On the 12 December 2015 the Paris Agreement was adopted by the
COP 21 UN Climate change conference in Paris. The official signature is scheduled for the 22nd of April 2016. It is expected that all 195 nations will have ratified /approved the agreement by this date. The full text can be found here: Link
Author: WM
Ontario, Quebec and Manitoba Agree to Link Cap & Trade Systems
On December 7, 2015, Ontario, Quebec and Manitoba signed a memorandum of understanding at the Paris climate talks to formalize the intent of all three provinces to link their cap and trade systems. Under the Western Climate Initiative, the three provinces’ cap-and-trade systems would then link to California’s cap and trade program.
Quebec’s cap and trade system has operating since 2013 and is already linked with California’s cap and trade program. Ontario is in the process of finalizing the details of its cap and trade program, which is expected to come online in 2017. When it released province’s new climate change strategy on December 3, 2015 – Climate Change and Green Economy Action Plan – Manitoba confirmed its intent to introduce a cap and trade program for 20 large emitters. Speaking in Paris, Manitoba Premier Greg Selinger said he believes more states and sub-national governments can be convinced to join them in linking cap and trade system, who can learn from each other’s experiences.
Manitoba Releases Updated Climate Change Strategy and Confirms Implementation of Cap & Trade
On December 3, 2015, Manitoba released its Climate Change and Green Economy Action Plan (the Plan), which updates the province’s 2008 Climate Action Plan, Beyond Kyoto. The Plan sets out Manitoba’s medium and long-term GHG reduction targets:
- By 2030, Manitoba will reduce its greenhouse gas emissions by one-third over 2005 levels.
- By 2050, Manitoba will reduce its greenhouse gas emissions by one-half over 2005 levels.
- By 2080, Manitoba will be carbon neutral.
The Plan also outlines projects that will be undertaken through Manitoba’s new five-year $5 million Climate Change Action Fund. Funds will be invested across sectors to continue driving innovation in the province’s transportation and agriculture sectors, assess local climate risks and develop solutions, expand climate change work on the ground by partnering with communities, and expand innovative energy projects in First Nation communities. Manitoba will also look at how carbon pricing can be used as a tool to drive innovation and boost economic growth while reducing GHG emissions. Manitoba, a member of the Western Climate Initiative, reiterated its commitment to implement a cap and trade program for 20 large emitters in the province and will look at other innovative measures, such as a made-in-Manitoba Carbon Stewardship model for sectors not covered by cap and trade. To that end, Manitoba will carry out public consultations on carbon pricing to explore a range of opportunities. Under the Plan, the Manitoba government will also reduce emissions from government operations through increased energy efficiency, a greener vehicle fleet and equipment, greener office spaces, and waste reduction. Manitoba will provide a complete inventory of its own GHG emissions and develop a comprehensive policy framework to enable it to become a carbon neutral government. The Plan also addresses key sectors such as buildings, transportation and agriculture. Manitoba has demonstrated its climate leadership with the development of new zero-emission battery electric transit buses and transformative research into new crops and natural bio-products.
BC Climate Leadership Team Issues 32 Recommendations to BC Government
In May 2015, BC Premier Christy Clark appointed a Climate Leadership Team (consisting of leaders from B.C. businesses, communities, First Nations, academia and the environmental sector) to provide advice and recommendations to government for its new Climate Leadership Plan.
Following stakeholder consultations, the Climate Leadership Team prepared a report that was released by the BC government on November 27, 2015, in advance of the COP 21 meeting in Paris. The team’s report consists of 32 recommendations addressing a number of areas including GHG reduction targets, carbon tax design, transportation, buildings, communities, offsets, and First Nations.
