Category: Green News

National Canadian Clean Fuel Standard to be Rolled Out Soon

The Clean Fuel Standard (CFS) is a proposed regulation under the Canadian Environmental Protection Act, 1999, which aims to reduce greenhouse gas (GHG) emissions by reducing the lifecycle carbon intensity (CI) of liquid fossil fuels used in Canada. While the initial scope of the CFS included liquid, gaseous and solid fuels, the scope of the CFS was narrowed under Canada’s latest climate change plan, A Healthy Environment and a Healthy Economy, to include only liquid fuels.

The objective of the CFS is to decrease the CI of liquid fuels approximately 13% by 2030. The proposed Clean Fuel Regulations (CFR, under the Canadian Environmental Protection Act, 1999) would establish annual lifecycle CI limits per type of liquid fossil fuel, expressed in grams of carbon dioxide equivalent per megajoule (gCO2e/MJ). The liquid fossil fuels that would be subject to the annual CI reduction requirement are gasoline, diesel, kerosene and light and heavy fuel oils. This obligation would be placed on primary suppliers (i.e. producers and importers) who domestically produce or import at least 400 cubic metres (m3) of liquid fossil fuel for use in Canada. Under the proposed CFR, primary suppliers would be required to reduce the CI of the liquid fossil fuels they produce in and import into Canada from 2016 CI levels by 2.4 grams of carbon dioxide equivalent per megajoule (gCO2e/MJ) in 2022, increasing to 12gCO2e/MJ in 2030, at a rate of 1.2 gCO2e/MJ per year. Reduction requirements for the years after 2030 would be held constant at 12 gCO2e/MJ, subject to a review of the regulations and future amendments.

The proposed CFR allows for flexible compliance options to enable primary suppliers to choose the lowest-cost compliance actions. Primary suppliers are required to satisfy their emission reduction requirements by creating or acquiring compliance credits. Primary suppliers can obtain compliance credits by:

1. undertaking activities that generate credits for its own account;
2. acquiring credits from others; or
3. paying into a compliance fund to acquire credits at a price of $350/tonne.

The proposed CFR would establish a credit market, where each credit would represent a lifecycle emission reduction of one tonne of CO2e. Parties that are not fossil fuel primary suppliers would be able to participate in the credit market as voluntary credit creators.

For each compliance period (typically a calendar year), a primary supplier would demonstrate compliance with their reduction requirement by creating credits or acquiring credits from other creators, and then using the required number of credits for compliance. Once a credit is used for compliance, it is retired and can no longer be used. For primary suppliers unable to satisfy their reduction requirement by June 30 following the end of a given compliance period, a market-clearing mechanism that facilitates credit acquisition by primary suppliers would also be available. The proposed CFR would set a maximum price for credits acquired, purchased or transferred in the credit clearance mechanism (CCM) at $300 in 2022 (CPI adjusted) per compliance credit. Where primary suppliers are unable to acquire sufficient compliance units through the CCM, they may carry forward up to 10% of their compliance obligation into subsequent compliance periods for up to two years. However, a 20% annual interest rate applies to amounts carried forward.

Compliance credits may be created by primary suppliers or voluntary credit creators who take one of the following actions:

1. Compliance Category 1: undertaking projects that reduce the lifecycle CI of fossil fuels;
2. Compliance Category 2: supplying low-CI fuels; or
3. Compliance Category 3: end-use fuel switching in transportation.

Environment and Climate Change Canada (ECCC) has identified four initial quantification methodologies for development in respect of Compliance Category 1, including: (i) carbon capture and storage (CCS); (ii) low-carbon intensity electricity generation; (iii) enhanced oil recovery; and (iv) co-processing of biocrudes in refineries and upgraders. In addition, a generic quantification methodology will be developed that can be utilized for activities which do not have their own bespoke quantification methodology, which will apply to such projects as energy efficiency, cogeneration, electrification and methane reductions. Project proponents would apply to ECCC to have a project recognized for credit creation and then submit an annual validation report with a third-party verification report and verification opinion. The credit period is 10 years with a possible five-year renewal for most projects, and a 20-year credit period and five-year renewal for CCS projects.

All low CI fuels supplied to the Canadian market, including fuels used to comply with existing federal and provincial renewable fuel regulatory requirements and British Columbia’s Renewable and Low Carbon Fuel Requirements Regulation, would be able to create credits under the proposed CFR.

To incentivize investments in low carbon fuels, the proposed CFR imposes limits on the proposed compliance options. These include a 10% limit of payment into the compliance fund mechanism, a 10% limit on the trading credits across fuel classes, and a 10% limit on carrying forward a credit obligation.

The CFR will retain the volumetric requirements under the existing federal Renewable Fuels Regulations (RFR) (5% low carbon fuel content in gasoline, 2% low carbon fuel content in diesel/fuel oil). This means that each primary supplier would be required to demonstrate for each compliance period that, of the total number of compliance credits it retires for compliance, a minimum (equivalent to 5% of its gasoline pool and 2% of its diesel and light fuel oil pool) is from low-CI fuels. These compliance credits are part of the total credits used to meet reduction requirements, but the same compliance credit cannot be used to meet the 5% and 2% requirements respectively. Prior to repeal of the RFR in 2024, companies will be entitled to rollover any existing compliance units and convert those units into credits recognized under the CFR.

The consultation period for the proposed CFR ended on March 4, 2021. Final regulations are expected to be published in the Canada Gazette, Part II in late 2021. Once the regulations are published, credit creators can register for and begin to create credits in the credit trading system. The CFR is expected to come into force on December 1, 2022.

Climate-related Financial Disclosure Requirements to Access the New Federal Economic Stimulus Fund: Large Employer Emergency Financing Facility (LEEFF) Program

On May 11, 2020, the Government of Canada announced the Large Employer Emergency Financing Facility (LEEFF) program as part of its COVID-19 Economic Response Plan. While the government is still in the final stages of establishing the LEEFF program, it has specified the eligibility to be large for-profit-businesses and certain not-for-profit businesses with annual revenues greater than $300 million.

