Of course we need to achieve net-zero by 2050: it’s a chemical necessity for the atmosphere. But this is hardly a goal that your average person can see and touch and wrap their arms around.

Compounding the difficulty is that 2050 is a quarter century away. What do the signposts of success look like between now and then? How do we make sure we’re on track? Where do we course-correct if we’re not?

One way that countries have tried to define progress is by measuring the reduction of greenhouse gas emissions.

The landmark Paris Agreement, signed a decade ago, aims to hold the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels. Countries determine themselves what contributions they should make to achieve the aims of the agreement. These plans, called nationally determined contributions (NDCs), are required to be “ambitious efforts” toward “achieving the purpose of this Agreement” and to “represent a progression over time.” The contributions are to be set every five years and registered with the United Nations.

Similar to many other nations, Canada has enshrined its Paris Agreement commitments in a national law, the Canada Net-Zero Emissions Accountability Act, adopted by Parliament in 2021. Under this act, the federal government has rolled out its Emissions Reduction Plan that it regularly updates.

For Canadians, decarbonization is a patriotic act

Unsurprisingly, given that the global community has consciously structured the climate change issue around these yearly measurements of emissions reduction, that’s the primary lens through which the public now views the discussion. A significant proportion of climate change media headlines relate to emissions targets being met, or not met.

Don’t get me wrong: I think this Paris Agreement approach has been useful. Like Canada, most countries in the world have methodically catalogued every scrap of carbon emissions and created policy architectures to start knocking them back. That’s led to a substantial reduction in projected future warming – close to one full degree Celsius by century’s end.

But a decade on from the Paris Agreement, I don’t think that communicating to the public the success or failure of climate progress in terms of megatonnes of carbon reduced – putting this in the metaphorical window every chance we get – is the best we can do.

For one thing, and as I’ve already observed above, it’s not really comprehensible or tangible for most people.

For another, there are better, more compelling stories of success or failure to tell. Let’s take electric vehicles as one example. When the Paris Agreement was signed, electric vehicles were less than 1% of new vehicle sales around the world. Today, they are more than 25% and rising fast. The boom in electric vehicles is actually resulting in less demand for oil and less greenhouse gas emissions. The International Energy Agency, for example, pegged the total number of barrels of oil displaced by EV adoption at more than 1.3 million barrels per day in 2024. The agency expects that number to rise to more than five million barrels per day by 2030.

Most compelling of all, EVs are just better machines than gasoline-powered cars. Anyone who drives one loves them and saves money in the long term (especially when the price of oil skyrockets because of the type of international conflicts we’re seeing at the moment).

Heat pumps are another example. In 2015, globally, heat pumps were generally a marginal technology. Now: heat pumps outsell gas furnaces in the United States and in many markets. And because they are more efficient than natural gas furnaces, and run by electricity, they are starting to measurably reduce carbon emissions.

A fork in the road for the Canadian climate change discussion

The rate of uptake of electric vehicles and heat pumps is an extremely important measure of climate change progress. As opposed to emission reductions, they are visible, tangible things.

So as a way of refocusing the climate change discussion in a positive direction, the Canadian Climate Institute is going to start tracking these indicators of progress such as EV and heat pump sales data in the months ahead.

This is also a way of holding governments to account. The recent announcement by Prime Minister Mark Carney that the federal government is aiming for 75% of new cars sold by 2035 to be EVs is a clear commitment. And it’s an opportunity to ensure that the package of policies he has released will get us to that goal.

As I’ve said before in this space, the climate change discussion is a marathon, not a sprint. It has evolved over decades and will continue to do so. The way we talk about the issue in order to ensure that it gets the attention it needs in a volatile world requires constant reinvention to ensure that we’re connecting with our audiences.

Rick Smith is president of the Canadian Climate Institute, the co-author of two bestselling books on the effects of pollution on human health, and the executive producer of Plastic People, a 2024 documentary chronicling the damage done by microplastics in the human body.

