Polling by Abacus Data found that 37% of respondents would definitely back a party that wanted to eliminate the federal carbon tax and another 28% might do so, while only about one in five said they would never support the idea.

The issue was one of four that Abacus identified as a vote winner for any party that espoused it, along with increasing income taxes on the richest 1% of Canadians (46% definite/32% possible), making public transit free in every Canadian city (40% definite/31% possible), and forcing religious organizations to pay taxes (34% definite/29% possible).

“This data confirms that eliminating the carbon tax has become a vote winner for the Conservatives and a real liability for the Liberals,” Abacus says.

Conservatives “overwhelmingly love” the idea of abolishing the carbon tax, the poll showed. Liberal and Bloc Québécois supporters are likely to oppose it, though with some disagreement, while New Democratic Party supporters “are the most divided—27% say they would never vote for a party that promised to eliminate the carbon tax while 25% say they definitely would vote for such a party,” the polling report states.

The Liberals maintain that better communication and public awareness will increase the carbon price’s popularity, and the party has tried to remind voters that the vast majority of households benefit from a carbon tax through rebates. Amid low poll numbers and with the election coming up, the current government is committed to moving forward without further exemptions since pausing it for home heating oil in the Atlantic provinces.

Meanwhile, Prime Minister Justin Trudeau trails behind Conservative leader Pierre Poilievre, whose “Axe the Tax” campaign has gained momentum and won him points at the polls.

The controversy prompted Corporate Knights Research Director Ralph Torrie to call for a “grown-up conversation” about how to address the climate emergency without having a “shouting match” over carbon pricing. “The last thing the country needs is a ‘take no prisoners’ battle to the death over the carbon tax that could set back what climate progress has been made,” he wrote earlier this year.

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Perceptions Skewed in the U.S.

Across the border in the United States, a skewed perception of public support for climate action is steering lawmakers away from implementing policies to address climate change, Grist reports.

Local officials especially continue to misinterpret public support for fossil fuels, even though three-quarters of Americans favour regulating carbon dioxide as a pollutant, according to polling by the Yale Program on Climate Change Communication.

Academics have studied specific cases of this disconnect. In a recent article in the journal Nature Energy, researchers wrote that locally elected officials in Pennsylvania underestimated their constituents’ support for large solar projects. Another study by Cambridge University found that congressional staffers underestimated the popularity of restricting carbon emissions in their local districts.

The misperception is partly due to a psychological bias, says Grist. But more deliberate, intentional actions by corporations are also at work to present a false narrative, with some going so far as to hire actors to indicate support for fossil fuel projects and oppose renewables at public meetings.

“What really matters, in some ways, is not objectively what the public thinks, but it’s what decision-makers think the public thinks,” said Matto Mildenberger, a political science professor at the University of California, Santa Barbara. “There’s this enormous effort by the industry to shape what politicians think the public wants.”

This article first appeared in The Energy Mix. Read the original article here.

The post How to draw voters in the next election: Roll back the carbon tax (and make transit free) appeared first on Corporate Knights.

This policy flip-flop, mixed with poor government communication and sustained attacks by politicians that prey on affordability concerns, isn’t advancing Canada’s economic or environmental objectives. Never mind the generous rebate cheques distributed by the federal government, leaving most families better off, or the drag on national prosperity from the wilder weather and extreme storms that heat-trapping pollution brings. This ongoing debate is a dangerous distraction from the hard task of building effective, efficient climate policy.

But the carbon tax is not the whole carbon-pricing story in the country. Behind the scenes, industrial carbon pricing through large-emitter trading systems (LETS), including output-based pricing or cap-and-trading systems, is propelling Canada’s clean energy transition. A new report by the Canadian Climate Institute shows that this industrial price on carbon will be roughly three times more effective at cutting emissions between now and 2030 than the carbon tax – contributing a whopping 53 to 90 megatonnes of reductions towards the 2030 target.  And even in Alberta, industrial carbon pricing is alive and well – and bringing down emissions.

Since 2007, successive provincial governments in Alberta have updated their industrial carbon-pricing program targeting large emitters, including producers of oil and gas, chemicals and cement. And the basic design of Alberta’s system has been adopted across the country. Currently, 42% of national emissions are covered by federal, provincial and territorial LETS, with tradable emissions credits valued at $2.4 billion and rising with the national carbon price. By comparison, the federal fuel charge covers 34% of national emissions.

Despite the rhetoric against carbon pricing, governments of all political stripes have become comfortable making big polluters pay. But why? The answer is simple: LETS are good at reducing emissions, good for business and good for competitiveness. To remain effective, however, adjustments will need to be made.

Let’s look closer at what LETS have going for them.

LETS protect competitiveness by lowering costs

To keep balance-sheet costs manageable, the carbon price is applied to only a fraction of industrial emissions, with typically 75% to 90% of emissions unpriced. The incentive to reduce emissions, however, remains unchanged since every emission reduced is still valued at the full carbon price. With the carbon price rising to $170 by 2030, every tonne reduced is worth $170, while the compliance cost that firms face in that year ranges between $17 and $43 per tonne of emissions (assuming unpriced emissions are still 75% to 90%). This means that a chemical plant with 100,000 tonnes of emissions would see carbon costs somewhere between $1.7 and $4.25 million instead of $17 million if all emissions were priced.

As competitiveness risks change, regulators can change the quantity of unpriced emissions. They do this through revaluating the level of the performance standard, which sets the level of unpriced emissions, typically expressed as emissions per unit of production (i.e., allowable emissions per tonne of steel produced). Should competitiveness pressures worsen, the level of unpriced emissions can be increased, and vice versa. To assess competitiveness pressures, Alberta has a series of profit and sales tests that determine whether the financial impact of compliance on a facility is significant. These tests compare the costs of carbon pricing to firm profit or sales. If a threshold is exceeded, the quantity of unpriced emissions is increased, thereby lowering costs.

This scalability to changing competitiveness – or even technology conditions should abatement become easier due to innovation – makes LETS a flexible policy option.

