CN Modal Shift Protocol to help British Columbia meet greenhouse gas
emissions targets

MONTREAL and VICTORIA, May 12 /CNW Telbec/ - CN has pioneered a modal shift protocol that will create new carbon offset project opportunities for British Columbia's transportation sector, CN President and Chief Executive Officer Claude Mongeau announced today.

Pacific Carbon Trust (PCT), a Crown corporation and leading provider of offsets in British Columbia (B.C.), has agreed to recognize the protocol for modal shift offset projects in B.C.

The modal shift protocol allows companies to generate carbon offsets by shifting freight shipments to rail from truck. An offset protocol is a detailed, specific set of instructions on how to carry out an offset project. A protocol may include information on procedures and requirements for project development, operation, and monitoring, as well as detailed instructions on how to quantify the offsets.

Shippers that demonstrate lower emissions from using a modal shift and meet the British Columbia Emission Offsets Regulation can use the resulting offsets to generate revenue through the sale of the offsets to PCT. Emission reductions may also help reduce carbon taxes and/or help companies meet their emissions reduction goals.

Reduced fuel consumption and carbon emissions are two of the environmental benefits CN offers its customers. Rail has been shown to be up to six times more energy-efficient than heavy trucks, because rail consumes a fraction of the fuel to transport one tonne of freight one kilometre.

Mongeau said: "Freight transportation is an important part of the North American economy and a major producer of greenhouse gases (GHG). The modal shift protocol is a powerful tool for shippers seeking ways of reducing GHG emissions, and will simultaneously help to reduce heavy truck activity on highways. We hope other jurisdictions across North America will also adopt this innovative modal shift protocol as they develop new measures to combat climate change."

B.C. Minister of State for Climate Action John Yap said: "CN is showing the type of low-carbon mindset that we would like to see all industries in B.C. follow. Finding ways to creatively lower emissions in all sectors of our economy is the way to stay competitive in the global marketplace and meet our target of reducing provincial emissions by 33 per cent."

PCT Chief Executive Officer Scott MacDonald said: "We're working across multiple sectors to stimulate the growth of a low-carbon economy in B.C. We congratulate CN for taking leadership role in this important sector and look forward to seeing new projects added to our diverse inventory of offsets."

According to the 2007 B.C. Provincial Greenhouse Gas Inventory Report, transportation accounts for 37 per cent of provincial GHG emissions, the largest share by sector.

In addition to pioneering the modal shift protocol, CN is taking comprehensive steps to reduce the energy and carbon footprint of its operations.

    
                                 BACKGROUNDER
    

The B.C. Modal Shift Protocol provides a methodology allowing companies to:

    
    - Compare GHG emissions from individual shipments, as demonstrated by a
      web calculator;
    - Calculate GHG savings from larger initiatives to shift shipments to
      rail from truck, and
    - Develop an internal benchmark for GHG emissions resulting from goods
      shipments and allow tracking of annual improvements in performance.
    

Shipments that can be included in an offset project are those that are controlled by the project proponent. Control is defined as payment for shipment. This means that a company could include all shipments to and from the project facility - including a mine, terminal, manufacturing plant or distribution centre -- for which it pays for freight.

The process for generating offsets would include the following steps:

    
    - Preparation of an Offset Project Plan using the protocol as guidance
      and providing general corporate information, how eligibility
      requirements will be met, the method of calculating emissions
      reduction, and the plan for accurately tracking required data.

    - Validation of the Offset Project Plan. This can be done by an
      independent third party that will ensure the project, if conducted
      according to the plan set out in the Offset Project Plan, will generate
      eligible offsets. This will mitigate the risk that a proponent's
      offsets will be denied during the verification process.

    - Monitoring and collection of tonnages and distances for shipments to be
      included in the project according to the plan established in the Offset
      Project Plan.

    - Calculation of the offsets generated by the project according to the
      methods described in the protocol and included in the Offset Project
      Plan.

    - Verification of the offsets. An independent third party will conduct
      verification to ensure the offsets comply with the B.C. Emission
      Offsets Regulation.
    

The British Columbia government calculates carbon taxes in B.C.

PCT is actively sourcing up to one million tonnes of GHG offsets annually to meet the provincial government's commitment to a carbon-neutral public sector and meet the needs of its corporate clients. PCT's offsets are acquired through an open and competitive process to ensure the best quality offset obtained at the best price. For more information on Pacific Carbon Trust's procurement process, please visit www.pacificcarbontrust.com.

Forward-Looking Statements

Certain information included in this news release constitutes "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and under Canadian securities laws. CN cautions that, by their nature, these forward-looking statements involve risks, uncertainties and assumptions. The Company cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although reasonable at the time they were made, subject to greater uncertainty.

Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results of performance of the Company or the rail industry to be materially different from the outlook or any future results or performance implied by such statements. Important factors that could affect the above forward-looking statements include, but are not limited to, the effects of general economic and business conditions, industry competition, inflation, currency and interest rate fluctuations, changes in fuel prices, legislative and/or regulatory developments, compliance with environmental laws and regulations, actions by regulators, various events which could disrupt operations, including natural events such as severe weather, droughts, floods and earthquakes, labor negotiations and disruptions, environmental claims, uncertainties of investigations, proceedings or other types of claims and litigation, risks and liabilities arising from derailments, and other risks detailed from time to time in reports filed by CN with securities regulators in Canada and the United States. Reference should be made to "Management's Discussion and Analysis" in CN's annual and interim reports, Annual Information Form and Form 40-F filed with Canadian and U.S. securities regulators, available on CN's website, for a summary of major risks.

CN assumes no obligation to update or revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs, unless required by applicable Canadian securities laws. In the event CN does update any forward-looking statement, no inference should be made that CN will make additional updates with respect to that statement, related matters, or any other forward-looking statement.

CN -- Canadian National Railway Company and its operating railway subsidiaries - spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, and Jackson, Miss., with connections to all points in North America. For more information on CN, visit the company's website at www.cn.ca.

For further information: For CN: Media: Mark Hallman, Director, Communications and Public Affairs, [phone]; Investors: Robert Noorigian, Vice-President, Investor Relations, [phone]; For Pacific Carbon Trust: Media: Hope Hickli, Associate, Marketing & Communications, [phone]