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But big questions remain. Does the alliance’s collapse open the gates for full-scale bank financing of fossil fuels? Or does it point to a lower-profile but possibly more effective financing path for the climate transition?

And what about bank regulation? Does the failure of this voluntary initiative validate what many non-governmental organizations have been saying for years; namely, that the banks should be compelled to invest in the climate transition through regulation?

These questions are now front and centre after the alliance – known as NZBA – closed last week, ending its existence as a membership organization and converting to an archive of banking-industry climate-target guidance.

NZBA was the flagship of the Glasgow Financial Alliance for Net Zero, former United Nations climate envoy Mark Carney’s high-profile effort to marshal the world’s largest financial institutions to reduce carbon emissions. When launched in 2021, NZBA and other financial industry networks pledged to reduce their carbon emissions to net-zero by 2050 and to align billions of dollars in assets to the climate transition.

But as banks were called upon to live up to their net-zero commitments through short-term reductions in fossil fuel lending and underwriting, many of the alliance’s leading members jumped ship. All the major United States and Canadian banks left NZBA earlier this year, followed by many European and Japanese lenders. With Carney now in the role of Canada’s prime minister, the alliance lost its key leader. Staving off anti-climate pressures and potential legal challenges in Europe, the remaining 140 NZBA members voted to formally close the organization.

“The end of the NZBA is a real loss,” writes David Carlin, a climate adviser to the financial sector. NZBA provided market signals, a community of practice and transition pathways on climate risk, Carlin argued in a blog post: “Those values do not disappear with the end of the alliance, but the collective ambition is weakened.”

‘Zombie targets’ possible

Todd Cort, sustainability lecturer with the Yale School of Management, said the banks could enter a protracted period of limbo in which they don’t drop net-zero targets, but neither will they work toward them. “What worries me is that I think there is a higher probability of zombie targets,” he told Trellis Briefing.

Collaborations such as ShareAction in Europe and the Shareholder Association for Research and Education in Canada will continue to exert shareholder pressure on banks to account for their emissions targets. Climate-dedicated investors such as New York City Pensions will continue to be key members of these coalitions. And jurisdictions like California have enacted climate legislation to provide at least some measure of accountability by banks and other companies through mandatory disclosure.

But Donald Trump’s overwhelming control of the public agenda rules out any meaningful measures to compel the banks in the United States to reduce fossil fuel lending and underwriting. This would suggest that the banks – particularly those in North America – are getting ready for years of full-throated support of coal, oil and gas. After two years of decline in fossil fuel financing, the global banking industry reversed course in 2024, sharply increasing fossil loans and underwriting.

The distressing prospect that banks could enter a period of long-term financing for fossil fuels – and the impact this would have on global warming – has triggered a debate among climate and sustainability activists and researchers. Some are doubling down on public action, mounting bank protests in the United States and Europe.

But RMI (formerly known as the Rocky Mountain Institute) is taking a different approach, calling for a “recalibration” in how climate campaigners and advocates relate to the banking industry.

Banks not ‘moral agents’

In a report issued only weeks before the NZBA closure, RMI argues that the non-profit climate movement has overestimated the power of the banking industry to unilaterally direct its capital to the climate transition. “Banks are not moral agents or policy substitutes,” the report states. “They are commercial actors operating within regulatory, fiduciary and risk-based constraints.” The report says some climate advocates don’t consider the “complex, interconnected spider webs” of the banks and the economies in which they operate. “The expectation that banks (or any part of the financial sector) could drive the energy transition was myopic.”

Banks and fossil fuel companies are drawn to one another partly because lenders can extend sizable loans to oil, gas and coal companies based on their healthy balance sheets. This enables banks to issue credit without committing large amounts of their own capital under lending regulations. By contrast, low-carbon projects such as renewable-energy facilities typically require project financing, representing greater regulatory and financial risk to the banks. In addition, private equity, asset managers and pension funds can provide ownership financing to these projects that is not an option for most banks.

Given such limitations, RMI argues that civil society organizations should shift their focus from confronting the banks on climate targets to engaging with them on specific low-carbon transactions, such as clean power, green steel, zero-carbon homes, methane abatement and renewable fuel projects.