LETS provide a revenue stream for low-carbon projects

Companies are able to sell credits when they reduce emissions and outperform their performance standard. And with carbon prices rising, emission credits will gain value. As this happens, firms can decide whether to sell credits at a profit or bank them to potentially apply them against rising future carbon-pricing costs. This profit motivation becomes particularly strong when assessing whether to invest in emissions-reduction technology, such as carbon capture, utilization and storage.

LETS protect against border carbon tariffs

LETS also help smooth protectionist waters as countries implement carbon border tariffs. With LETS in place, the risk that other countries will impose carbon tariffs on Canadian exports lowers. The protectionist winds are blowing hard out of Europe, where the European Union will apply a carbon price on imports from specific industries, including cement and steel. Various carbon protectionist tariffs are also being contemplated in the United States that would first assess the emission intensity of key products, including aluminum, cement, oil, fertilizer, iron and steel. The Unites States then would seek to apply a border carbon charge or tariff on carbon-intensive imports, increasing the market price in the United States for Canadian products.

Let’s get the details right

There are two big risks that need to be addressed to ensure that LETS can continue to contribute emission reductions in line with Canada’s climate targets. First, recent analysis by the Canadian Climate Institute indicates future LETS market prices don’t always hold at the national carbon price, notably in Alberta, due to an oversupply of credits.  Credit oversupply can happen for a variety of reasons, including when firms are granted more credits than needed for compliance; technology investments, spurred by subsidies, generate large volumes of credits; and overlapping policies double count reductions. The institute’s analysis shows that addressing credit oversupply and some policy overlap, notably between LETS and the oil and gas emissions cap, can cut another 15 megatonnes of national emissions by 2030 from industrial processes. This 15 megatonnes equals more than a third of the reductions needed to close Canada’s 2030 emissions gap.

This policy fix is straightforward. Regulators need to routinely monitor and update greenhouse gas performance standards to make them stricter. The movement toward government insuring against uncertain future carbon prices, as in the case of carbon contracts for differences and credit offtake agreements, can also help maintain investment certainty.

Second, market transactions and trading prices are opaque and apart from Quebec’s cap-and-trade system, there is no foresight on the current or future value of emission credits in the LETS markets. This adds uncertainty for investors but also limits the ability for regulators to predict market imbalances and take corrective action. Canadian LETS markets are currently worth about $2.4 billion, but this value rises rapidly with the carbon price and stricter performance standards, growing to $6 to $7 billion by 2030. It’s astounding that market oversight and trading systems are not yet in place to track how these markets function and whether the market price holds.

It is no wonder that LETS are the policy tool of choice across Canada and across the political spectrum. These systems incentivize emission reductions, minimize competitiveness risks, and calm the threat of border tariffs on Canada’s exports.

LETS get the job done.

Dave Sawyer is principal economist with the Canadian Climate Institute and operates EnviroEconomics.

The post Despite claims to the contrary, industrial carbon pricing is working well appeared first on Corporate Knights.

The book’s insights struck a chord with people who felt a growing sense of economic inequality but didn’t have the data to back it up. I was one of them. It made me wonder, how much carbon pollution is being generated to create wealth for a small group of extremely rich households? Two kids, 10 years and a Ph.D. later, I finally have some answers.

In a new study, colleagues and I investigated U.S. households’ personal responsibility for greenhouse gas emissions from 1990 to 2019. We previously studied emissions tied to consumption – the stuff people buy. This time, we looked at emissions used in generating people’s incomes, including investment income.

If you’ve ever thought about how oil company CEOs and shareholders get rich at the expense of the climate, then you’ve been thinking in an “income-responsibility” way.

While it may seem intuitive that those getting rich from fossil fuels bear responsibility for the emissions, very little research has been done to quantify this. Recent efforts have started to look at emissions related to household wages in France, global consumption and investments of different income groups and billionaires’ investments. But no one has analyzed households across a whole country based on the emissions used to generate their full range of income, including wages, investments and retirement income, until now.

We linked a global data set of financial transactions and emissions to microdata from the U.S. Census Bureau and Bureau of Labor Statistics’ monthly labor force survey, which includes respondents’ job, demographics and income from 35 categories, including wages and investments. People’s wages we connected to the emission intensity of the industries that employ them, and we based the emissions intensity of investment income on a portfolio that mirrors the overall economy.

The results of our analysis were eye-opening, and they could have profound implications for producing more effective and fair climate policies in the future.

A view from the top 1%

Both our consumption- and income-based approaches reveal that the highest-earning households are responsible for much more than an equitable share of carbon emissions. What’s more surprising is how different the level of responsibility is depending on whether you look at consumption or income.

In the income-based approach, the share of national emissions coming from the top 1% of households is 15% to 17% of national emissions. That’s about 2.5 times higher than their consumer-related emissions, which is about 6%.

In the bottom 50% of households, however, the trend is the exact opposite: Their share of consumption-based national emissions is 31%, about two times larger than their income-based emissions of 14%.

Why is that?

A couple things are going on here. First, the lowest earning 50% of U.S. households spend all that they earn, and often more via social assistance or debt. The top income groups, on the other hand, are able to save and reinvest more of their income.

Second, while high-income households have very high overall spending and emissions, the carbon intensity – tons of carbon dioxide emitted per dollar – of their purchases is actually lower than that of low-income households. This is because low-income households spend a large share of their income on carbon-intensive basic necessities, like home heating and transportation. High-income households spend more of their income on less-carbon-intensive services, like financial services or higher education.

Implications for a carbon tax

Our detailed comparison could help change how governments think about carbon taxes.

Typically, a carbon tax is applied to fossil fuels when they enter the economy. Coal, oil and gas producers then pass this tax on to consumers. More than two dozen countries have a carbon tax, and U.S. policymakers have proposed adding one in recent years. The idea is that raising the price of these products by taxing them will get consumers to shift to cheaper and presumably less carbon-intensive alternatives.

But our studies show that this kind of tax would disproportionately fall on poorer Americans. Even if a universal dividend check was adopted, consumer-facing carbon taxes have no impact on saved income. Generating that income likely contributed to greenhouse gas emissions, but as long as the money is used to buy stocks rather than consumables, it is excluded from carbon taxes. So, this kind of carbon tax disproportionately affects people whose income goes primarily toward consumption.