To have access to the LEEFF, large companies will not only be required to meet the usual criteria (respect union agreements, protect workers’ pensions, adhere to rules around share buy-backs and the salaries and bonuses of top executives), but also be required to commit to publish annual climate-related financial disclosure reports consistent with the Task Force on Climate-related Financial Disclosures (TCFD). This announcement is noteworthy since emergency funds rarely come with such requirements. Moreover, it is meaningful because it shows Canada’s strong commitment to meet its emissions targets and sends a clear signal to the Canadian companies to set their foot in the right path.

Globally, the TCFD has been gaining traction throughout all sectors from collaborative efforts of WBCSD organizing sector-specific Preparer Forums and the Corporate Reporting Dialogue aligning standards and reporting with the TCFD’s recommendations. In the beginning of this year, the world’s largest asset management firm, BlackRock, announced that sustainability will be the firm’s new standard for investing and released a public letter addressed to companies it invests in to disclose climate-related risks.

More Background of Task Force on Climate-related Financial Disclosures (TCFD) can be found here.

 

Canadian Federal Carbon Pricing System Comes into Force in Backstop Jurisdictions

The Canadian federal government is committed to pricing carbon emissions and advancing the objectives of the Pan Canadian Framework on Clean Growth and Climate Change. The main components of the  federal carbon pricing backstop system are set out in the Greenhouse Gas Pollution Pricing Act, which was passed in June 2018:

  1. federal fuel charge; and
  2. an Output-Based Pricing System for large emitters, i.e. those facilities with emissions 50,000 tonnes of carbon dioxide equivalent.

On October 23, 2018, the federal government announced that the federal carbon pricing system would come into force in 2019 in so-called “backstop jurisdictions”, i.e. those jurisdictions that have either decided not to implement a carbon price or to implement a system that does not meet federal requirements (the key requirement being a price on carbon of $20 per tonne starting in 2019, increasing by $10 per tonne annually until it reaches $50 per tonne in 2022. The backstop jurisdictions include:  Ontario, New Brunswick, Manitoba, and Saskatchewan. In October 2018, the Department of Finance released details about how proceeds from the federal carbon pricing backstop will be returned directly to residents of backstop jurisdictions through the Climate Action Incentive. Both Ontario and Saskatchewan have launched constitutional challenges to the federal government’s jurisdiction to impose the federal carbon pricing scheme on the provinces. Both cases are expected to be heard in 2019. In the meantime, the federal carbon pricing system will come into force as planned.

Alberta, British Columbia, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Quebec and Yukon have either developed their own carbon pricing systems that meet federal requirements or chosen to adopt the federal backstop.

The following table summarizes the carbon pricing initiatives across all provinces and territories as of January 1st, 2019:

Jurisdiction Carbon Pricing Approach
British Columbia:  

Carbon tax = $35 per tonne, which will increase by $5 per tonne on April 1, 2019 until it reaches $50 per tonne by 2021.
Alberta:  

Carbon levy = $30 per tonne.  No further increases planned at this time.
Saskatchewan:  

The federal backstop will apply, in part, in Saskatchewan:

·   Saskatchewan will implement its output-based performance standards system on January 1, 2019 (applicable to industrial facilities that emit ≥25,000 tonnes of CO2e per year).

·   Federal OBPS will apply to electricity generation and natural gas transmission pipelines beginning January 1, 2019 (applicable to facilities from those sectors that emit ≥50,000 tonnes of CO2e per year, with the ability for smaller facilities that emit ≥10,000 tonnes of CO2e per year to voluntarily opt-in to the system).

·   Federal fuel charge to apply from April 2019.
Manitoba:  

·   Federal OBPS will apply from January 1, 2019 (applicable to facilities from those sectors that emit ≥50,000 tonnes of CO2e per year, with the ability for smaller facilities that emit ≥10,000 tonnes of CO2e per year to voluntarily opt-in to the system).

·   Federal fuel charge to apply from April 2019.
Ontario:  

·   Federal OBPS will apply from January 1, 2019 (applicable to facilities from those sectors that emit ≥50,000 tonnes of CO2e per year, with the ability for smaller facilities that emit ≥10,000 tonnes of CO2e per year to voluntarily opt-in to the system).

·   Federal fuel charge to apply from April 2019.
Québec:  

Cap & Trade System – Allowance Price of CAD $20.27 (based on results of November 14, 2018 auction)

 
New Brunswick:  

·   Federal OBPS will apply from January 1, 2019 (applicable to facilities from those sectors that emit ≥50,000 tonnes of CO2e per year, with the ability for smaller facilities that emit ≥10,000 tonnes of CO2e per year to voluntarily opt-in to the system).

·   Federal fuel charge to apply from April 2019.
Nova Scotia:  

Cap-and-trade program will start on January 1, 2019.

 
PEI:  

The federal backstop will apply in PEI, in part:

·   A carbon levy on fuel will come into force on April 1, 2019.

·   Federal OBPS will apply from January 1, 2019 (applicable to facilities from those sectors that emit ≥50,000 tonnes of CO2e per year, with the ability for smaller facilities that emit ≥10,000 tonnes of CO2e per year to voluntarily opt-in to the system).
Newfoundland and Labrador:  

Newfoundland & Labrador’s own carbon pricing plan came into force on January 1, 2019:

·   Provincial carbon tax rate of $20 tonne will commence on January 1, 2019.

·   A performance-based system for offshore and onshore industries will establish GHG reduction targets for large industrial facilities and large scale electricity generation; exemptions for certain sectors are available.
Nunavut:  

·   Federal OBPS will apply from July 1, 2019 (applicable to facilities from those sectors that emit ≥50,000 tonnes of CO2e per year, with the ability for smaller facilities that emit ≥10,000 tonnes of CO2e per year to voluntarily opt-in to the system).