Some of the key recommendations from the Climate Leadership Team include:
- setting a legislated target for 2030 of 40% GHG reduction from 2007 levels, and reaffirming B.C.’s commitment to the 2050 target of an 80% GHG reduction from 2007 levels;
- establishing the following sector-specific GHG reduction goals (below 2015) for 2030: (a) 30 per cent for the transportation sector totalling 6.3 MT of CO2; (b) 30 per cent for the industrial sector totalling 8.4 MT of CO2; and (c) 50 per cent for the built environment totalling 3.4 MT of CO2;
- lowering the provincial sales tax (PST) from 7 per cent to 6 per cent, supported by incremental carbon tax;
- increasing the carbon tax by $10 per year commencing in July 2018 while (a) maintaining the current tax reductions achieved through the existing carbon tax that are broad based, provide support to vulnerable populations, or promote GHG reductions; (b) adjust the current low income and rural and northern tax credits; and (c) establish targeted and transparent mechanisms for emission-intensive, trade-exposed sectors until such time that carbon pricing and regulatory policy equivalency with other jurisdictions is achieved;
- expanding the coverage of the current carbon tax to apply to all GHG emission sources in BC after five years, starting with measurable GHG emissions covered by the current reporting regulation;
- using incremental revenues generated from the increase in the carbon tax to (a) eliminate PST on all electricity rates; (b) establish mechanisms to facilitate investments in technology and innovation that reduce GHG emissions; and (c) establish mechanisms to provide local governments with funding for projects that will result in demonstrable GHG emission reductions;
- amending the Clean Energy Act to increase the target for clean energy on the integrated grid from 93 per cent to 100 per cent by 2025;
- establishing a strategy and funding to phase out diesel generation in remote communities and replace it with low-GHG electricity service by 2025;
- developing a low-carbon transportation strategy to enable the transportation sector to emit 30 per cent fewer GHG emissions by 2030 which include Zero Emission Vehicle targets, increases to the scope and coverage of the Low Carbon Fuel Standard, and the establishment of a revenue neutral PST for all vehicles based on grams of Co2 per kilometre;
- undertaking a review and update of the Climate Action Charter to align provincial and community goals;
- creating a waste-to-resource strategy that reduces GHG emissions associated with food waste, organic waste, and landfills;
- working with First Nation communities to transition communities that are currently dependent on diesel generation to low-GHG electricity service; and
- undertaking a review of the current offset policy in BC.
The BC government is now reviewing the Climate Leadership Team’s recommendations. It will commence the public consultation process in January 2016, with a view to releasing a final Climate Leadership Plan in March 2016.
Ontario Outlines Next Steps Of Climate Change Strategy
On November 24, 2015, the Ontario government released the province’s Climate Change Strategy which sets out the government’s near and long-term vision for a low-carbon future. Although the strategy is short on details, it provides an indication of the government’s priorities on climate change. The Ontario government has said that it will release a detailed five-year action plan in 2016, which will include specific commitments to meet near-term 2020 emissions reduction targets, and establish the framework necessary to meet targets for 2030 and 2050. Ontario has set an interim emissions reduction target of 37% below 1990 levels by 2030 and a long-term target of an 80% reduction in emissions over 1990 levels by 2050.
As articulated in the strategy, by 2050, the Ontario government envisions that its citizens will be using less energy and the energy they do use will be from low-carbon sources. Communities will be climate-resilient, complete and compact. More people will choose electric or other zero-emission vehicles and transit to get swiftly and efficiently where they need to go. Agricultural lands, natural areas and ecosystems will be better protected for the benefit and enjoyment of all. By 2050, the government sees a province that will be employing new ways to reduce waste while ensuring that more of the waste produced is reintroduced to the economy. Industries will be thriving while generating fewer or zero emissions. Finally, businesses and innovators will be creating world-leading clean technologies and products that drive new economic growth, productivity, and job creation.
Under the Climate Change Strategy, the government will:
- Introduce climate legislation to establish a long-term framework for action and make the cap-and-trade program law in Ontario.
- Integrate climate change mitigation and adaptation considerations into government decision-making and infrastructure planning.
- Introduce changes to government operations, procurement, employee training, building retrofits and in other areas to help government move towards carbon neutrality.
- Develop a coordinated approach to reduce emissions from new and existing buildings.
- Reduce emissions from transportation by promoting the uptake of zero emission and plug-in hybrid vehicles.
- Develop data and metrics to measure emission impacts of projects and programs including progress towards emission reduction targets. This will entail the development of tools to assess climate change risk to food production, human health, vital infrastructure, and the economy.
The government will also report on, and renew, its action plan every five years. This strategy is meant to support Ontario’s proposed cap-and-trade program and complements earlier climate initiatives, which include establishing a 2030 mid-term emissions reduction target, ending coal-fired electricity generation, and electrifying and improving Ontario’s commuter rail network.