A profit-focused carbon tax

What if, instead of focusing on consumption, carbon taxes addressed greenhouse gases as an outcome of profit generation?

The vast majority of American corporations operate under the principle of “shareholder primacy,” where they see a fiduciary duty to maximize profit for their investors. Products – and the greenhouse gases used to make them – are not created for the benefit of the consumer, but because the sale of those products will benefit the shareholders.

If carbon taxes were focused on shareholder income linked to greenhouse gas emissions rather than consumption, they could target those receiving the most economic benefits resulting from these emissions.

The impact

A couple of interesting things might result, particularly if the tax was set based on the carbon intensity of the company.

Corporate executives and boards would have incentive to reduce emissions to lower taxes for shareholders. Shareholders would have incentive, out of self-interest, to pressure companies to do so.

Investors would also have incentive to shift their portfolios to less-polluting companies to avoid the tax. Pension and private wealth fund managers would have incentive to divest from carbon-polluting investments out of a fiduciary duty to their clients. To keep the tax focused on large shareholders, I could see retirement accounts being excluded from the tax, or a minimum asset threshold before the tax applies.

Revenue generated from the carbon tax could help fund adaptation and the transition to clean energy.

Instead of putting the responsibility for cutting emissions on consumers, maybe policies should more directly tie that responsibility to corporate executives, board members and investors who have the most knowledge and power over their industries. Based on our analysis of the consumption and income benefits produced by greenhouse gas emissions, I believe a shareholder-based carbon tax is worth exploring.

Jared Starr is a sustainability scientist at UMass Amherst.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The post What if we slapped carbon taxes on shareholders not consumers? appeared first on Corporate Knights.

In July, Environment Minister Steven Guilbeault released a discussion paper that proposes an industry-specific pricing regime to be layered on top of the output-based pricing system. The Liberal government argues that an additional price signal is needed to achieve its emissions cap for the sector. 

The current carbon tax system has received some criticism for failing to charge oil and gas producers their fair share for their emissions. Earlier this year, Corporate Knights reported that some of Canada’s largest emitters were paying only a small fraction of the price on carbon emissions. The output-based pricing system (OBPS) is currently either levied directly on large industrial emitters or sets the standard for provinces that opt to have their own carbon price for industry. 

Even as it consults on an additional pricing model for the oil sector, Environment and Climate Change Canada is also reviewing the existing OBPS to determine whether greater stringency is required in terms of the percentage of a company’s emissions that it covers. 

Ottawa has pledged to cap oil and gas emissions at current levels and then see them reduced by 42% below 2019 levels by 2030. The industry accounted for more than a quarter of Canada’s greenhouse gas emissions in 2020 and has been the fastest-growing source since 2005. 

As many regions around the world face extreme heat and droughts this summer, Guilbeault argues that Canada must redouble its efforts to deal with the growing climate emergency.  

Last month, the government announced a plan to introduce either an oil-and-gas-specific carbon price or establish a cap-and-trade system for the industry that would provide more opportunity for trading emission rights. 

However, the Liberal government faces a determined opposition from the industry and its political supporters. Alex Pourbaix, CEO of Cenovus Energy Inc., warned that the proposed cap would force future production cuts in Canada “at a time when the world is literally crying out for more oil and gas production.” 

The oil industry executive made the comments on July 27 after his company – one of Canada’s largest oilsands producers – reported record cash flow and net earnings of $2.4 billion in the second quarter. 

Pourbaix and other industry leaders are leveraging the current energy crisis resulting from Russia’s invasion of Ukraine to undermine Canada’s long-term effort at meeting its international climate commitments. 

Guilbeault and his Liberal colleagues will have to maintain a disciplined approach, encouraging additional production to meet a short-term global supply crunch while pursuing longer-term policies to dramatically reduce emissions from the sector.  

The OBPS is one tool that is already in place and has been upheld by the Supreme Court of Canada. It levies a price on only a small percentage of greenhouse gases from large industrial facilities on the rationale that such a price provides an incentive for companies to reduce their GHGs while protecting their competitiveness. 

However, the Canadian Climate Institute concluded in an assessment last year that the current system produces “a perverse long-term incentive.”  

“They are explicitly rewarding the most emissions-intensive facilities in the country to not make the major investments needed to be prepared to compete in a carbon-constrained market,” the institute said in its report.  

There is no way a new cap-and-trade system [for oil and gas] emerges.

–David Sawyer, Canadian Climate Institute economist 

The carbon price is already scheduled to increase each year to $170 in 2030 from $50 per tonne in 2022. The institute’s report recommended that the government should gradually increase the stringency by imposing the levy on a greater proportion of an industrial polluter’s emissions over time.  

Canadian Climate Institute economist David Sawyer said a strengthened OBPS can provide much of the policy push needed for the industry to meet federal targets.  

He predicted that Ottawa would ratchet up the stringency of its benchmark in order to raise the actual cost of the levy and create greater incentives for deep reductions.  

“There is no way a new cap-and-trade system [for oil and gas] emerges,” Sawyer said in an email, arguing that such an approach would be far too cumbersome. 

The oil sands industry itself has issued a “pathways to net zero” plan that pledges to cut emissions by 22 megatonnes a year by 2030 and then virtually eliminate emissions from direct operations by 2050. The plan relies heavily on industry efforts to capture CO2 from emission streams and store it underground – a hugely expensive and technically challenging undertaking. 

Alberta politicians and industry leaders argue that the Liberal government’s climate goals are punishing the oil and gas sector and will force industry to curtail production.  

However, the federal government is expecting less emission reduction from oil and gas than from some other sectors. Its plan aims to reduce GHGs by 40% to 45% below 2005 levels nationally by 2030, with a 31% cut from the oil and gas industry. 

In its emission reduction plan released in March, Environment and Climate Change Canada projected that, even before the new pricing measures, the sector could be expected to cut emissions by 26% from 2005 levels by 2030.  

Those projections assume that Ottawa would have indeed tightened its output-based pricing system to cover an additional 2% of firms’ emissions each year, and it would require provinces to meet that added stringency.  

The outlook also assumes that Canada’s oil and gas production would increase by nearly 1.4 million barrels a day to 5.6 million – a generous assumption that many private forecasters do not share. And it assumes that industry will make significant investments in carbon capture technology, spurred by a federal tax credit and the companies’ own net-zero plan. 

