Climate Change – GHG Accounting

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.

Carbon Clock

The MCC Carbon Clock shows how much CO2 can only be released into the atmosphere to limit global warming to a maximum of 1.5°C and 2°C, respectively.

Task Force on Climate-related Financial Disclosures (TCFD)

Disclosure of Climate Risks increasingly becoming important as more companies support the Task Force on Climate-related Financial Disclosures (TCFD) At the COP21 Paris Climate Change Conference in 2015, the Financial Stability Board (FSB) established an industry-led disclosure task force on climate-related financial risks under the chairmanship of Michael Bloomberg – the Task Force on Climate-related Financial Disclosures (TCFD). Since the establishment, the TCFD developed recommendations on climate-related financial disclosures in 2017 to help businesses disclose clear, comparable and consistent information about the risks and opportunities presented by climate change as well as promote and monitor adoption of its recommendations. In 2018, it published a status report, which stated that the TCFD had more than 500 supporters, including 457 companies and 56 other organizations (e.g., industry associations, governments). The companies represent a broad range of sectors with a combined market capitalization of over $7.9 trillion. This includes over 287 financial firms, responsible for assets of nearly $100 trillion. (2018 Status Report: Task Force on Climate-related Financial Disclosures)

Recent Development in Canadian Regulatory World

This growing voluntary movement is bringing the issue of climate-related financial disclosure to mainstream. In light of TCFD recommendations, Canadian Securities Administrators (CSA) announced a project in 2017 to review the disclosure of risks and financial impacts associated with climate change. The CSA’s review looked at the mandatory and voluntary climate change-related disclosures of 78 large companies from the S&P/TSX composite Index. Currently, the companies are obliged under existing Ontario Securities Commission (OSC)’s rules to disclose information relating to climate change if the information is deemed a “material fact,” but there is otherwise no explicit obligation for companies to disclose climate change related information or risks. (Green Peace Report) Earlier this year, the CSA completed the report with a finding that there was a broad consensus for improvement on disclosure in respect to climate change-related risks and financial impacts. In the near-term, the CSA plans to develop new guidance and initiatives to educate issuers about climate change-related disclosures and consider new disclosure requirements regarding climate change-related risks. The OSC, in its Notice of Statement of Priorities for Financial Year to End March 31, 2019, stated that it will continue to monitor developments of TCFD for a regulatory response.

Recent Development in American Regulatory World

In the U.S., the Securities and Exchange Commission (SEC) requires public companies to disclose any “material” effects on their operations that arise from the direct and indirect effects of existing or pending legislation and regulations related to climate change as well as the effects of physical changes caused by climate change (such as more severe weather events, water availability, and changing patterns of farmland fertility). However, a number of reports point out that these requirements were not prioritized or enforced.

In response to investors’ call for greater SEC scrutiny, Senator Elizabeth Warren introduced a bill with seven co-sponsors in September, 2018 that would require public companies to disclose climate-related risks in their annual Securities and Exchange Commission (SEC) reporting. The bill also directs the SEC, in consultation with climate experts and other federal agencies, to issue rules within one year that require every public company to disclose:

Its direct and indirect greenhouse gas emissions
The total amount of fossil-fuel related assets that it owns or manages
How its valuation would be affected if climate change continues as its current pace or if policymakers successfully restrict greenhouse gas emissions to meet the Paris accord goal; and
Its risk management strategies related to the physical risks and transition risks posed by climate change.

The bill further directs the SEC to tailor these disclosure requirements to different industries and to impose additional disclosure requirements on companies engaged in the commercial development of fossil fuels.

Following this legislative push, a group of investors representing more than $5 trillion in assets under management petitioned the SEC in October, 2018 to develop a comprehensive framework that would require public companies to disclose environmental, social and governance (ESG) aspects relating to their operations. The petition cites increasing demand from investors for information regarding climate risks, notes that voluntary disclosures by some companies are insufficient and suggests the TCFD’s recommendations as a starting point for the SEC to “promulgate its own Framework for comprehensive ESG disclosure.”