“What we need now is less choreography and more closing of deals,” says Kaitlin Crouch-Hess, senior principle for RMI’s newly formed Center for Climate-Aligned Finance. “We can get capital flowing by recognizing banks’ commercial role and playing to their strengths,” she says in an email statement. “Where the economics do not add up, we must work across the financial, policy and corporate systems to align policy and risk-sharing.”

Fossil risk buffer needed

While RMI’s new approach is aimed at boosting the low-carbon economy, it doesn’t address the large climate risk posed by bank-financed fossil fuel projects.

Last month, sustainable investment advocate Finance Watch issued a report showing that the 60 largest banks in the world carry more than US$1.6 trillion in credit exposure to coal, oil and gas. Finance Watch argues that as the world electrifies and decarbonizes, this large fossil-industry exposure poses a major risk to the banks as the value of fossil assets supporting loans could decline sharply and suddenly. “Banks have more than a trillion dollars of exposure to mispriced fossil fuel assets,” Julia Symon, head of research and advocacy at Finance Watch, said in a statement. “This is a carbon bubble that could burst, like subprimes in 2008. This risk is not properly recognized and banks are not prepared.”

Finance Watch argues that the European Central Bank (ECB) should impose a climate risk buffer (a requirement that additional bank capital be set aside for fossil loans). Banks with more fossil fuel credit on their books would be required to maintain a larger capital reserve, shoring up their stability in the event of a crash in fossil assets. Finance Watch is urging the ECB to impose such a buffer as part of a current review by the central bank on risks to the financial system posed by environmental issues.

While it’s unlikely that the Trump administration would permit such a climate risk buffer to be imposed in the United States, it’s expected that financial regulators in other countries would follow ECB’s lead. Global adoption could also pave the ground for a similar measure in the United States after Trump’s term comes to an end.

The end of NZBA is not good news, but it shouldn’t signal an end to climate action by the banks. Advocacy organizations could engage with the banks on important decarbonization projects and policy supports while also challenging them to achieve their net-zero targets.

At the same time, financial regulators can send a clear signal to the banks that fossil fuel lending is risky. If banks choose to lend to the industry, regulators should ensure they’re going to have to commit more of their own money to do it.

Eugene Ellmen writes on sustainable business and finance. He is a former executive director of the Canadian Social Investment Organization (now the Responsible Investment Association).

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Aviation is responsible for 13.9% of the world’s carbon dioxide emissions from transport and 2.5% of emissions from all human activity. Between 2000 and 2019, emissions from the aviation sector have risen faster than those from rail, road or shipping – in 2024 alone, GHGs jumped by 5% – while efforts to decarbonize the aviation industry have made little progress.

Recently, however, there have been indications that this may change. The International Air Transport Association (IATA) set a target for international aviation to be 5% less carbon-intensive by 2030 and achieve carbon neutrality by 2050. This will primarily be through the use of sustainable aviation fuels (SAFs), which are typically made from used cooking oil and agricultural waste and mitigate the lion’s share of emissions produced by conventional jet fuel. Canada’s Aviation Climate Action Plan targets net-zero emissions for the aviation industry by 2050 and a goal of 10% use of low-emission aviation fuel by 2030.

Given the sluggish pace at which airlines are replacing jet fuel with SAFs, not to mention the projected growth of air travel, reaching these milestones appears unlikely. Passenger air travel is expected to double by 2050. “Even the most ambitious jurisdictions are falling short of tracking to net-zero,” says Nikita Pavlenko, director of aviation and fuels at the International Council on Clean Transportation’s Washington, D.C., office. “In aviation, there are no silver bullets to decarbonization. In the auto sector, there’s electrification. In the power sector, there’s renewables. In the aviation sector, there are not the same kind of easy answers.”

Others have struck a more hopeful note. Geoff Tauvette, executive director of the Canadian Council for Sustainable Aviation Fuels (C-SAF), a non-profit representing more than 100 industry members, writes in an email that “Canada has all the right ingredients from start to finish to build a leading and made-in-Canada SAF production market.”