Guilbeault and his officials are now consulting with provinces, industry and other experts with regards to the best mix of policies that would yield the most economically efficient emissions reduction path. 

Contrary to the critics’ complaints, the Liberals have not singled out oil and gas for punitive treatment. The government has moved on a series of regulatory fronts – from carbon taxes to emissions standards for electricity generation to vehicle fuel efficiency standards – in order to meet its commitments under the Paris climate treaty. 

If the Liberals remain in office long enough, the next steps would be to make good on standards for electric vehicle sales, including a requirement for new car sales to be 100% zero-emissions by 2035. The Trudeau government has also pledged to set standards for a net-zero electricity system by 2035. 

Those goals are a long time away, but the government will have to introduce measures to get there over the next several years. 

The impacts of climate change are here and will only worsen. We still have time to avert catastrophic effects, but all countries and all industries must work to urgently speed the pace of emissions reductions and the transition off fossil fuels.

The post Ottawa mulls new carbon tax system for oil and gas sector appeared first on Corporate Knights.

Article 6 of the 2015 accord would set up a carbon market in which countries that have met their emissions-cutting goals could sell credits to nations that failed on their commitments. But since the Paris Agreement was struck, governments have quibbled about the rules that would govern the creation and purchasing of such credits.

The Canadian government and many business groups argue that a well-functioning carbon market would lower the cost for corporations and countries to hit ambitious targets to reduce greenhouse gas emissions. Critics warn such a system would discourage direct emission reductions in favour of more questionable measures and could place an undue burden on citizens of poorer countries as richer nations purchase the right to pollute.

In talks leading up to the Glasgow conference, national negotiators have narrowed their differences over proposed rules, but further concession will be required, Wilkinson told Corporate Knights in a telephone interview. Brazil – one of the leading holdouts – signalled last week that it is willing to compromise to reach an agreement.

“I think we all understand where the issues lie; I think everyone sees there may be landing zones for some of the big issues,” he said.

“It will require everybody to be a little bit flexible in terms of their positions, including Canada. But I’m cautiously optimistic we’ll get there this time with something that Canada can accept.”

However, no Article 6 would be better than a watered-down version that lacks environmental integrity, transparency and equity for people in less-developed nations. Canada will have to be prepared to walk away without an agreement if a proposed compromise undermines Paris Agreement goals.

Prime Minister Justin Trudeau will unveil his post-election cabinet tomorrow, and Wilkinson will find out whether he will be reappointed as Minister of Environment and Climate Change or be shuffled to a different post.

The first order of business for either a reinstalled Wilkinson or his replacement will be to represent Canada at COP26 – though Trudeau is expected to attend in the closing days. Sending a new minister to Glasgow would reduce Canada’s effectiveness in defending the national interest. 

The government also faces a massive challenge in implementing its climate strategy after committing to more ambitious targets and policies over the past year and in the recent election campaign. Wilkinson’s experience and savvy would be major assets in that effort.

Unfinished business

A major agenda item for the summit is to complete the work on Article 6. Canada played a key role in its inclusion in the Paris accord in 2015 when then-neophyte Environment Minister Catherine McKenna led negotiations that nailed down language despite serious opposition from a number of countries led by Brazil.

In the phone interview, Wilkinson said Canada’s own commitment to reduce emissions by at least 40% by 2030 does not depend on the purchase of foreign credits or a functional Article 6.

“Our focus is to ensure we have a plan where we can make the domestic reductions to meet our new target,” he said. “The government sees a path to achieving that target that both reduces emissions and transforms Canada’s domestic economy to prosper in a net-zero-carbon world.”

However, the rules of Article 6 will apply not only to the current Liberal plans but to any future government that may be inclined to purchase foreign credits as an easier route to hitting emission-reduction targets when confronted with political and economic challenges at home. Rigorous standards will be needed to govern its use by other nations, as well as future Canadian governments.

Trading credits

The goal of an international carbon market is to finance the lowest-cost emissions reductions on the path to a net-zero future. 

In a report released last week, the International Emissions Trading Association said an effective Article 6 framework would enable countries to make more ambitious emission-reduction commitments at no additional cost. As such, it would accelerate the transition to a net-zero world, the report concluded.

Quebec is already participating in a cap-and-trade market with California. Completion of Article 6 would allow Canada to claim in its future reports to the United Nations the credits purchased by Quebec entities under the Western Climate Initiative (WCI). In an August auction, the WCI price per tonne of carbon dioxide equivalent was $29.41, while the federal carbon price is $40 per tonne this year. 

Wilkinson said Canada would achieve its targets with or without Quebec’s WCI credits.

Many corporations – including oil and gas companies – have also announced net-zero targets for 2050 that will rely to varying degrees on the purchase of offsets.

That trend worries some environmentalists who argue the focus should be on direct emission reductions and an economy-wide transition off fossil fuels. 

“With a very small global carbon budget to limit global warming to 1.5°C, implementing the Paris Agreement should not rely on mechanisms that let polluters off the hook via offsetting,” Climate Action Network Canada (CAN-C) said in a brief released last week. The network represents more than 100 environmental and civil society organizations across the country. 

It argued that Canada must insist on strong environmental integrity provisions as well as human rights protections to ensure that farmers and other people in the Global South are not pushed off their land as a result of Article 6 transactions involving conservation and reforestation.

The CAN-C briefing noted concern that the oil industry is looking to Article 6 to claim emission credits for the sale of liquified natural gas to Asian markets that currently use a lot of coal for their electricity. 

Wilkinson said such a transaction could be possible but only if the full emissions of natural gas extraction, shipping and use are factored in; if there is a clear and direct link between the sale of gas in replacing coal; and if the foreign utility and national government did not want to use the emission-reduction credits for its targets and UN reporting.

Those are big conditions that would severely limit – if not eliminate – the potential for Canadian producers to claim Article 6 credits.

Many of the issues arising in the discussions around Article 6 echo broader concerns about the market economy that offers efficiency but often at a cost in terms of environmental protection, equity and human rights. 