More on TCFD

The TCFD has 32 members that were chosen by the Financial Stability Board to include both users and preparers of disclosures from across the G20’s constituency covering a broad range of economic sectors and financial markets. The TCFD’s recommendations published in 2017 are structured around four thematic areas that represent core elements of how organizations operate: governance, strategy, risk management, and metrics and targets. In addition, there are guidance to support all organizations in developing climate-related financial disclosures as well as supplemental guidance for specific sectors.

One of the TCFD’s key recommended disclosures focuses on the resilience of an organization’s strategy, taking into consideration different climate-related scenarios, including a 2° Celsius or lower scenario. The Climate Disclosure Standards Board (CDSB)—an international consortium of business and environmental NGOs committed to advancing and aligning the global mainstream corporate reporting model to equate natural capital with financial capital—developed a Framework for reporting environmental information, natural capital and associated business impacts aligned with the TCFD’s recommendations.

As mentioned earlier, as of September 26, 2018, 513 organizations from around the world have expressed their support for the TCFD—of which 32 supporters are from Canada. It is notable that major pension funds, banks and asset management firms from Canada are in support of disclosure of climate risks.

Canadian organizations that support the TCFD

Name	Sector	Industry	Date
AIMCO	Financial	Asset Management	June 2017
Barrick Gold Corporation	Materials	Metals & Mining	June 2017
British Columbia Investment Management Corporation	Financial	Asset Management	June 2017
Caisse de dépôt et placement du Québec	Financial	Asset Management	June 2017
Canada Pension Plan Investment Board	Financial	Pension	June 2017
Ontario Teachers’ Pension Plan	Financial	Pension	June 2017
OPTrust	Financial	Pension	June 2017
PSP Investments	Financial	Asset Management	June 2017
Royal Bank of Canada	Financial	Banking	October 2017
TD Bank Group	Financial	Banking	October 2017
Chartered Professional Accountants of Canada (CPA Canada)	Other	Accounting Association	November 2017
City of Vancouver	Government	Government Local	November 2017
Manulife Financial Corporation	Financial	Insurance	November 2017
Telus	Telecommunication Services	Diversified Telecommunication Services	November 2017
The Co-operators Group	Financial	Insurance	November 2017
Workplace Safety & Insurance Board (WSIB)	Financial	Insurance	November 2017
BMO Financial Group	Financial	Banking	December 2017
Scotiabank	Financial	Banking	February 2018
Canadian Imperial Bank of Commerce (CIBC)	Financial	Banking	March 2018
AGF Investments Inc.	Financial	Asset Management	April 2018
Desjardins Group	Financial	Asset Management	April 2018
National Bank of Canada	Financial	Banking	April 2018
NEI Investments	Financial	Asset Management	April 2018
Suncor Energy	Energy	Oil, Gas & Consumable Fuels	April 2018
Toronto Financial Services Alliance (TFSA)	Other	Government Organization	April 2018
AlphaFixe Capital	Financial	Asset Management	June 2018
Addenda Capital	Financial	Asset Management	July 2018
Export Development Canada	Financial	Export Credit Agency	September 2018
Sun Life Financial	Financial	Insurance	September 2018
Teck	Materials	Metals & Mining	September 2018
Toronto Centre-Global Leadership in Financial Supervision	Industrials	Professional Services	September 2018
Ontario Power Generation	Utilities	Utilities	November 2018

Source: TCFD Supporters as of the One Planet Summit September 2018. https://www.fsb-tcfd.org/tcfd-supporters/

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:

federal fuel charge; and
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 1^st, 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.

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.

Investors Increasingly Backing Shareholder Resolutions on Disclosure of Climate-related Risks

In the past few months, an increasing number of investors have been pushing shareholder resolutions on the risks related to carbon regulations. Ceres (a leading sustainability non-profit organization) reports that in 2017 so far, almost half of investors in fossil fuel and utility companies are backing resolutions for carbon intensive companies to undertake and disclose 2-degree scenario analysis, in order to better align their business plans with the goals of the Paris Climate Agreement and the accelerated transition to a low-carbon economy that is already underway. The following are highlights from the 2017 shareholder season so far, as reported by Ceres:

Highlights from the 2017 shareholder season include:

A historic majority vote of 62% at ExxonMobil. At ExxonMobil’s annual meeting on May 31, 2017, 62% of shareholders voted in favour of a proposal calling on the company to assess and disclose how it is preparing its business for the transition to a low-carbon future. Institutional investors with more than $5 trillion of combined assets under management co-filed the proposal, including lead-filers from the New York State Common Retirement Fund and the Church Commissioners for England.
A first evermajority vote of 57% at PPL Corp. While the company has divested much of its power generation, it has not disclosed a long range greenhouse gas reduction strategy or goals.
A 48% vote at Dominion Resources.Ceres indicates that the company appears to be relying too heavily on natural gas, which is not aligned with a 2-degree scenario, and the company ranks at or near the bottom for delivery of energy efficiency and renewable energy to customers.
A 45% vote at DTE Energy.In an encouraging development, just one week after the vote, DTE Energy Chairman and Chief Executive Gerry Anderson announced that the company would reduce carbon emissions by 80% by 2050 and close its coal plants.
A 46% vote at Southern Company. In a climate-related vote held on May 24, 2017, 46% of its shareholders asked the Southern Company to report on how it plans to align its business operations with a 2-degree global warming scenario, up from 34% last year. The company has made sizable, high risk bets on nuclear and carbon capture and storage (CCS) technologies and has not set long-range GHG reduction goals or disclosed plans for aligning its business with a 2-degree scenario.
A 50% vote at PNM Resources. While the company recently proposed a shift from coal to natural gas and renewables, it has not disclosed a long range strategy consistent with a 2-degree Scenario.
A 46% vote at Duke Energy. Duke Energy is the second largest emitter in the US, and does not have long range GHG reduction plans.
Xcel Energy agreed to disclose its long-range GHG reduction plans. This move indicates that it is well-positioned to meet the expectations of international climate goals.

Ceres analyzed the resolutions and saw an average of 45% support this year for resolutions asking companies to report regularly on the kind of impact regulations aimed at reducing carbon emissions would have on their operations. The percentage in favor is up from 21% in 2014 and 34% in 2016.

These shareholder votes send a strong message that investors are slowly sitting up and taking notice of the material financial implications of climate change. Many investors recognize that if companies take advantage of a near term weakening of regulations and make investments that are not prudent over the long time horizon that these investments demand, they risk stranding assets and potential future write-downs on financial statements.

This trend in shareholder voting is taking placing within a broader push by global institutional investors to spur action at the governmental level to fully implement the Paris Agreement. Ahead of the G20 Summit in Hamburg, 400 investors with $22 trillion in assets under management sent a clear signal that climate action is essential through support of both the Paris Agreement and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The TCFD has laid out an ambitious five-year path for full implementation of the Paris Agreement, which will depend on companies taking a leadership role to start implementing the recommendations this year.

Setting our sights on 2050: Canada announces Mid-Century Long-Term Low-Greenhouse Gas Development Strategy at COP 22

At COP 22 in Marrakech, Morocco, federal Minister of Environment and Climate Change, Catherine McKenna, announced Canada’s Mid-Century Long-Term Low-Greenhouse Gas Development Strategy (the Strategy). As one of the first countries to release a long-term greenhouse gas (GHG) strategy focused on 2050, the Strategy describes various pathways for innovative and creative solutions consistent with the Paris Agreement’s goal of holding the global average ‎temperature rise to well below 2 °C, while pursuing efforts to limit the temperature increase to 1.5 °C. In particular, the Strategy considers an emissions abatement pathway consistent with net emissions falling by 80% in 2050 from 2005 levels.

The federal government acknowledges that in order to achieve emission reductions in line with this goal will require substantial effort on the part of all Canadians, with a fundamental restructuring of multiple sectors of the economy. Cost-effective abatement opportunities will need to be realized from virtually every greenhouse gas emissions source and activity. In the energy sector, this will include enhanced energy efficiency and conservation, finding cleaner ways to produce and store electricity, and switching towards non-emitting electricity or other low-GHG alternatives.