Alberta Releases Details of Climate Leadership Plan in Advance of Federal/Provincial Climate Change Meeting and COP 21
In advance of a meeting with Prime Minister Justin Trudeau and fellow premiers, Alberta Premier Rachel Notley unveiled the details of the province’s Climate Leadership Plan on November 22, 2015. The plan, which is based on the advice of the Climate Change Advisory Panel (the Panel, led by Dr. Andrew Leach), will also be promoted by Premier Notley at the United Nations Climate Change conference that will take place in Paris from November 30 to December 11, 2015.
Alberta’s Climate Leadership Plan accelerates the province’s transition from coal to renewable electricity sources and sets an emissions limits of 100 megatonnes for the oil sands with provisions for new upgrading and co-generation (the level of current emissions from the oil sands is approximately 70 megatonnes). To ensure that the policy is progressive and protects the competitiveness of Alberta’s core industries, the Panel has recommended a consumer credit which will offset the impact of the policy for households and allocations of emissions credits for industrial emitters. A copy of the Panel’s Report to the Minister, which was also released on November 22nd, is available Leadership Report Online.
Alberta’s Climate Leadership Plan sets out the following policy objectives:
Carbon Pricing
Carbon pricing provides the backbone of the Panel’s proposed policy architecture. Alberta will phase in carbon pricing in two steps:
o $20/tonne economy-wide in January 2017.
o $30/tonne economy-wide in January 2018.
The Panel has also proposed that the existing Specified Gas Emitters Regulation be replaced by a Carbon Competitiveness Regulation in 2018, which would:
a) broaden the carbon pricing signal in Alberta to cover approximately 90% of the province’s emissions, up from less than 50% today;
b) provide a consumer rebate to mitigate the impacts of carbon pricing on low- and middle-income Albertans, fund complementary emissions-abatement programs and, where applicable, support a sound and just transition for labour and communities and strategies to protect small- and medium-sized businesses;
c) improve the mechanism by which trade-exposed industries are protected to ensure their competitiveness while encouraging and rewarding top performance;
d) increase stringency at the same pace as peer and competing jurisdictions; and
e) avoid the transfer of wealth outside of Alberta.
Electricity and Renewables
• Alberta will phase out all pollution created by burning coal and transition to more renewable energy and natural gas generation by 2030.
• Three principles will shape the coal phase-out: (i) maintaining reliability; (ii) providing reasonable stability in prices to consumers and business; and (iii) ensuring that capital is not unnecessarily stranded.
• Two-thirds of coal-generated electricity will be replaced by renewables – primarily wind power – while natural gas generation will continue to provide firm base load reliability.
• Renewable energy sources will comprise up to 30 per cent of Alberta’s electricity production by 2030.
Methane Reduction
• In collaboration with industry, environmental organizations, and affected First Nations, Alberta will implement a methane reduction strategy to reduce emissions by 45% from 2014 levels by 2025.
Revenue Neutral
• One-hundred per cent of proceeds from carbon pricing will be reinvested in Alberta.
• A portion of collected revenues will be invested directly into measures to reduce pollution (including clean energy research and technology), green infrastructure (such as public transit), and programs to help Albertans reduce their energy use.
• Other revenues will be invested in an adjustment fund that will help individuals and families make ends meet; provide transition support to small businesses, First Nations, and people working in affected coal facilities.
Alberta’s Climate Leadership Plan is expected to reduce emissions from current trends by approximately 20 Mt by 2020, and approximately 50 Mt by 2030. This would roughly stabilize emissions, by 2030, just above current levels at approximately 270 Mt.
Ontario’s cap-and-trade program design options released for further consultation
In the lead-up to Paris climate talks (COP 21), the Ontario government has released a consultation paper that sets out the early details of how Ontario’s proposed cap-and-trade program will work. The proposed program details are not final and are subject to further consultation before a final cap-and-trade regulation is expected to be issued in spring 2016.