In the consensus-based decision-making at Glasgow, the Canadian government can insist on a market-based approach that features rigorous safeguards to protect the global public interest. Anything less would be a setback in the battle against climate change.

The post Negotiators to tussle at COP26 in Glasgow over creating an international carbon market appeared first on Corporate Knights.

In Canada, Alberta farmers were the first to gain options to sell carbon offsets, back in the mid-2000s. Since then, agriculture’s role in carbon markets has evolved unevenly across the country. For most Canadian farmers, accessing carbon markets to sell carbon offsets has been a pending, abstract option. Recently, however, companies as diverse as IBM, The North Face, Boston Consulting and Barclays have signalled their willingness to invest in GHG reductions from agriculture to offset their own footprints, and regulatory frameworks now being developed suggest that the limited options for Canadian farmers to participate in carbon markets may soon multiply.

The private sector has an important role to play in fostering a carbon market that encourages responsible investment and catalyzes meaningful engagement in agricultural offset projects. Empowering farmers to decide how and if they want to participate in carbon markets starts by addressing knowledge gaps within Canada’s agricultural sector on the opportunities, limitations and requirements of carbon markets. A growing number of agri-food and agribusiness companies are educating farmers about how to participate in carbon markets and pilot programs; however, challenges remain.

A recent McKinsey report highlighted some of the key problems with voluntary carbon markets. “When selling those credits, suppliers face unpredictable demand and can seldom fetch economical prices. Overall, the market is characterized by low liquidity, scarce financing, inadequate risk-management services, and limited data availability.” The report, however, notes that private sector actors can help by sending clear demand signals to offset suppliers, which could be supported through the development of guidelines and consensus among companies on the appropriate use of carbon credits to offset emissions.

To make carbon markets more accessible to farmers, new initiatives promise to streamline transactions and drive down verification costs, including efforts to develop networks of soil-health monitoring technologies, such as the U.S.-based OpenTEAM community. Advancing the use of soil carbon measurement is critical to improving the supply and robustness of carbon offsets from agriculture. Public-private-people partnerships will be key to driving innovation and scaling the application of technology via research and pilot projects.

Upcoming options for Canadian farmers to participate in carbon markets

In addition to the existing cap-and-trade opportunities in Alberta and Quebec, there are also growing voluntary carbon market opportunities for agriculture. This is driven in part by the increasing demand for land-based carbon offsets from companies such as Maple Leaf Foods, Cargill and Shopify seeking to offset their GHG emissions. In the voluntary market space, Canadian agriculture recently gained greater access to protocols that could expedite the development of offset projects, including the Canada Grassland Protocol on Climate Action Reserve’s voluntary market registry, and the Improved Agricultural Land Management Methodology overseen by the Verified Carbon Standard program.

Put forward in early March, Canada’s Federal Greenhouse Gas Offset System is in its first round of developing offset protocols that will set out a consistent approach for quantifying reductions in GHG emissions for given project types. The first protocols will include one key regimen for farmers: the Enhanced Soil Organic Carbon (ESOC) protocol. If successfully implemented, ESOC will allow Canadian farmers to be compensated for adopting practices that enhance carbon storage. Down the road, other agriculture-related protocols may be considered, including livestock feed management and projects that maintain or increase forest coverage.

While recent developments in carbon markets present exciting opportunities, barriers for some farmers remain, including the costs associated with verification. Forming partnerships with established project developers, who would receive a credit “split,” is one route to overcoming financial obstacles.

Although much uncertainty remains in the evolving offset markets, these options are progressing at unprecedented scale and speed. This trend underlines the need for action to foster responsible investment in agricultural carbon-offset projects, integrate measuring and monitoring technology, and build greater awareness of the opportunities and challenges for farmers to engage.

Existing landscape of carbon markets in Canada

Farmers in Alberta have successfully enrolled in the conservation cropping protocol within the Alberta Emission Offset System, where they receive carbon credits for reducing tillage. According to the provincial government, more than 600,000 tonnes of carbon per year have been offset by the conservation cropping protocol, which covers about a third of all seeded acres in Alberta. (Like all offset protocols, the conservation protocol has an expiry date, which is set for December 31, 2021.)

Other offset protocols under which Alberta farmers can receive credits include reducing emissions involved in cattle feed and producing biogas from anaerobic digesters, which break down livestock manure, food waste and other unwanted organics into biogas.

Alberta has faced challenges in getting offset protocols off the ground. For instance, the Nitrous Oxide Emission Reduction Protocol (NERP) has gone through multiple iterations but has not yet been successful because of the complexity of the issue and the proofs required.

Quebec linked its cap-and-trade system to California’s in 2014, creating the largest carbon market in North America. So far, however, no agricultural offset projects have been developed, although Quebec farmers are eligible for carbon credits to implement anaerobic digesters. The province is currently analyzing several new protocols, including development of its own NERP system.

In Nova Scotia, farmers currently do not have access to offset programs under the cap-and-trade system, although the provincial government is reviewing offset development.

In Ontario, the Output-Based Pricing System (OBPS) timeline might best be described as a rollercoaster ride. In 2017, Ontario signed an agreement to link the province’s cap-and-trade system to Quebec and California’s system, but that was scrapped with the change of government in 2018 – resulting in the federal OBPS coming into effect. In fall 2020, Ontario and New Brunswick received reluctant approval from Ottawa for their own carbon pricing systems for heavy emitters, but Ontario doesn’t seem likely to offer agricultural offset opportunities for the foreseeable future. Still, Ontario farmers will be able to participate in the federal GHG Offset System if they qualify, once the full protocols are developed.

Lisa Ashton is a PhD candidate in the Department of Geography, Environment and Geomatics at the University of Guelph.

Shahira Esmail is the director of global consulting at Radicle.

The post How the private sector can boost agriculture’s role in carbon markets appeared first on Corporate Knights.

The most urgent and dire of these is the threat of climate change. Only the state, acting in an interventionist mode, has the financial resources, administrative capacity and legislative authority to produce a serious plan to fight the climate crisis. But just as importantly, an interventionist state is capable of initiating a plan that generates a sense of solidarity and common purpose in the population – a necessity if the plan is to succeed.