While developing a healthy market for SAFs will require a long-term regulatory framework and investment strategy, the smart money is on cleaner fuels, more than initiatives to increase efficiencies, to drive aviation decarbonization in the decades ahead.

Air travel takes off

Between 2013 and 2019, global demand for air travel increased by 50%, jumping another 10% in 2024 – 4% above pre-pandemic levels, an all-time high, according to figures released by IATA in January. IATA expects air travel to climb 6% this year, causing another surge in emissions.

In addition to carbon dioxide, airplanes emit pollutants such as nitrogen oxide and soot and form heat-trapping contrails. Scientists estimate that the net warming effect of these may be up to three times as great as the warming caused by the carbon dioxide emitted.

To realize the 2030 target, airlines would need to boost consumption of SAFs more than 30-fold. Some fear, however, that even if airlines replace 10% of their fuel with low-carbon alternatives by the end of the decade, the climate benefits would be erased by the anticipated growth in the aviation business.

Bending the curve

Reducing the carbon footprint of the aviation sector is one of the most difficult pieces of the energy transition, largely because it requires multiple solutions and the technology required is not yet available at scale. Writing in Nature, a science publication, researchers point out that zero-emission aviation demands a holistic approach, which includes increasing efficiencies in propulsion systems, making improvements to aircraft design and using low-carbon materials.

Carbon reductions in the production of conventional fuel, electrifying ground operations and route planning designed to minimize stopovers all represent additional levers to lighten aviation’s climate impact.

While such efforts are worthwhile, the resulting emission reductions are marginal. Numerous experts have concluded that replacing diesel with SAFs is the most viable near-term pathway for meaningful decarbonization. SAFs are liquid fuels derived from sustainable sources, versus conventional jet fuel that comes from crude oil. The cleaner fuels can mitigate as much as 80% of carbon dioxide in life-cycle emissions compared to conventional fuel. Moreover, “SAF is appealing because you can use it in existing aircraft,” Pavlenko says, noting that the European Union is leading the pack in the deployment of sustainable fuels.

Says Tauvette in an email, “It is critical that government and industry work together to properly assess the impacts and develop an SAF policy that helps reduce actual aviation emissions, supports creating value from Canadian feedstocks by producing SAF in Canada and enhances the competitiveness of the sector.”

A flight path to net-zero

The European Union aims for a 55% reduction in aviation emissions by 2030 and net-zero by 2050, leveraging SAFs and emission trading systems. China plans to achieve carbon neutrality by 2060, focusing on green airports and SAFs. Japan and the United Kingdom also target net-zero by 2050 and have drafted strategies that emphasize sustainable fuel, hydrogen-powered aircraft, and optimized air traffic management.

In Canada, British Columbia became the first jurisdiction in North America to require the use of SAFs in 2023, when the province released its revised low-carbon-fuels program.

The regulations now require renewable fuel to comprise at least 1% of jet fuel starting in 2028, increasing to 2% in 2029 and 3% in 2030 and subsequent compliance periods. The regulations also require a carbon-intensity reduction for conventional jet fuel. (The federal Clean Fuel Regulations set life-cycle carbon-intensity-reduction requirements for gasoline and diesel but does not have a reduction requirement for jet fuel.)

Currently, the high cost of low-emission aviation fuels – often far exceeding that of conventional jet fuels – has prevented widespread adoption. “The reality is that there is going to be a significant cost premium for SAF in the foreseeable future. It’s just going to be more expensive than fossil fuel,” Pavlenko says.

In its 2023 road map, C-SAF put forward an optimistic target of one billion litres of SAF production by 2030. Uptake would result in a 50% reduction, or more, in life-cycle greenhouse gas emissions relative to fossil fuel, which translates into the elimination of approximately 1.6 million tonnes of GHG emissions.

