GHG Accounting Solutions – GHG Accounting

UNFCCC Parties Agree on Katowice Climate Package at COP24

At the 24^th 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.

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:

Facility-specific Standards – an EIPS is set at the individual facility level based on a facility’s historical GHG performance.
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.
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