Here again our government’s role in fighting the pandemic proves instructive. Canada’s relief efforts, while far from perfect, have aimed largely to help ordinary Canadians by getting money into their hands quickly. In the U.S., Congress approved an astonishing $4 trillion in spending to deal with the pandemic, but a strong resistance to “big government” redistributive schemes meant that the lion’s share went to bailing out corporations. And unlike in Canada, where temporary relief efforts are backstopped by universal healthcare, in America there are 44 million people who lack any kind of health insurance at all.

The inadequate American pandemic response has done nothing to calm the political, economic and racial tensions that already plagued the U.S. Nor has it inspired confidence in the machinery of state: a number of polls have shown a steep decline in American levels of trust in government over the course of the pandemic. In Canada, we’ve seen a very different trend. Although attitudes may now be shifting thanks to recent delays in the vaccine roll-out, polling throughout 2020 revealed rising levels of trust in government. This trust was borne out in the fact that Canadians have been much more supportive of government-mandated health protocols and more willing to bear the inconveniences and privations that they impose on their lives.

A common criticism of interventionism is that it breeds self-seeking individuals who (to riff on a famous American) ask only what their country can do for them and not what they can do for their country. But the fact is that state programs that are guided by notions of justice and fairness can help to nurture a sense of a common good and breed feelings of shared purpose. A nation that does little to address the inequities within its borders, on the other hand, can give rise to widespread symptoms of anomie and fragmentation.

State programs that are guided by notions of justice and fairness can help to nurture a sense of a common good and breed feelings of shared purpose.

A serious national climate plan would build on this lesson and incorporate policies capable of embodying an idea of the common good. The centrepiece of the Liberal Party’s current climate plan, the federal carbon tax, is poorly suited to this purpose. Many fiscal conservatives like carbon pricing as a policy response to global warming because it is a market mechanism that relies purely on the self-interested actions of consumers to curb carbon use. But it is hard to whoop up public enthusiasm around something as abstract as an economic signalling instrument. More to the point, self-interest as a motivation sits in uneasy tension with feelings of loyalty or commitment to the larger whole.

Not surprisingly, the carbon tax is unpopular with many Canadians, something the government has tried to remedy by promising a rebate to most households in excess of what they are taxed and, as a sweetener, by opting to send those rebates as quarterly cheques, rather than as an annual tax credit. These inducements may yet succeed in selling the Canadian public on the deal, but inasmuch as they constitute a narrow appeal to the self-interest of individuals, they will never generate the sort of popular support that Canadians express for public healthcare.

Inasmuch as carbon tax rebates constitute a narrow appeal to the self-interest of individuals, they will never generate the sort of popular support that Canadians express for public healthcare.

Climate policy is more likely to gain this sort of support if it produces concrete outcomes that are felt in the lives of ordinary Canadians and that can be associated with the goals of justice and equity. Such a plan would, for instance, need to provide good, secure income opportunities in local, low-carbon agricultural production, renewable energy projects like hydrogen and geothermal development, and cleantech industries like decarbonized steel and concrete. It would also need to invest in care work like teaching and nursing – climate-friendly jobs that, as the pandemic has taught us, we underfund at our peril.

A climate plan that invests in these areas – without letting private industry run away with the profits – could dramatically reduce our carbon footprint while also addressing the wage stagnation and economic inequality that have become endemic in recent decades. It could also address long-standing regional and cultural divides. In Alberta, for instance, where many view the federal carbon tax as a direct attack on the oil industry that has served as their province’s economic backbone, a dramatic investment in clean industry would go a long way to calming economic fears and easing resentments. A green economy could also help us to address wrongs against Indigenous Peoples in Canada, helping to create new economic opportunities on lands that have too often been treated as a resource storehouse or thoroughfare for extractive industries.

In recent months there have been small signs that some of this may come to pass. A federal budget is anticipated this spring, and the Liberal government has provided indications that it will assume a more interventionist role in fighting climate change.

If it recognized that it also has a role to play in creating unity and a sense of shared purpose in the country, it might be emboldened to act more quickly.

Scott Staring has a PhD in Political Science and is a professor in Georgian College’s Liberal Arts department.

The post What a carbon tax can’t do appeared first on Corporate Knights.

The U.S. Environmental Protection agency has been accepting comments regarding its Clean Power Plan, a proposal that would reduce carbon emissions from U.S. power plants by 30 per cent below 2005 levels by 2030. This plan is a critical part of President Barack Obama’s efforts to combat climate change, so the EPA’s process is being followed closely. Paying particular attention is the Canadian Electricity Association (CEA), which is worried the U.S. regulator won’t allow clean power imports from Canada to count toward emission-reduction efforts. In a comment to the EPA this week, CEA president and chief executive Jim Burpee urged that the door be open to Canadian hydro, wind and even nuclear power. “The interconnection of the Canadian and U.S. electric grids serves as a valuable and advantageous platform from which to maximize reductions in carbon emissions across North America,” wrote Burpee. “With a national electricity mix that is already comprised of approximately 80 per cent non-emitting resources, Canada is therefore well positioned to support our American partners in fulfilling their carbon-reduction objectives.”

Developing countries most affected by pharma pollution

Pollution from drugs, everything from antidepressants and antibiotics to cancer medication and painkillers, ultimately end up in our waste and wastewater systems. We either toss them out or excrete and flush them, or they exist as effluent from pharmaceutical manufacturers. Unlike pathogens and heavy metals, which are destroyed or captured by most treatment technologies, the molecules in the drugs we produce and consume often slip through. This is messing up the ecology of lakes and rivers – from bugs, amphibians and fish to the creatures that eat them – and it’s why new technologies are emerging to tackle the problem. But developing countries are the least likely to use these technologies, making them more vulnerable, according to research from Rai Kookana, a scientist with the Common Wealth Scientific and Industrial Research Organization. Speaking to ABC News in Australia following release of new research, Kookana said China and India are particularly impacted. “Nearly 60 per cent of the generic drugs of the world are produced in China and India,” he said, adding that developed nations have a responsibility to help developing countries combat the problem.