Earlier this year, Boeing announced that it will invest $17.48 million to promote the production of SAF in Canada, an encouraging signal that some investors see a long-term future for decarbonization. “Just getting a handful of commercial scale projects built to produce those second-generation technologies comprises a significant step forward for the industry and would help achieve some of those longer-term targets,” Pavelenko says. Anything less, and “we’re going to fail to achieve our 2050 goals.”

Victoria Foote is a writer and editor who specializes in clean energy and climate.

The post As air travel booms, can the aviation industry decarbonize for real? appeared first on Corporate Knights.

From the perspective of the urgency of the climate crisis, progress toward real transition plans has been agonizingly slow. CDP, a prominent climate disclosure platform, has found that while a quarter of the companies it tracks have 1.5°C-aligned transition plans, only 2% provided enough information to judge their credibility. And that number “falls to less than 1% when all companies reporting environmental data are considered,” Bloomberg reports.

Transition planning has been hampered by the slow rollout of two key regulatory components: mandatory climate-risk reporting by companies, or “disclosures,” and official definitions for all the relevant terms, or what is sometimes called a “green taxonomy.” Each are required not only to prevent greenwashing, but also to give investors, lenders and insurers the information they need to keep pace as economies evolve with the changing climate.

Delays create need for a new approach

After years of debates about what counts as sustainable or what should be included in a transition fund, the Canadian government announced last October that it would build and implement a taxonomy for transition investments. During his election campaign, Prime Minister Mark Carney promised that his government would finalize and implement the guidelines by fall 2026.

Mandatory climate reporting, meanwhile, suffered a major setback in April when the Canadian Securities Administrators (CSA) opted to pause work on developing the regulations, following a similar move by the U.S. Securities and Exchange Commission (SEC) in March.

We’ve been focused on the data on emissions, not the plans on how to reduce those emissions.

– Marie-Josée Privyk, ESG disclosure coach

Climate-risk disclosures are nonetheless in high demand, and Gary Gensler, the former U.S. SEC chair, has called them the “bare minimum” to help investors. Canada already has voluntary disclosure standards, which the Canadian Sustainability Standards Board (CSSB) finalized in December, and which many expected the CSA to make compulsory.

“These standards are there for companies to adopt . . . And that’s a crucial step. But that takes us only so far. For the benefits of the hard work that was done to develop these standards, we really do need to see adoption across the country,” CSSB chair Wendy Berman said at the Sustainable Finance Summit in Montreal in May.

Marie-Josée Privyk, an ESG disclosure coach in Montreal, says broader change won’t happen without mandatory requirements. “We have gotten as far as we were going to get with voluntary disclosures,” she says.

The Business Future Pathways strategy

Not wanting to wait even longer for companies to make serious transition plans, leading organizations and key figures from Canada’s sustainable finance sector have formed Business Future Pathways, a program to make transition planning an authentic reality, despite insufficient regulatory support.

We’re trying to take transition planning from what is currently seen as a compliance exercise to one that is centred more on creating an engine of future growth and prosperity for each company.

– Jonathan Arnold, director of sustainable finance, Canadian Climate Institute

Rather than lobbying or shareholder activism, the initiative focuses on providing concrete steps to help businesses pick up the pace and move past the hurdles. Barbara Zvan, president and CEO of the University Pension Plan Ontario (UPP), is leading the effort.

There are two parts to achieving this, says Jonathan Arnold, director of sustainable finance at the Canadian Climate Institute, which is responsible for the bulk of the research that will underpin guidance provided by Business Future Pathways.

The first is to get Canadian financial institutions on the same page about what good, credible transition plans look like. This matters because companies need to be properly recognized for reducing their greenhouse gas emissions and detaching from fossil fuels, as significant investment and financing opportunities will be tied to those changes. “This won’t involve creating a new standard but rather will boil down the essential components from existing international frameworks to what matters most to Canadian investors,” Arnold says.

While mandatory disclosures have been delayed for most companies, Canada’s financial institutions are already required to report on their exposure to climate risks, as well as their contributions to emissions, under rules from the Office of the Superintendent of Financial Institutions that come into effect this year.