The Strategy notes that the risks of inaction are threefold:

Ongoing emissions of anthropogenic GHG will cause atmospheric concentrations to continue to rise, leading to higher global average temperatures and a cascade of related impacts, including increases in severe weather, and rising sea level.
Failure to act now means that costs will likely rise in the future as the required pace of decarbonisation increases. This raises the probability of misallocation of investment and infrastructure, as well as stranded assets.
As the world moves to address climate change, Canada should not be left behind in the emerging global markets for clean energy and related goods and services.

The Strategy identifies the following key messages:

Most Canadians recognise the need to mitigate climate change and limit the increase in the global average temperature, but the magnitude of the challenge is less well understood, with a requirement for very deep emissions cuts from every sector by mid-century.
Mitigating greenhouse gas emissions is necessary to avoid the increasing threat presented by climate change. Benefits of action to reduce climate risk will outweigh costs and the international community is moving towards low-greenhouse gas economies. A particular focus on short-lived climate pollutants is also required if we are to stay below the 1.5°C – 2°C temperature goal.
Canada has worked closely with the United States and Mexico in the development of this report. Our continental partners have also described ambitious mitigation action by 2050 in their respective strategies.
Encouraging international efforts, including reducing emissions in other countries will be key to the global response.
Working collaboratively with Indigenous peoples by supporting their ongoing implementation of climate change initiatives will be key. Consultations with Indigenous communities must respect the constitutional, legal, and international obligations that Canada has for its Indigenous peoples.
The Strategy will help inform the pan-Canadian framework for clean growth and climate change.

In addition, the Strategy identifies a number of building blocks that could provide the foundation for Canada’s long-term climate change mitigation strategy:

Cities are home to 70% of the world’s energy related carbon dioxide emissions. Canadian cities host 80% of the national population, compared to 62% sixty years ago. With a continuing trend in urbanization for the upcoming decades, cities across Canada cannot afford to wait to increase climate change mitigation and adaptation efforts.
Canada’s forests and lands will continue to play an important role in sequestering substantial amounts of carbon dioxide from the atmosphere. This sequestration can be augmented through policies and measures that better manage our forests and forest products. Without consideration of the global land sector, the 1.5 to 2°C temperature goal will be very hard to achieve.
Energy efficiency and demand side management are key to achieving deep GHG reductions. Efficiency gains are also key enablers of electrification technologies and consumer savings.
Electrification has been identified as an essential step in all deep GHG mitigation analyses. The electrification of end-use applications that are currently using fossil fuels is fundamental, e.g. using electricity to power certain cars, trucks, building appliances and heating systems, and energy requirements for some industries.
Concurrent trends towards decarbonization of the electricity generating sector are needed. Electricity generation in Canada is already more than 80% non-emitting, with a trend towards non-emitting generation expected to continue, including through increased government action.
Some sectors such as heavy industries, marine transportation, some heavy freight transportation, and aviation could move to lower or low-carbon fuels such as second generation biofuels or hydrogen. Alternatively, new and emerging technologies in synthetic hydrocarbons or energy storage would be needed.
Abatement of non-carbon dioxide greenhouse gases, such as methane and hydrofluorocarbons, is a priority given their high global warming potentials. Reductions of these pollutants can often help slow the rate of near-term warming and contribute to achievement of the global temperature goal. Although black carbon is not classified as a greenhouse gas, it has strong global warming effects that must also be addressed.
Innovation will also be crucial. A sustainable energy transition is possible with currently deployed or near-commercial technologies, but the long-term transition will be eased with the near-term accelerated deployment of clean energy options, or the development of more innovative technologies. The private sector has an important role to play in this respect including spurring investment and innovation towards low GHG alternatives. Carbon pricing will be an important element to achieving this objective.
Collaboration with provinces and territories, Indigenous peoples, municipalities, business and other stakeholders will be essential to Canada’s long-term success in enabling clean growth, reducing emissions and seizing the opportunities of the low-carbon global economy.

Dealing with climate change will ultimately require net-zero anthropogenic greenhouse gas emissions over the course of this century. The Strategy document concludes by noting that Canada will need to fundamentally transform all economic sectors, especially patterns of energy production and consumption.