·   Federal fuel charge to apply from July 1, 2019.
Yukon:  

·   Federal OBPS will apply from July 1, 2019 (applicable to facilities from those sectors that emit ≥50,000 tonnes of CO2e per year, with the ability for smaller facilities that emit ≥10,000 tonnes of CO2e per year to voluntarily opt-in to the system).

·   Federal fuel charge to apply from July 1, 2019.
Northwest Territories:  

Northwest Territories will introduce a carbon tax on fuels starting July 1, 2019 = $20/tonne of GHG emissions; this will increase annually until it reaches $50/tonne.

 

UNFCCC Parties Agree on Katowice Climate Package at COP24

At the 24th Conference of the Parties (COP24) held in Katowice, Poland in December 2018, negotiators from 196 countries and the European Union finalized the Katowice Climate Package, which seeks to implement the Paris Agreement. The Paris Agreement, which was adopted at COP21, establishes a goal of limiting the global average temperature increase to well below 2°C above pre-industrial levels, while pursuing efforts to limit it to 1.5°C. The Paris Agreement requires each member party to deliver successively more ambitious emission reduction goals – known as Nationally Determined Contributions or NDCs – every five years. The Paris Agreement also dealt with issues including climate finance, technology, compliance, transparency, adaptation and a global stocktake process starting in 2023. Under the Paris Agreement, member parties established the Ad hoc Working Group for the Paris Agreement, which is tasked with developing the operational details for implementation through the Paris Agreement Work Programme (PAWP).

The discussions of COP 24 were focused on completing the PAWP. The Katowice Climate Package covers decisions on many of the key issues mandated under the PAWP including:

  • Finance – The parties identified the information to be provided by parties in accordance with Article 9.5 of the Paris Agreement (finance transparency) along with matters relating to the Adaptation Fund, and setting a collective quantified goal on finance.
  • Technology – The parties adopted decisions on the scope of and modalities for the periodic assessment of the Technology Mechanism and the technology framework.
  • Mitigation – The parties developed further guidance on NDCs and common timeframes, as well as modalities, work programme, and functions of the forum on the impact of the implementation of response measures under the Paris Agreement.
  • Adaptation – The parties developed further guidance on adaptation communication.

Other issues addressed by the parties include: (i) discussions around the procedures and guidelines for the transparency framework for action; (ii) procedures for the operation of the committee to facilitate implementation and promote compliance; and (iii) the global stocktake.

The Ministers attending COP24 also adopted the “Forests for Climate” Katowice Ministerial Declaration, which provides for accelerated actions to ensure that the global contribution of forests and forest products is maintained and further enhanced by 2050 to support the goals of the Paris Agreement .

The draft decisions on Matters relating to the implementation of the Paris Agreement is available online (the official version will be made available on the UNFCCC web site once they are finalized by the United Nations Office).

During the formal opening of COP24, UN Secretary-General António Guterres stated that “we are in deep trouble with climate change” and shared four messages:

  • science demands a significantly more ambitious response to the challenge of climate change;
  • the Paris Agreement provides the framework for the needed transformative action and must be operationalized in Katowice;
  • there is a collective responsibility to invest in averting “global climate chaos”; and
  • climate action offers a compelling path to transformation, but political will and more far-sighted leadership are required.

While the Katowice Climate Package provides a good starting “rule book” to advance the objectives of the Paris Agreement, some of the more difficult discussions (including those around setting more stringent emission reduction targets and carbon markets) have been delayed until COP25, which will be held in Chile. Stay tuned for further developments.

 

Federal Government Announces Next Steps in Climate Change Plan, including Climate Action Incentive Payments

On October 23, 2018, the federal government announced that it is moving forward with the next steps in its Pan-Canadian Framework on Clean Growth and Climate Change (the Framework), including a price on carbon. In January 2018, the government released the Greenhouse Gas Pollution Pricing Act, which set out a carbon pricing system based on a two-pronged approach: (1) a charge on fossil fuels that are consumed within a province or territory (which will generally be paid by fuel producers and distributors), which will be administered by the Canada Revenue Agency; and (2) an output-based pricing system (OBPS) that will apply to emissions-intensive industrial facilities, which will be administered by Environment Canada and Climate Change (ECCC).

Under the Framework, provinces and territories have the flexibility to design their own carbon pricing systems. The federal government’s plan requires provinces and territories to implement a carbon price of $20 per tonne of CO2e starting in 2019, which will increase by $10 per tonne annually until it reaches $50 per tonne in 2022. BC, Alberta, Newfoundland & Labrador, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Quebec and Yukon have all adopted carbon pricing systems that meet the federal benchmark. Four provinces – Ontario, New Brunswick, Manitoba and Saskatchewan – have decided either not to implement a carbon price or they have implemented system which do not meet federal standards. As a result, they will have the federal carbon pricing backstop implemented in their jurisdictions on January 1, 2019. As part of the federal government’s announcement, the Department of Finance Canada released a set of draft regulatory proposals under the Greenhouse Gas Pollution Pricing Act. The federal government will return the proceeds of the federal carbon pricing system to the province or territory of origin:

  • directly to the governments of those jurisdictions that choose to adopt the federal system;
  • directly to individuals and families, through the proposed Climate Action Incentive payments, as well as to particularly affected sectors in those other jurisdictions that do not meet the federal standard (i.e. Ontario, New Brunswick, Manitoba and Saskatchewan); and
  • proceeds from the OBPS in Ontario, New Brunswick, Manitoba and Saskatchewan will be returned to the province of origin (the mechanism by which such proceeds will be returned will be determined at a later date).

The federal government has committed to provide annual updates on how the proceeds of the federal carbon pricing system were allocated.