By agreeing on what information they want and how it should be shared, the big banks, pension funds and insurers can create the stable ground that companies need to ensure that their transition plans are credible enough for investors who don’t want to be overly exposed to climate risks in their portfolios.

Once that piece is in place, the next step is convincing Canadian businesses to accept the help that’s offered by Business Future Pathways and then go ahead and do their transition plans with confidence, Arnold says.

Related

How climate risk disclosure became a battleground for the clean economy

‘ESG tourists’ are leaving, but sustainable funds are still growing in Canada

RBC’s climate retreat sparks debate over anti-greenwashing law

The arrival of Business Future Pathways has not been universally celebrated in sustainable finance circles, and it will still have to prove its worth. Some see it as yet another think tank, though Arnold denies that the term applies. Think tanks create more delay than value, according to Chris McDermott, a former Canadian climate negotiator at the United Nations. “Shareholders have far more clout in pressing for reporting than some think tank does,” he argues.

A forward-facing mindset

While efforts to establish mandatory climate-reporting rules have preoccupied the sustainable finance sector, transition planning presents a different outlook on climate mitigation and adaptation. “We’ve been focused on the data on emissions, not the plans on how to reduce those emissions,” Privyk says.

Disclosure is a backward-looking accounting exercise where companies report their historical data, Arnold explains. While disclosure is considered foundational for transition plans, it doesn’t do the work of strategizing how to pivot businesses toward sustainable models.

“We’re trying to take transition planning from what is currently seen as a compliance exercise to one that is centred more on creating an engine of future growth and prosperity for each company,” Arnold says. The work of Business Future Pathways is to shift the conversation more toward profitability and competitiveness, he argues. Credible transitions will have “a material impact on a business’s ability to survive and remain profitable.”

Mark Mann is a Montreal-based journalist and the associate editor at Corporate Knights.

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“Achieving net zero by 2050 remains a widely adopted goal and critical ambition for many countries, companies, and international organizations,” the Canada Pension Plan Investment Board (CPPIB) says [pdf] in its annual report released this week. But the report falls short of reaffirming the net-zero commitment the fund announced in 2022 while steadfastly refusing to abandon its fossil fuel investments.

Instead, CPPIB simply states that “the fulfillment of commitments made by governments, technological progress, fulfillment of corporate targets, changes in consumer and corporate behaviours, and development of global reporting standards and carbon markets will determine the pace of the transition to net zero.”

In the FAQ section of its Approach to Sustainability web page, CPPIB explains that “recent legal developments in Canada have introduced new considerations around how net-zero commitments are interpreted,” resulting in “increasing pressure to adopt standardized emissions metrics and interim targets, many of which don’t reflect the complexity of a global investment portfolio like ours.”

Those “rigid milestones could lead to investment decisions that are misaligned with our investment strategy,” CPPIB adds. “To avoid that risk – and to remain focused on delivering results, not managing legal uncertainty – we have made a considered decision to no longer maintain a net-zero by 2050 commitment.”

The FAQ material appears on a page where chief sustainability officer Richard Manley declares that “companies that effectively anticipate and manage material sustainability-related factors are better positioned to be more profitable and resilient over the long term.” A CPPIB spokesperson did not reply to an email requesting further detail on the announcement.

The news from CPPIB echoes the Royal Bank of Canada’s late-April decision to abandon its $500-billion sustainable finance pledge and stop public disclosures on its updated climate strategy, citing the new anti-greenwashing provisions in the Competition Act. At the time, legal and climate policy experts said the new rules shouldn’t be a problem for companies that were telling the truth about their climate performance – or that were working in good faith to meet their commitments, even if they ultimately fell short.

“Walking away from a climate commitment when asked to prove its credibility raises serious concerns about the integrity of that commitment in the first place,” Senator Rosa Galvez (ISG-Quebec), who worked to introduce and pass a Climate-Aligned Finance Act (CAFA) in the last Parliament, said at the time. “Moreover, by abandoning its claims, RBC has demonstrated that the provisions of the Competition Actthat intend to address greenwashing are in fact serving their purpose.”