Harper challenged on climate, carbon tax comments

Proponents of carbon pricing in Canada were stunned this week after listening to an end-of-year interview with Prime Minister Stephen Harper on the CBC. Harper has previously called any mention of carbon pricing as an attempt to force a “job-killing tax” on Canadians, but now he was singing a different tune. He talked about Alberta’s carbon levy, generally recognized as weak and ineffective, as a model he could see spreading across the country. And perhaps as a nod to Stephen Colbert, he stretched the definition of “truthiness” by taking credit for Canada’s falling emissions. He even suggested this whole climate problem would be under control if the world just followed Canada’s lead. Critics were quick to pounce, including Glen Murray, Ontario’s environment and climate minister, who on Twitter called the CBC exchange an “odd interview.” In addition to pointing out Harper’s carbon pricing flip-flop, Murray said the prime minister was disingenuously taking credit for Ontario’s coal-plant closures. Canada’s emissions did fall slightly during the economic downtown, and while it has leveled off, this is largely because of Ontario’s coal phase-out. As the CBC reported, Harper’s comments are “more about politics than policy – an attempt to soften his image on the environment in an election year when climate change is again becoming a hot political topic.”

Odd interview @petermansbridge did w/ @pmharper who provided no support 4 coal plant closures & opposed carbon pricing now supports both???

— Glen Murray (@Glen4Climate) December 19, 2014

Study says world’s food production at great risk

Rising global temperatures resulting from climate change could see up to a fifth of world food production destroyed by 2050, according to a new study from researchers at the International Institute of Applied System Analysis in Laxenburg, Austria. The study, appearing in the journal Environmental Research Letters, said the biggest challenge will be managing water resources to adapt to changing rainfall patterns. With the right investment in infrastructure and irrigation – for example, expanding the reach of irrigation by 25 per cent – the researchers suggested it is possible to eliminate most food-production impacts. However, doing so may requiring moving production to different geographies, such as northern Europe, where warming and increased precipitation may increase agricultural output.

Junior exploration companies aim to de-risk the mining industry

Corporate Knights’ assistant editor Ashley Renders wrote today about a new generation of junior exploration companies that is trying fix the mining industry’s social license problem. By experimenting with profit-sharing schemes and engagement programs, junior companies are trying to make a good first impression on community members. In the event that they find a large deposit, juniors are banking on the assumption that majors will pay a premium for a pre-established relationship with the community. They are essentially aiming to “de-risk” the industry, which is crucial to the future financial success of the industry. But even though their intentions may be good, there are certain pitfalls that these companies will have to navigate if they want to redefine the way that the mining industry does business with local communities.

The post December 19, 2014 appeared first on Corporate Knights.

The financial windfall is expected to be enormous. According to Point Carbon, a carbon consultancy owned by Thomson Reuters, the carbon derivatives market is estimated to reach $3 trillion by 2020. That would make the carbon market larger than the subprime mortgage market and hedge fund industry combined – before the 2008 financial crisis.

Already, carbon rights are issued and traded in more than 30 markets, without common quality standards, effective regulatory oversight, almost no transparency and varying degrees of verification.

The perils of carbon derivatives have led to comparisons with subprime mortgage derivatives that were at the root of the financial crisis. But carbon derivatives are even riskier because carbon is not a tangible asset. Unlike holders of mortgages who can claim physical homes, carbon investors acquire rights to … well, air. Tracing air back to a specific issuer or a country of origin is a huge challenge. And since carbon rights are not printed on paper, but registered electronically, there’s a real risk that registries can be hacked and carbon stolen.

Reports of fraud and malfeasance tarnished European carbon markets that remain the world’s largest. The European Commission does little to police it: a Belgian court denied an Italian manufacturer’s request to enjoin the commission to identify the entities that had stolen its carbon permits from the registry.

Wall Street anticipated that President Barack Obama’s election would boost the carbon market. New players and leading financial firms invested and acquired businesses to issue, register, audit, certify and trade carbon rights. But the immediate turmoil of the 2008 financial crisis supplanted the long-term need to reduce carbon emissions.

Meanwhile, the continued economic, social and political ramifications of uncurbed carbon emissions are rekindling countries’ interest to act, with Australia playing a key role. Already, in 2012 Australia and Europe agreed to develop a two-way linked carbon emissions trading system.

A joint Chinese-Australian press release on March 27 announced the development of carbon trading markets “as a first step towards a broader Asia-Pacific carbon market.” Government authorities confirmed that New Zealand, parts of Canada and California would join the regional initiative. Only weeks after this watershed announcement, South Korea announced that it too would adopt a national carbon cap and trade scheme, adding momentum to the initiative.

China’s carbon trading pilot program will occur in two provinces (Hunan and Guangdong) and five of China’s largest cities (Beijing, Chongqing, Shanghai, Shenzhen and Tianjin). The seven pilot cities and provinces have a total population of 250 million people. That’s 10 times Australia’s population and amounts to twice the carbon emissions covered by Australia’s trading system.

Any regional carbon market without China, the world’s largest net carbon emitter, was doomed to flounder. With China’s announcement, Australia now becomes the carbon kingpin that offers traders a pathway to accessing and flooding European, American and Asian markets. Faced with a difficult re-election, Australia’s former prime minister Kevin Rudd dropped the country’s unpopular carbon tax and doubled down on efforts to boost cap and trade. (Ed note: due to the subsequent election of cap and trade opponent Tony Abbott after this article was published, the future of Australian climate policy has grown cloudier.)

All of this activity around cap and trade in the Asia-Pacific region has renewed efforts in North America.

California, the only American state with a mandatory cap and trade scheme, announced on April 19 that it would link its carbon markets with Quebec and expand joint investments in low carbon technologies. Later, during an official visit on July 10, Chinese and American government officials announced that the two countries would jointly develop carbon-capture technologies and take other steps to combat climate change.

That announcement came only days after Obama’s historic speech on climate change at Georgetown University on June 26. And on July 31, officials in California and Australia announced they would work to link their respective carbon markets.

Business is ready to reap the rewards of this new financial frontier. Firms such as Bloomberg and Thomson Reuters have acquired carbon businesses and developed carbon products and services for traders. Financial institutions and hedge funds will trade to see profits grow.