Finance Canada also released the following details on the application of the federal backstop in the four provinces that do not have carbon pricing systems in place that meet federal requirements:

  • The fuel charge rates that will apply starting in 2019. For example, in 2019, the price on gasoline will be $0.0442 per litre and the price on aviation turbo fuel will be $0.0516 per litre, both based on a carbon price of $20 per tonne. The fuel charge will come into effect on April 1, 2019.
  • The proceeds from the fuel charge that forms part of federal carbon pollution pricing system will be returned directly to individuals and families through Climate Action Incentive These payments will be delivered as part of federal tax returns, and the government has indicated that most people should receive more in rebates than they pay as a result of the fuel charge.
  • There will be some exemptions and/or supplements from the fuel charge for greenhouse operators and power plant operators that generate electricity for off-grid communities, which will include farmers, fishers and residents of rural and remote communities.
  • The federal government has also announced that it will provide support to municipalities, universities, colleges, schools, colleges, hospitals, non-profits and Indigenous communities that incur an additional cost as a result of pricing carbon pollution. Finance Canada has provided estimates of support available for municipalities, public sector organizations and Indigenous communities in each of the four provinces:
Table 1: Estimated Support for Municipalities, Universities, Schools and Colleges, Hospitals, Non-Profits, and Indigenous Communities, 2019-20 to 2023-24
Province 2019-20 2020-21 2021-22 2022-23 2023-24 Total
Ontario $50 million $75 million $100 million $125 million $125 million $475 million
Saskatchewan $15 million $25 million $30 million $40 million $40 million $150 million
Manitoba $5 million $10 million $15 million $15 million $15 million $60 million
New Brunswick $3 million $4 million $5 million $5 million $5 million $22 million
Note: Annual amounts under $5 million are rounded to the nearest million; those over $5 million are rounded to the nearest $5 million. Estimates are illustrative and subject to adjustments as more information becomes available. Costs to administer the support are not included in the above figures and will be borne by the Government of Canada.

 

In addition, universities, schools and hospitals can seek funding from the Low Carbon Economy Fund (LCEF) for GHG emission reduction initiatives under both the Low Carbon Economy Leadership Fund and the LCEF Challenge.

  • In recognition of the importance of small and medium-sized enterprises (SMEs), the federal government has committed to providing additional support to help them take climate action. To that end, Finance Canada has provided estimates of support available for SMEs in each of the four provinces:
Table 1: Estimated Support to Small and Medium-Sized Businesses, 2019-20 to 2023-24
Province 2019-20 2020-21 2021-22 2022-23 2023-24 Total
Ontario $105 million $155 million $205 million $255 million $255 million $975 million
Saskatchewan $30 million $45 million $60 million $80 million $80 million $295 million
Manitoba $15 million $20 million $25 million $35 million $35 million $130 million
New Brunswick $5 million $10 million $10 million $15 million $15 million $55 million
Note: Numbers are rounded to the nearest $5 million. Estimates are illustrative and subject to adjustments as more information becomes available. Costs to administer the support are not included in the above figures and will be borne by the Government of Canada.

Under the LCEF, the federal government has so far contributed over $300 million to provincial/territorial programs for eligible SMEs including energy retrofits, energy efficient equipment upgrades and fuel switching.

Further design details on the various support programs will be outlined in early 2019. Finance Canada is accepting comments on the draft regulatory proposals until November 23, 2018.

With respect to the OBPS, the government has indicated that draft regulations will be released in the next few weeks. Impacted industrial facilities in the four provinces that are subject to the federal OBPS will need to register by December 31, 2018.

News Round-Up from the Global Climate Action Summit & Call to Global Climate Action

From September 12 to 14, 2018, citizens, political and business leaders from around the world gathered in San Francisco for the Global Climate Action Summit to “Take Ambition to the Next Level.” The Summit represented not only an opportunity to celebrate the achievements of states, regions, cities, companies, investors and citizens with respect to climate action, but also served as a launch pad for deeper worldwide commitments and accelerated action from countries to achieve their commitments under the Paris Climate Agreement.

The Summit ended with delegates calling on national governments to join forces to step up climate action ahead of 2020 – the year when global greenhouse gases (GHG) need to peak and fall sharply thereafter to avoid the worst impacts of climate change. The meeting of leaders from states and regions, cities, business, investors and civil society at the Summit also underscored the transformational action they are already pursuing. For example, over 100 leaders are now committed to carbon neutrality, with the Governor of California bringing the date forward for California achieving this to 2045. Leaders also unveiled a range of bold new commitments across five specific challenge areas aimed at taking their collective ambition to the next level. These are aimed at avoiding risks and seizing the opportunities outlined in a suite of reports including the new Unlocking the Inclusive Growth Story of the 21st Century by the New Climate Economy.  The report finds that a stepped-up transition to a low-carbon economy can:

  • Result in $26 trillion in economic benefits worldwide through 2030.
  • Generate over 65 million new low-carbon jobs in 2030, equivalent to today’s entire workforces of the U.K. and Egypt combined.
  • Avoid over 700,000 premature deaths from air pollution in 2030.
  • Generate, through just subsidy reform and carbon pricing, an estimated US$2.8 trillion in government revenues per year in 2030, funds that can be used to invest in other public priorities or reduce distorting taxes.
  • By a shift to more sustainable forms of agriculture combined with strong forest protection, deliver potentially more than US $2 trillion per year of economic benefits, generating millions of jobs, improving food security—including by reducing food loss and waste—and delivering over a third of the climate change solution.
  • By restoring natural capital, especially our forests, degraded lands and coastal zones, strengthen our defenses and boost adaptation to climate impacts, from more extreme weather patterns to sea-level rise.