Ontario’s proposed cap-and-trade system would commence on January 1, 2017 and the cap on greenhouse gas emissions would decline by 3.7% in each of the following three years, falling to 15% below 1990 levels by 2020. It is anticipated that the cap-and-trade program will have a broad reach and most sectors of the economy will fall under the cap including heavy industry, transportation fuel (including gasoline and natural gas), and electricity generation.
Since the transportation sector accounts for a significant portion of the province’s overall emissions, a carbon price on transportation fuels will seek to incentivize drivers to choose alternative means of transportation. The Canadian Fuels Association has estimated that if Ontario’s carbon allowances trade at the same minimum price as those under Quebec’s cap-and-trade system, the cost of gasoline will initially increase by at least 3.6 cents per litre, rising to 4.6 cents by 2020.
In order to provide some relief to certain trade-exposed sectors, the Ontario government has proposed allocating free allowances to certain industries, in some cases up to 100% for the first four years of the program. Under the cap-and-trade program, these industries will still be required to reduce emissions in order to comply with their obligations under the cap, but their compliance costs would be lower.
Consultations with industry and other stakeholders is ongoing, and as noted above, it is anticipated that the details of the cap-and-trade program will be finalized in spring 2016. As we reported earlier, Ontario has proposed changes to the provincial Greenhouse Gas Emissions Reporting Regulation, which will help to facilitate the linking of Ontario’s cap-and-trade program with the Quebec and California programs.
ISAE 3410
ISAE 3410 – International Standard on Assurance Engagements 3410 Assurance Engagements on Greenhouse Gas Statements
This International Standard on Assurance Engagements (ISAE) deals with assurance engagements (limited or reasonable) to report on an organisation’s Greenhouse gas (GHG) statement. In cases were organisations are quantifying their GHG emissions for the purpose of regulatory compliance or on a voluntary basis they might look for an independent assurance that their statement in all material respects has been prepared in accordance with the applicable criteria . Voluntary disclosures may be published as a stand-alone document, included as part of a broader sustainability report or in an entity’s annual report.
New Report from World Bank Points to Global Shift Towards Carbon Pricing
On September 20, 2015, the World Bank released its 2015 State and Trends of Carbon Pricing report (the Report), which shows the number of implemented or planned carbon pricing schemes around the world have almost doubled since 2012, and are now worth about $50 billion.
The Report indicates that about 40 national and 23 city, states and regions around the world are using carbon pricing schemes, like emissions trading systems (ETS) or carbon taxes. This represents about 7 gigatons of carbon dioxide equivalent, or 12% of global greenhouse gas emissions, a threefold increase over the past decade.
Based on a review of carbon pricing initiatives around the world (including emissions trading systems and taxes in places like British Columbia, the European Union, Denmark, Sweden, and the United Kingdom), the Report reinforces lessons learned to date – in particular, that well-designed carbon pricing schemes are a powerful and flexible tool that can cut emissions and if adequately designed and implemented, they can play a key role in enhancing innovation and smoothing the transition to a low-carbon global economy.
The Report points to a number of examples to demonstrate the shift to carbon pricing instruments worldwide, including:
• Launch of the South Korean ETS in January 2015.
• Approval of a national carbon tax by Chile to start in 2017.
• The European Union ETS is the largest carbon instrument in terms of value, followed by the trading systems in Korea and California.
• Ontario announced in April that it is joining California and Québec’s emissions trading systems.
• The EU and South Korea recently announced plans this week to explore linkage between their emissions trading systems.
• The US and China – the world’s largest greenhouse gas emitters – host the two largest national carbon pricing initiatives in terms of volume covered (as driven by initiatives in their states and provinces). In China, the carbon initiatives cover the equivalent of 1 gigaton of CO2e, while in the US, they cover the equivalent of 0.5 gigatons of CO2e.
• China currently has seven pilot carbon markets operating in major cities and provinces, and has plans to launch a national system in 2016.
It was also announced in September 2015 that more than two dozen cities in China and the US are making new pledges to lower emissions.
The Report also considers the issue of “carbon leakage”, whereby carbon pricing leads some industries and lead them to move production to other countries or jurisdictions where emission costs are lower. The Report notes that ex-post analysis of the EU ETS, the biggest cap-and-trade system in place today, shows that so far, carbon leakage has not materialized on any significant scale. The risk of carbon leakage will remain real as long as carbon price signals are strong and differ significantly between jurisdictions. However, this risk tends to affect a limited number of carbon intensive and trade-exposed sectors, which risk can be effectively mitigated through policy design.