Walking away from a climate commitment when asked to prove its credibility raises serious concerns about the integrity of that commitment in the first place.

– Senator Rosa Galvez

In a media release Wednesday, Toronto-based Shift Action for Pension Wealth and Planet Health said CPPIB’s investment and asset management decisions “have been misaligned with a credible net-zero strategy ever since it first made this commitment in 2022,” continuing to invest in fossil fuel expansion “in violation of credible science-based commitments and prudent due diligence” against climate risk.

“Net-zero commitments are not optional,” Shift Action wrote. “They have become essential tools to manage risk and maximize long-term financial returns for pension funds. Climate impacts are already reducing global GDP growth, threatening the stability of financial markets and disrupting lives and livelihoods in Canada and around the world,” pointing to a future where “pension funds like CPPIB are unlikely to generate the stable, future returns necessary to pay out their long-term obligations.”

Canadians under 40 who are now in the work force “won’t be eligible to receive their CPP benefits until after 2050,” the release adds. “What kind of a world are Canadians expected to retire into? How would CPPIB be able to sustain benefits in a world of climate breakdown?”

This article was first published by The Energy Mix. It has been edited to conform with Corporate Knights style. Read the original story here.

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The Science Based Targets initiative (SBTi) will continue to insist that corporations seeking validation under its climate-plan accreditation – considered an international gold standard – must set a 1.5°C climate target, as set out by the Paris Agreement.

Scientists have warned that the 1.5°C goal has likely already been breached, after multiple record-setting temperatures. But newly appointed SBTi CEO David Kennedy said the 1.5°C goal is the basis of a science-based approach to corporate climate planning and forms the foundation of a new SBTi corporate net-zero standard. Kennedy said the science shows that there are large planetary risks in going higher than 1.5°C. “That is why in the Paris Agreement we have agreed internationally to aim for 1.5 degrees, and that is the central scenario that underpins the draft [SBTi] standard,” he said in an SBTi webinar last week.

Speaking directly to corporate representatives on the webinar, Kennedy said a 1.5°C goal implies a range of activities and objectives for corporate transition plans. “Decarbonize heat. Decarbonize electricity. Decarbonize transport. Decarbonize those things not only in your own operations, but do that in your supply chains as well.”

By firmly supporting the 1.5°C goal, SBTi is drawing a red line against corporate and financial interests moving to loosen their climate targets and plans. The new draft standard, released in March, also addresses weaknesses in SBTi’s process that have permitted many companies to achieve validation without implementing credible climate transition plans.

The SBTi draft standard will be out for consultation until June 1 and finalized later in 2025. Its publication comes at a time when fossil fuel companies like BP are pulling back on their climate commitments, the Net Zero Banking Alliance is moving away from its target of 1.5ºC global warming and many banks are casting doubt on whether 1.5°C is achievable. In addition, many large corporations are counting carbon credits and offsets as a way to report lower emissions.

The document also settles a rancorous debate over carbon credits and offsets that gripped the organization last year.

Carbon credits rejected

Under the new standard, SBTi will not validate the use of carbon credits as offsets against a company’s carbon dioxide emissions. Carbon removals through efforts such as reforestation or direct-air-capture projects will be accepted, but only for a company’s so-called residual emissions, the estimated 10% of emissions that cannot be abated when a company reaches net-zero. Removals are different from credits from sources such as renewable-energy projects, which are based on “avoided” emissions.

Last year, the SBTi board set off a major controversy when it suggested the organization would accept credits to offset carbon dioxide emissions. After staff pushed back, the organization reversed itself, saying an earlier policy against offsets had not changed. Shortly after, SBTi published a study that cast doubt on the efficacy of credits, setting the stage for the policy released last month. “Everybody knows we had a difficult situation with the position on credits last year,” Kennedy said. “I hope you will see in the draft standard that we have moved on, and we have a very good position on credits.”