The announcements made during and prior to the Summit are aimed at meeting the goals under the Paris Climate Agreement. The following is an overview of the announcements made at the Summit:

Zero Emission Vehicles

  • An alliance of more than 60 state/regional, city governments and multinational businesses are now committed to a 100% zero emission targets through the ZEV Challenge.
  • 12 regions – including Catalonia, Lombardy, Scotland, and Washington State – representing over 80 million people and over 5% of global GDP will have 100% zero emission public fleets by 2030.
  • 26 cities with 140 million people are committed to buy only zero emission buses starting in 2025 and creating zero emission areas in their cities starting in 2030.
  • Business is stepping-forward with 23 multinational companies in EV100, with revenue of over US $470 billion, committed to taking fleets zero emission.
  • IKEA Group will transition to EV in Amsterdam, Los Angeles, New York, Paris, and Shanghai by 2020 – to reach 100% zero emissions for last mile home delivery.
  • More than 3.5 million additional zero emission vehicle charging points will be installed by 2025, and a goal for transport hydrogen to be zero-emissions by 2030 was launched.
  • Almost 400 global companies along with health care providers, cities, states and regions now have 100% renewable energy targets. This includes nearly 150 major global companies such as Tata Motors and Sony who have joined the RE100 initiative: collective annual revenues of these companies total well over US $2.75 trillion and their annual electricity demand is higher than that of Poland.
  • Over 30 energy intensive industry and property players have set smart energy and net zero carbon buildings targets through EP100.

Private Sector Initiatives

  • 488 companies from 38 countries have adopted emission reduction pathways in line with the science of the Paris Agreement – up nearly 40% from last year. Collectively, these companies represent US $10 trillion of the global economy, equivalent to the value of the NASDAQ stock exchange.
  • Nearly a fifth of Fortune Global 500 companies have now committed to set science-based emissions reduction targets including big emitters like India’s Dalmia Cement. Another example is Levi Strauss & Co, which has an approved Science Based Target for a 90% reduction in emissions in all owned-and-operated facilities and 40% reduction in its supply chain by 2025.
  • At the Summit, 21 companies announced the Step Up Declaration, a new alliance dedicated to harnessing the power of emerging technologies and the fourth industrial revolution to help reduce greenhouse gas emissions across all economic sectors and ensure a climate turning point by 2020. Signatories include several established climate leaders: Akamai Technologies, Arm, Autodesk, Bloomberg, BT, Cisco Systems, Ericsson, HP, Hewlett Packard Enterprise, Lyft, Nokia, Salesforce, Supermicro, Symantec, Tech Mahindra, Uber, Vigilent, VMware, WeWork, and Workday. Companies Autodesk, Safaricom and Unilever became the first to join a new Pledge for a Just Transition to Decent Jobs. They pledged to only buy from renewable energy providers that uphold fundamental workers’ rights including social protections and wage guarantees.

Sustainable Communities

  • Over 70 big cities – home to some 425 million citizens – are now committed to carbon neutrality by 2050, including Accra, Los Angeles, Tokyo and Mexico City. These actions will lead to a 2.5% cut of annual global GHG emissions and the avoidance of 12 billion tonnes of carbon dioxide equivalent by 2050. A further 9,100 cities representing 800 million citizens are now committed to city-wide climate action plans. This could lead to reductions of more than 60 billion tonnes of carbon dioxide equivalent between now and 2050.
  • Mayors of over 70 of the world’s key cities reaffirmed their commitment to delivering on the highest ambitions of the Paris Agreement, namely to keep a global temperature rise to below 1.5°C.

Land and Ocean Stewardship

  • A powerful Leaders Group and a new alliance linking over 100 NGOs, businesses, state and local governments, indigenous groups and local communities was launched to fire up action across the forest, food and land agendas.
  • Over 100 global supply chain actors (including supermarket chain Tesco and investors managing over US $5.6 trillion) pledged to work with a variety of organizations to halt deforestation and native vegetation loss in the Cerrado, Brazil.
  • Walmart announced a new platform to identify high-risk jurisdictions and source palm oil and paper and pulp from jurisdictions with no deforestation. Unilever – an anchor partner and supplier to Walmart – will support farmer certification as well as restoration in the Sugut, Kinabatangan and Tawau river basins in Sabah, Malaysia.
  • Through the Pacific Coast Collaborative, states and cities on the United States’ West Coast committed to reduce food loss and waste by 50% by 2030, a commitment with the potential to reduce 25 million tons of GHG emissions per year from the often-overlooked food sector.
  • The Global Environment Facility announced $500 million in funding to drive improved land use and forest conservation.
  • Nine of the world’s leading philanthropic foundations announced their intent to commit at least $459 million through 2022 to the protection, restoration and expansion of forests and lands worldwide—the announcement underlined indigenous peoples’ and traditional communities’ collective land rights and resource management.

Transformative Investments

  • The Investor Agenda was formally launched bringing together nearly 400 investors managing US $32 trillion of assets including CalPERS, the largest US pension fund; La Caisse de dépôt et placement du Québec (CPDQ), Danish pension fund PKA, and Sumitomo Mitsui Trust Asset Management. These investors are focused on accelerating and scaling-up financial flows into climate action and building a more sustainable, low-carbon, global economy.
  • CDPQ, Canada’s second largest pension fund has, for example, committed to increase its low-carbon investments by 50% by 2020, representing more than US$6.2 billion in new investment, and pledged to reduce the carbon intensity of its portfolio by 25% by 2025.
  • PKA, Denmark’s labor market pension fund manager, announced it plans to increase its investments in low-carbon climate solutions to 10 percent of its assets.
  • APG, the Dutch pension fund manager, announced it would no longer be investing in any coal related infrastructure going forward.
  • New York City announced it would be doubling its investments in clean energy and climate solutions to $4 billion over the next three years.
  • 296 investors have now joined Climate Action 100+ which is working with some of the highest emitting companies to assist them in lowering emissions, getting on track with clean energy and the goals of the Paris Agreement.
  • The Green Bond Pledge announced founding signatories including the City of Mexico, Luxembourg Green Exchange and SFPUC who join the state treasurers of California, New Mexico and Rhode Island; some major cities including the City of San Francisco; Australian pension fund LGS and two financial firms – together, this should spur the goal of seeing US $1 trillion-worth of green bonds issued by the end of 2020.
  • A Global Green Bond Partnership, (GGBP) backed by the World Bank, International Finance Corporation, Amundi and major climate finance and sustainability groups was launched with the aim of supporting and assisting sub-national and corporate green bond issuance.
  • 42 financial institutions gathered under the mainstreaming Climate Action in Financial Institutions initiative, representing over $13 trillion in assets, announced a commitment to helping cities, states, and regions finance climate action, including Multilateral Development Banks, members of the International Development Finance Club as well as leading private financial institutions from developing and developed countries.