The Report also discusses the enormous savings that can be made through cooperation between countries. Compared to domestic action alone, cooperation and linking of carbon pricing instruments across borders could significantly lower the cost of achieving a 2°C stabilization goal, because countries have more flexibility in choosing who undertakes emission reductions, and who pays for them. Based on an analysis of studies made over the years, the Report shows that this cooperation can mobilize resources and transfers between countries and investors, and result in net annual flows of financial resources of up to $400 billion by 2030 and up to $2.2 trillion by 2050.
Finally, the Report says that carbon prices that converge have a positive impact on competitiveness by favouring more efficient and cleaner sectors, leading to a more efficient economy.
The FASTER Principles
To help countries navigate the carbon pricing landscape, the World Bank Group, together with the OECD and with input from the IMF, also released a report on the FASTER Principles, which aims to help governments and businesses develop efficient and cost-effective carbon pricing instruments.
The FASTER principles are: F for fairness; A for alignment of policies and objectives; S for stability and predictability; T for transparency; E for efficiency and cost-effectiveness and R for reliability and environmental integrity.
Climate Change in the Spotlight
The spotlight is now on New York with the upcoming United Nations meeting on the new Sustainable Development Goals, Climate Week New York, and in about two months, global leaders will meet again in Paris for COP 21.
The decisions made in New York and Paris will set the course for development for years to come. But while these are top level, pivotal meetings, actors around the world are not waiting for a global agreement to act. They are already putting a price on carbon dioxide and other greenhouse gas emissions to drive clean investment. This includes the private sector. And we’ve seen companies from the oil and gas industry – calling for widespread carbon pricing. Today, over 400 businesses worldwide are using an internal price on carbon to guide their investments.
Ontario Releases Regulatory Proposal to Amend GHG Reporting Regulation
In support of the development and future implementation of its cap-and-trade system, Ontario’s Ministry of the Environment and Climate Change (MOECC) is proposing amendments to the Greenhouse Gas Emissions Reporting Regulation (O. Reg. 452/09) (the GHG Reporting Regulation). Under the current GHG Reporting Regulation, regulated facilities emitting 25,000 tonnes or more of carbon dioxide equivalent (CO2e) per year are required to report and verify their emissions. Once implemented, the proposed amendments will significantly increase the amount of emissions reported and the number of facilities reporting under the GHG Reporting Regulation.
The proposed amendments include the following:
• lowering the reporting threshold to 10,000 tonnes CO2e from the current threshold of 25,000 tonnes per year, while maintaining the requirement to have emissions greater than 25,000 tonnes per year third party verified;
• dividing the emission sources into those that are reporting only and those that require third party verification;
• adding petroleum product suppliers and natural gas distributors to the GHG Reporting Regulation starting in 2016; and
• adding other sources to the reporting regulation including:
– equipment used for natural gas transmission, distribution and storage,
– electricity imports,
– electricity transmission and distribution,
– magnesium production, and
– mobile equipment at facilities.
Similar to California, there will be no emissions thresholds for electricity importers, the purpose of which is to prevent them from sub-dividing into smaller entities to avoid compliance obligations.
The reporting threshold for liquid petroleum fuel distributors and suppliers will be set at 200 litres of fuel to ensure consistency with Québec requirements. The verification threshold will remain at 25,000 tonnes of CO2e, but any liquid fuel distributor and suppliers that exceed the 200 litre threshold will be required to verify their emissions reports. All electricity importers will be required to verify their emissions reports.
The amended GHG Reporting Regulation will also categorize certain emission sources as being subject to reporting requirements only, meaning that these emission will need to be reported, but would not be subject to verification or potential compliance requirements under the cap-and-trade program. These proposed categories include:
• fugitive geothermal units and hydrofluorocarbons (HFC) emissions from cooling units at electricity generators;
• coal storage emissions;
• biomass combustion emissions; and
• on-site emissions from mobile equipment.
The proposed amendments have been posted for a 45 day public review and the comment period will end on October 29, 2015. Comments may be submitted to the MOECC’s designated contact person or online.