Next trade dispute may be over hydro

Monday February 18, 2002

Next trade dispute may be over hydro

By James Baxter

'Clean' energy row brewing over what's a renewable source

OTTAWA - Canada's hydroelectric producers could find themselves embroiled in trade disputes over clean energy if a NAFTA-wide definition of "renewable sources" cannot be agreed upon, the Commission for Environmental Co-operation of North America warns.

Disagreements over what constitutes sources of renewable energy could become a major source of trade friction between Canada, the United States and Mexico, as a growing number of U.S. states have begun demanding that a percentage of energy imports come from "green" sources.

Already, 22 states have laws requiring that part of their energy consumption must be generated by renewable sources. That could present a problem for Canadian producers because some states do not regard hydroelectric power to be acceptable as a result of the vast environmental damage caused to natural water flows.

Canadian power producers and the federal government, however, maintain all hydro projects, even large-scale dam systems, are renewable sources.

"It represents an issue of major future importance as states increase over time the mandatory percentages of green electricity sold," CEC executive director Janine Farretti stated in a news release announcing a one-day conference on the subject in Montreal today.

"As we move toward a continental energy market and as states increase the percentage of electricity that must come from 'green' sources, developing a common definition of those sources will be an important area of harmonization for the NAFTA partners."

The commission was created by the NAFTA partners to deal with regional environmental concerns, help prevent potential trade and environmental conflicts and promote the effective enforcement of environmental law.

North America lags Europe in the adoption of clean alternatives for power production, especially wind-power generation, the commission noted. It said Canada, mostly through Hydro Québéc, produces less than 0.1%, or 100 megawatts, of its electricity from wind power. Within five years, that is expected to climb to 1,000 megawatts.

The commission says "experience has demonstrated that market and financial incentives, along with government purchasing commitments ... make a significant difference to the speed with which renewable energy is adopted."

With the U.S. having made clear last week it plans to use tax incentives and subsidies to promote the adoption of renewable energy, rather than ratify the more restrictive Kyoto accord on greenhouse-gas emissions, pressure will be on the U.S. to prove its system will work.

That could put pressure on electricity sales from Canada, especially to states whose laws do not view hydro power as sufficiently green.