Call to Global Climate Action

At the end of the Summit, delegates issued the following Call to Global Climate Action:

We, the people gathered at the Global Climate Action Summit, and communities around the world calling for climate action, commit to a climate-safe future for all.

The climate crisis calls for urgent action. We have seen the human impact on health, disease, famine, conflict, refugee crises, and livelihoods. We have seen thousands of people die each year from worsening storms and floods, heat waves, droughts, and wildfires. These impacts disproportionately affect the poor, disadvantaged, and vulnerable.

Now is the time for all leaders to step up and take bold action. Climate change is a threat to all humanity, and it can only be solved by a global cooperative effort. Only together will we transform our communities and energy systems, create employment opportunities and economic prosperity, protect our oceans and natural environment, and complete the transition to a zero-carbon world.

Under the Paris Agreement, the global community has agreed to confront the climate crisis by keeping the rise in global temperature well below 2 degrees C, and pursuing efforts to limit it to 1.5 degrees. 

Delivering this future requires collaborative and transformative action at all levels and in all sectors of society. Recognizing this imperative, over 500 commitments were made at the Global Climate Action Summit. Our continued global leadership includes: 

  • Over 100 Mayors, state and regional leaders, and CEOs have committed to become emissions neutral by 2050 at the latest and in line with the 1.5 degree goal of the Paris Agreement.
  • 488 businesses will set science-based targets to ensure that they are part of the climate solution.
  • More than 60 CEOs, state and regional leaders, and mayors are committed to delivering a 100% zero-emission transport future by 2030, putting us on an irreversible road towards decarbonization.
  • 38 cities, major businesses, state and regional governments have committed to net-zero carbon buildings, cutting emissions equivalent to more than 50 coal-fired power stations.
  • More than 100 indigenous groups, state and local governments, and businesses launched a forest, food and land-focused coalition to deliver 30% of climate solutions needed by 2030.
  • Nearly 400 investors, with $32 trillion under management, will work to ensure a low-carbon transformation of the global economy with the urgency required to meet the challenge.

We dedicate our actions, commitments and determination to give national leaders the confidence and assurance needed to increase their ambition and accelerate climate action by 2020 for the security of our planet, now and for generations to come. We call on the national governments of the world to: 

STEP-UP AMBITION NOW: Commit to increased climate ambition, including in the form of strong national policies and updated, enhanced Nationally Determined Contributions (NDCs) by 2020, consistent with what science tells us is needed to achieve the goals of the Paris Agreement;

CHART A CLEAR PATH TO YOUR ZERO-CARBON FUTURE: Develop net-zero mid-century emissions plans to inform future NDCs and to guide long-term economic and technological transformation that ensures decent jobs and increasing community resilience; 

EMPOWER BOTTOM-UP CLIMATE ACTION: Support and accelerate climate action at the local and regional level, with legislation, regulation, financing and policies that incentivize zero-carbon development, and through inclusive, transparent planning, dialogues and consultations that empower businesses, cities, states, investors, civil society, and individuals.

The whole world has to do more. Building on this positive wave of climate action, there are critical milestones for stepping up ambition by 2020, including the Talanoa Dialogue at COP 24 and the UN Secretary-General’s Climate Summit in 2019. By working together we can do more to transform our politics, our thinking, our values, and our way of life. It is up to all of us to roll back the forces of carbonization. Together we will rise and converge on a new climate-safe agenda for the world.

 

New Report Confirms the Significant Contribution of Cities, States, Regions and Businesses to Meeting Paris Climate Commitments

A new report released on August 29, 2018 has found that climate action by cities, states, regions and businesses makes up a significant contribution towards meeting the goals of the Paris Climate Agreement. However, more support from national governments is needed to hold the global temperature increase to well below 2°C, while working towards limiting it to 1.5° C. The report (authored by experts at Data-Driven Yale, NewClimate Institute, PBL Netherlands Environmental Assessment Agency, in partnership with CDP) is the most comprehensive assessment to date of city, region, and company commitments to reduce greenhouse gases (GHG). In particular, the report examines the impact of international cooperative initiatives addressing climate change, and lists the Under2 Coalition as offering the greatest potential for reducing emissions by 2030, as well as a significant contribution from RE100.

Key findings from the report include:

  • By 2030, global GHG emissions could be lowered by as much as twice the size of Canada’s 2016 GHG emissions through the actions of nearly 6,000 cities, states and regions, and over 2,000 companies.
  • In the European Union, city, region and company commitments could reduce GHG emissions by 230 to 445 MtCO2e/year – roughly equivalent to Italy’s greenhouse gas emissions in 2016.
  • In the United States, full implementation of the reported city, region and company commitments could provide at least half of the emissions reductions needed to meet America’s Paris pledge.
  • In China, these actions could reduce emissions by up to 155 MtCO2e, roughly equivalent to what the country’s industrial processes generated in 2014.

 

According to the report, global GHG emissions in 2030 would be approximately one-third (15-23 GtCO2e/year) lower than what will be achieved through national policies alone if international cooperative initiatives like the Under2 Coalition and Global Covenant of Mayors grow their membership, meet their goals, and add to existing action. This report will inform deliberations at that Global Climate Action Summit (GCAS), which will be held in San Francisco from September 12-14, 2018.  The summit will showcase the climate leadership of states, regions, cities, businesses, investors and citizens and serve as an opportunity for them to announce significant new commitments to climate action across topics such as zero emission vehicles, net-zero buildings and land use.