But few will immediately profit more than Atlanta-based IntercontinentalExchange (ICE). Founded in 2000 by the who’s who of oil, gas, and commodities trading, ICE rapidly became a leading owner and operator of exchanges trading energy commodity derivatives.

Benefiting from a loophole that virtually eliminated all regulatory oversight, ICE morphed into a multi-billion-dollar cash machine and went on a global buying spree, recently acquiring the New York Stock Exchange Euronext. ICE is now positioned to become the trading platform of preference as the momentum for cap and trade grows.

While governments have their eyes set on the next United Nations Climate Change Conference in Paris in 2015 with a potential global agreement, they must be mindful of the recent economic and social havoc caused by poor regulatory oversight.

Wall Street will not wait to flood the market and our portfolios with unregulated carbon derivatives that could easily turn toxic. If we don’t want to pay for others’ financial recklessness, the industry’s opaque veil needs be lifted: a new body of rules to oversee carbon derivatives and the industry is needed. Otherwise, we risk having a bitter replay of the subprime mortgage crisis, but on a much larger global scale.

The post Capping carbon-trading risk appeared first on Corporate Knights.

China’s aviation overseer vows its airlines won’t co-operate. Legislation before the U.S. Congress would make it illegal for American carriers to comply. Along with India and several other countries, they threaten lawsuits or trade retaliation. Canada has expressed disappointment.

The EU, though, is hanging tough on a plan it estimates will eliminate 70 million tonnes of annual emissions by 2020. “We will not back down from our legislation, and we will not modify it,” says Isaac Valero-Ladron, spokesperson for EU climate action commissioner Connie Hedegaard.

All this over a measure that environment groups describe as a modest first step, and one that will boost ticket prices by far less than airlines’ fuel surcharges or baggage fees.

The groups accuse the industry of hypocrisy: “Negotiations at ICAO have dragged on without result for 14 years … the airlines have tried at every turn to make sure nothing happens,” says Bill Hemmings, program manager at Brussels-based Transport & Environment, which campaigns for sustainable transportation. “The ETS will add no more than 15 euros (about $20) to long-haul flights. That’s less than the daily variations in price. No one worries about them, but along comes an environmental measure and we have an international case.”

The ETS has its origins in the 1997 Kyoto Protocol, which instructed the industry to develop a strategy for reducing emissions – now just three per cent of the global total but rising fast – via the United Nations’ International Civil Aviation Organization, or ICAO.

Seven years later, seeing no progress, the EU decided to add aviation to its emissions trading system, which already covers about 12,000 factories and power plants.

The scheme caps total annual emissions from all flights. This year, the ceiling is 97 per cent of the 2004-2006 average, or about 215 million tonnes. For 2013 to 2020, it drops to 95 per cent. From this pot, credits, each worth one tonne, are allocated among the 900 airlines that must participate – in effect, setting an upper limit on the emissions they’re allowed.

This year, the ETS gives each carrier 85 per cent of its credits; they must purchase the rest. From 2013, the free portion drops only slightly to 82 per cent. Those that emit less than their limit can sell unneeded credits; those over must buy enough to cover their excess.

The credits’ value is set through trading on Europe’s carbon market. In theory, since air traffic is certain to increase while credits stay constant, demand will increasingly exceed supply, raising their value and prompting polluters to reduce emissions.

How that works in practice remains uncertain given the depressed carbon market, where credits fetched about eight euros, or roughly $10.50, at the end of January – close to half the level a year ago.

Even so, the airlines estimate that by 2020 they’ll have bought 700 million credits. That expense, they complain, will force fare hikes, which will make them less competitive and further threaten an industry hurting from overcapacity. The money would be better spent on more efficient aircraft, alternative fuels (see “Green Shades of Jet Fuel”) and other measures that cut emissions, they say.

A study by researchers at the Massachusetts Institute of Technology and Germany’s Muenster University recently generated headlines by concluding U.S. airlines could actually reap windfall profits of up to $2.6 billion from the ETS over the next nine years.

That would occur only if they charge their customers for all the emission credits they require, ignoring the fact they’ll get most of them for free – as some European electricity generators and oil refiners did when they were brought into the ETS.

On the other hand, if the airlines pass through only the costs of allowances that they actually purchase there would be no windfall, and in the unlikely event they don’t pass on any costs their profits would decrease, argues the study, published in the Journal of Air Transport Management.

The EU, meanwhile, dismisses airlines’ complaints of competitive hardship, arguing that since all carriers are impacted none will be disadvantaged. The number of passengers who balk at higher fares will be undetectable among the other fluctuations in demand, it maintains. And if the airlines become more efficient, they’ll need fewer credits.

But opponents also allege the ETS violates international law since it applies to flights over other nations and the open seas, and amounts to an illegal tax. “It’s not so much a financial question or about climate change, but that it was imposed on states outside the EU,” says ICAO spokesperson Denis Chagnon.

In December, the European Court of Justice dismissed a U.S. lawsuit, which Canada backed, based on those claims.

ICAO urges patience, noting its 191 member states have endorsed three of their own measures: 1.5-per-cent annual fuel-efficiency improvements from 2009 to 2020; a cap on carbon emissions after 2020; and a 50-per-cent reduction from 2005 levels by 2050. The members are now to propose how they’d hit these targets.

But ICAO won’t confront the issue until at least 2013 and, critics say, its track record offers no assurance of results, especially since any measures would be “aspirational,” not mandatory.

Europe says conflict isn’t inevitable. The ETS exempts flights from countries with equivalent pollution-fighting measures. And, since it doesn’t require airlines to calculate this year’s emissions or buy credits until March 2013, there’s time to negotiate a wider plan.

While opposing the ETS, the United States might be forced into action. Last summer, a Federal Court judge agreed with environment groups that the Environmental Protection Agency has a legal responsibility to determine whether aviation emissions endanger public health and, if so, to regulate them. The EPA was to respond in February.

And where do Canadian airlines stand? The National Airlines Council of Canada – representing Air Canada, WestJet, Air Transat and Jazz – says voluntary measures to date have been working. For now, the airlines are unhappily complying with the new EU rules, but the council continues to urge the EU to suspend its scheme and wait for global consensus on an international plan.

The EU, having reached for the sky, is showing no sign that it plans to back.

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