methodology .............................................................................................................................. 3 2.1. Benefit-and-Cost Analysis ................................................................................................................. 3 2.2. Environmentally Extended Input-Output (EEIO) Model .................................................................. 5 2.3. Saskatchewan Computable General Equilibrium (SK-CGE) Model ............................................... 12 3. Affordable Penalty Analysis................................................................................................... 17 3.1. Affordable penalty analysis of Mosaic ............................................................................................ 17 3.2. Affordable penalty analysis of Agrium Inc. .................................................................................... 27 3.3. Affordable penalty analysis of PotashCorp ..................................................................................... 37 3.4. Affordable penalty analysis of Prairie Mines & Royalty Ltd .......................................................... 46 3.5. Affordable penalty analysis of CCRL ............................................................................................. 54 3.6. Affordable penalty analysis of Yara Belle ....................................................................................... 62 3.7. Affordable penalty analysis of Evraz............................................................................................... 70 3.8. Affordable penalty analysis of Terra Grain Fuels Inc. .................................................................... 80 3.9. Affordable penalty analysis of Meadow Lake Mechanical Pulp Inc. .............................................. 89 3.10. Affordable penalty analysis of TransGas....................................................................................... 97 3.11. Affordable penalty analysis of Alliance Pipeline ........................................................................ 104 3.12. Affordable penalty analysis of TransCanada Pipelines ............................................................... 109 4. Real Reduction Ability Analysis .......................................................................................... 119 4.1. Real reduction ability of Mining-coal ............................................................................................ 119 4.2. Real reduction ability of Mining-Potash ........................................................................................ 133 4.3. Real reduction ability of Petroleum Refinery ................................................................................ 142 4.4. Real reduction ability analysis of Manufacturing-fertilizer ........................................................... 160 4.5. Real reduction ability of Manufacturing-steel ............................................................................... 173 4.6. Real reduction ability of Manufacturing-ethanol ........................................................................... 195 4.7. Real reduction ability of Manufacturing-pulp ............................................................................... 212 4.8. Real reduction ability of Trans-pipeline ........................................................................................ 227 5. Carbon Tax Impacts Analysis.............................................................................................. 240 5.1. Overview of carbon tax scenarios .................................................................................................. 240 5.2. Impacts on Marco economy ........................................................................................................... 246 5.3. GDP decomposition analysis ......................................................................................................... 249 Project Name: CGE Modeling Services Contract #: RE214416 ii 5.4. Industries overlap relationship analysis ......................................................................................... 258 6. Summary ................................................................................................................................ 240 6.1. Affordable penalty analysis ........................................................................................................... 246 5.2. Real reduction ability ..................................................................................................................... 246 5.2. Carbon tax impacts analysis .......................................................................................................... 246 Appendix .................................................................................................................................... 263 Project Name: CGE Modeling Services Contract #: RE214416 iii List of Figures Figure 1. The flowchart of SK-CGE model .................................................................................. 12 Figure 2. Locations of Potash mines ............................................................................................. 19 Figure 3. Potash sales in 2015 and 2016 ....................................................................................... 32 Figure 4. Potash cash cost of product manufactured .................................................................... 33 Figure 5. Potash sales in 2014 and 2015 ....................................................................................... 36 Figure 6. Potash gross margins of 2014 and 2015 ........................................................................ 36 Figure 7. Nutrien global capacity.................................................................................................. 40 Figure 8. Green gas emmisions ..................................................................................................... 45 Figure 9. Co-Op Refinery complex wastewater improvement project ......................................... 57 Figure 10. Partial site plan ............................................................................................................ 82 Figure 11. Ethanol plant process diagram..................................................................................... 85 Figure 12. Full process diagram.................................................................................................... 86 Figure 13. Operations of Canfor Pulp ........................................................................................... 92 Figure 14. Introduction about SaskEnergy ................................................................................... 98 Figure 15. The location of TransCanada Corporation. ............................................................... 113 Figure 16. the location of TCPLP pipeline systems ................................................................... 114 Figure 17. Multiple CMM end-use and destruction options for underground coal mines. Courtesy of Sindicatum Carbon Capita ...................................................................................................... 123 Figure 18. Overview of GHG emission reduction of Potash industry ........................................ 134 Figure 19. Small module reactors ............................................................................................... 135 Figure 20. DTB crystallizer ........................................................................................................ 139 Figure 21. Forced circulation evaporator .................................................................................... 140 Figure 22. Simplified flowchart of refining processes and product flows. ................................. 146 Figure 23. Contribution of different emission sources to the nationwide CO2 equivalent GHG emissions from petroleum refineries ........................................................................................... 147 Figure 24. Process schematic of a progressive distillation process (from ARCADIS, 2008). ... 159 Figure 25. Process of ammonia synthesis ................................................................................... 161 Figure 26. Reducing condensing pressure in steam turbines Schematic Mollier diagram ......... 164 Figure 27. Psicrometric diagram of an evaporative cooling ....................................................... 165 Figure 28. Enabling extraction in syngas compressor driving turbine. Operation conditions