As the report demonstrates, cities, states, regions and businesses all have a crucial role to play in meeting the commitments under the Paris Agreement and as such, will be key drivers for bending down the emissions curve by 2030.

Manitoba Releases Draft Framework for Output-based Carbon Pricing System for Large Industrial Emitters

In October 2017, the Manitoba government released its Made-in-Manitoba Climate and Green Plan (the Plan) and announced that it would be introducing a flat carbon tax of $25 per tonne of carbon dioxide equivalent (CO2e). One of the commitments set out by the Manitoba government in the Plan was the development an output-based pricing system (OBPS) for large industrial emitters. In July 2018, Manitoba fulfilled this commitment by releasing its Draft Regulatory Framework for a Made-in-Manitoba Output-based Pricing System (the Draft Framework) for public consultation.

The release of the Draft Framework follows the introduction of Bill 16 into the provincial legislature in March 2018. Bill 16, also known as The Climate and Green Plan Implementation Act – is expected to come into law in November 2018. Bill 16 provides the legislative authority for the Manitoba government to implement the Plan, along with the fiscal tools needed to introduce a carbon price in the province. Bill 16 also establishes the Industrial Greenhouse Gas Emissions Control and Reporting Act, which provides the government with the authority to develop an OBPS for industrial facilities competing in emissions intensive, trade exposed (EITE) sectors of the economy. Manitoba’s proposed OBPS is described in further detail below.

Overview of Manitoba’s Proposed OBPS

The Draft Framework describes the key elements to be considered in the design and implementation of the OBPS. Manitoba’s proposed OBPS is separate from the proposed federal OBPS. Manitoba’s OBPS will apply to large industrial emitters in the province, specifically those facilities with emissions of 50,000 tonnes or more of CO2e. At the moment, there are six large industrial emitters in Manitoba (representing approximately 6% of the province’s total emissions): Koch Fertilizer Canada, TransCanada Pipelines, Graymont, Canadian Kraft Papers, Husky Oil and Vale.

Manitoba plans to establish emission limits for covered facilities in the form of emissions intensity performance standards, or EIPS, which are expressed in tonnes of carbon dioxide equivalent (tCO2e). Covered facilities with emissions above their established limit will be required to pay the $25 per tCO2e emitted beyond their limit or meet their compliance obligations through another approved compliance option (e.g. emission offset credits). Covered facilities which emit less than their established emissions limit will be able to bank or sell emissions to other covered facilities up to their limit at a compliance price of $25 per tCO2e.

Manitoba’s OBPS will cover emissions from the following on-site sources: stationary combustion, on-site transportation, industrial processes and product use, waste and wastewater, flaring, and some venting and fugitive sources.

The Manitoba government is considering three options for setting EIPS:

  1. Facility-specific Standards – an EIPS is set at the individual facility level based on a facility’s historical GHG performance.
  2. Sector-level Standards – an EIPS is set at a designated percentage below the production-weighted average emissions intensity of similar facilities within the same sector.
  3. Best-in-class Standards – an EIPS is set at the emissions intensity of the best-performing facility within a sector, globally, nationally, regionally, or provincially.

The Draft Framework notes that there are industrial facilities in the province with multiple product/activity lines that may warrant establishing multiple emissions-intensity performance standards (one for each product/activity). The emissions limit for these facilities will be based on the sum of the limits for each product/activity. A covered facility’s compliance obligation will be based on the following formula:

Compliance Obligation (tCO2e) = Facility’s Total Emissions – Facility’s Emissions Limit

In order to facilitate continuous improvement in GHG performance, the stringency of EIPS will increase over time. It is proposed that each EIPS be subject to an annual 2% declining cap factor. The declining cap factor would apply to all emissions included in the emissions intensity standard, with the exception of industrial process emissions.

Covered industrial facilities will receive an OBPS registration certificate that enables them to purchase carbon tax-free natural gas and solid fuels and receive a full rebate on the carbon tax paid throughout the calendar year on all other fuel types. The first compliance period would begin in January 2019 and reporting would be required as of January 1, 2019. However, performance standards would not be set until June 2019 given the time constraints for implementation.

For compliance purposes, covered facilities must compensate for excess emissions by: (a) remitting an emissions performance credit at a rate of one credit for each tonne of greenhouse gas emissions in excess of the limit; (b) paying a levy at a rate of $25 for each tonne of greenhouse gas emissions in excess of the limit; or (c) a combination of both (a) and (b). The Manitoba government will issue performance credits to facilities for each tCO2e below their emissions limit. Under the OBPS, the following types of emission credits will be available:

  • Performance Credits – issued to an industrial operation whose emissions in a compliance period are below the limit that applies in that period.
  • Manitoba Offset Credits – under the regulations, an emissions offset credit system may be established for projects in Manitoba that reduce emissions or remove emissions from the atmosphere.
  • Agreements with Other Jurisdictions – the minister may enter an agreement respecting recognition of credits issued by the other jurisdiction.

The Manitoba government plans to establish an emissions registry to track the issuance, trading, and use of emissions performance credits. Each registered facility will be required to create an account with the registry once it becomes available.

In addition, registered facilities will be required to quantify emissions using a prescribed methodology. Consideration is being given to requiring third-party review of facility reports verified by a certified third-party accredited to ISO 14065 by the Standards Council of Canada or the American National Standards Institute.

The Manitoba government is also considering an opt-in provision for industrial facilities that do not meet the 50,000 tCO2e eligibility threshold, but may experience competitiveness pressures due to the carbon tax. Facilities that meet both of the following criteria would be eligible to opt-in:

  • Have annual emissions between 10,000 and 50,000 tCO2
  • Compete in an EITE sector/sub-sector of the economy.

The Manitoba government will hold workshop and information sessions for stakeholders throughout fall 2018, and will issue registration certificates to covered facilities in December 2018. The OBPS would be implemented in January 2019, followed by the establishment of EIPS in June 2019. The opt-in for qualified entities would commence in January 2020.

The Manitoba government has invited interested parties to provide written comments/feedback on the proposed regulatory framework to Manitoba Sustainable Development by September 30, 2018. Comments may be submitted in writing to the following address or email:

Sustainable Development Climate Change and Energy Branch

12-155 Carlton St., Winnipeg, MB, R3C 5R9

Email: ccinfo@gov.mb.ca

Federal Government Adjusts Output-Based Carbon Pricing System for Industrial Emitters

The federal government remains steadfast in its commitment to implement a price on carbon in 2019. As a cost effective way to reduce emissions while incentivizing clean innovation, carbon pricing is a key policy tool in the fight against climate change.

The federal carbon pricing backstop, which will come into force on January 1, 2019, is made up of two components: (1) a charge on fossil fuels that will generally be paid by fuel producers or distributors, and (2) a separate pricing system for industrial facilities that are emissions intensive and trade-exposed, known as the output-based pricing system (OBPS).

Following stakeholder consultations in spring 2018, Environment and Climate Change Canada (ECCC) released its preliminary competitiveness assessment on July 27, 2018. Based on its assessment and feedback received from emissions intensive and trade-exposed industries, the federal government announced that it is updating its proposed approach to setting output-based standards. In particular, ECCC will adjust the benchmark under the proposed OBPS from 70% to 80% of an industry’s average emissions, and from 70% to 90% for producers of cement, iron and steel, lime and nitrogen fertilizer. This means that emissions generated above these benchmarks will be subject to the carbon price. The federal carbon pricing backstop will be imposed on provinces that do not have a carbon pricing system that meets the federal benchmark. The tax is set for $20 a tonne in 2019, and will increase by $10 each year until it reaches $50 in 2022. The federal government has said that it will release a detailed paper on the draft OBPS regulations for public comment in fall 2018.

Overview of the OBPS

In January 2018, ECCC released the draft regulatory framework for the OBPS, which set the benchmark at 70% of an industry’s average emissions performance.  The OBPS is designed to incentivize companies to reduce their greenhouse gas (GHG) emissions and spur innovation, while maintaining competitiveness and protecting against carbon leakage.

Instead of paying the charge on fuels that they purchase, industrial facilities subject to the OBPS will face a carbon price on the portion of their emissions that are above a limit, which will be determined based on relevant output-based standards (emissions per unit of output). The OBPS will apply to industrial facilities located in jurisdictions where the federal carbon pricing system applies and that emit 50,000 tonnes of carbon dioxide equivalent (CO2e) or more per year; smaller facilities (emitting 10,000 tonnes of CO2e or more) will have the choice to opt in voluntarily. Facilities that emit less than their annual limit will receive surplus credits from the federal government for the portion of their emissions that are below their limit. A facility can trade surplus credits it earns, creating an incentive for facilities to reduce emissions below the limit when cost effective to do so. In May 2018, ECCC released additional details on the proposed compliance options under the output-based pricing system.

Summary of Preliminary Competitiveness Analysis

As noted above, the January 2018 regulatory framework proposed that output-based standards be set at 70% of an industrial sector’s average greenhouse gas emissions intensity, with the possibility to adjust the standard based on an assessment of the potential impacts of carbon pricing on sector competitiveness and to carbon leakage. In the framework, ECCC identified two factors by which the competitiveness of industrial sectors or specific facilities within a sector may be impacted by carbon pricing:

  1. the carbon emissions intensity associated with the production of the products of the sector or facility (the carbon emissions per unit of net output is representative of the cost exposure of the sector or facility to carbon pricing); and
  2. the extent to which facilities in the sector are able to pass on the costs of carbon pricing without significant loss of market share, an indicator of which is its degree of trade-exposure.

As part of its assessment, ECCC is undertaking a three-phased approach to determine the level at which the output-based standards are set for a given sector:

  1. Phase 1 consists of a “static” test that considers historical data at the national level to calculate sector-level estimates of emissions intensity and trade exposure. These metrics are then combined to provide an indication of competitiveness risk due to carbon pricing. This approach is similar to the quantitative tests used in several other jurisdictions with carbon pricing, including Alberta, Québec and California.
  2. Phase 2 is a “dynamic” test using economic modeling that uses projected emissions and economic data to evaluate the same emissions intensity and trade exposure metrics as phase 1, for the year 2022.
  3. In Phase 3, stakeholders are invited to submit additional supporting information and analyses on aspects of competitiveness to supplement the results of Phases 1 and 2.

Phase 1 and 2  preliminary assessments have been completed for the following sectors: base metal smelting and refining, cement, petroleum refining, bitumen and heavy oil upgrading, upstream oil and gas, oil sands and heavy oil, natural gas pipelines, iron and steel manufacturing, lime, pulp and paper, nitrogen fertilizers, ethanol, food processing, potash, mining, and iron ore pelletizing.

Based on its findings from the Phase 1 and 2 analyses, ECCC is making the following two adjustments to the output-based standards:

Four sectors were assessed to be in a high competitive risk category and will have their output-based standard adjusted to 90%of the sector’s average GHG emissions intensity:

  1. cement
  2. iron and steel manufacturing
  3. lime
  4. nitrogen fertilizers

The starting point for all remaining industrial sectors is revised from 70% to 80% of the sector’s average GHG emissions intensity.

With Phase 3 of ECCC’s analysis now under way, stakeholders have been invited to submit additional supporting information (e.g. evidence of significant facility-level impacts, domestic or international market considerations, and a consideration of indirect costs on sectors associated with carbon pricing). ECCC has said that further sectors or sub-sectors may see adjustments to their output-based standards based on the results of the Phase 3 analysis. Once Phase 3 of the analysis is complete, ECCC will release draft OBPS regulations for public comment.