By firmly supporting the 1.5°C goal, SBTi is drawing a red line against corporate and financial interests moving to loosen their climate targets and plans.

Kennedy said SBTi welcomes companies that want to invest in credits and will recognize their leadership in this area, even if they won’t be considered as offsets against emissions. “Credits are never an alternative to reducing carbon footprints, but they can be a very useful complement.”

Validation from the London-based SBTi is recognized as the gold standard for corporate climate plans. The non-profit organization – funded with charitable and corporate donations and validation fees – has reviewed more than 10,000 companies with targets or commitments. It has validated targets for more than 7,000 companies, including 1,700 with net-zero targets, and has recognized more than 3,000 companies committed to developing targets. The SBTi validation is used extensively by investors to assess portfolio companies.

No credible transition plans

Yet, SBTi has struggled to push corporations to move from targets to firm net-zero plans. A recent study by Morningstar Sustainalytics of 1,450 companies with SBTi-validated targets found that none had a transition plan aligned with a 1.5°C scenario. Only 25% of the companies were found to be on a 1.5°C to 2°C pathway, while 56% were on a 2°C to 2.5°C pathway.

However, Morningstar said 55% of the SBTi-validated companies do demonstrate strong management practices on climate risks and emissions, more than double the 24% of the broad universe of companies in the Morningstar database that score high on climate management. Forty-five percent of SBTi-validated companies had average or weak management practices.

Changes to the standard should improve the organization’s ability to validate company transition plans, SBTi’s head of standards, Emma Watson, told the webinar.

These changes include detailed transition metrics and methods to track emissions, including the percentage of revenue that companies derive from net-zero-aligned products and services. Larger companies and those located in high-income countries will face more stringent standards, while there will be flexibility to impose less stringent standards on smaller companies and those located in low-income countries. She also said SBTi will encourage companies to start investing in removal of residual emissions immediately rather than wait until the end of the net-zero period.

Kennedy also said SBTi expects companies to start transitioning on energy use. The organization has set 2040 as the year when companies will need to rely on low-carbon electricity for their energy needs.

Kennedy said the conservative backlash in the United States has made it more difficult for all businesses and organizations to manage the net-zero transition. “The political situation in the U.S. is not helpful,” he said. “It has changed the mood music and some of the perceptions and discussions in boardrooms and C suites.”

The draft changes are meant to focus SBTi and its validated companies on executing transition plans, not just setting targets, Kennedy said. “I think SBTi can have a huge impact going forward on the net-zero transition for business. To do that, we have to focus on action and implementation.”

Eugene Ellmen writes on sustainable business and finance. He is a former executive director of the Canadian Social Investment Organization (now the Responsible Investment Association).

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Environment and Climate Change Minister Steven Guilbeault pledged to release a plan next year that delivers on the 2035 target, even as Ottawa faces considerable blowback on its current efforts to meet its 2030 goal of a 40% to 45% reduction. The 2035 target “balances our need to drive green innovation while being responsive to our unique trade exposed and natural resources dependent economy,” the minister said in a document released December 12. “It also takes into account the concerns of Canadians around affordability. With increasing global political uncertainty, we need to ensure we can withstand unforeseen obstacles while making Canada a safe, stable and appealing place for investment.”

Ottawa is already facing some visible obstacles to achieving either its 2030 or 2035 climate goals. They include the opposition of provinces to more ambitious regulations, the election of climate-change-denier Donald Trump as president in the United States last month, and the lower priority that Canadians appear to be giving climate action compared to affordability issues.

The Trudeau government faces a likely election next year, and the Liberals trail the Conservative Party of Canada by 20 points in public opinion surveys.

A recent audit by the commissioner of the environment and sustainable development found that Ottawa has failed to put in place the measures that are required to meet its target for 2030. Of the 20 measures the auditor examined, only nine were on track to be implemented in a timely manner. Key among those missing measures are the long-promised oil and gas emissions cap against which the Alberta government and industry are campaigning aggressively, and the clean electricity regulations that Ontario and other provinces oppose.

Guilbeault insists that Ottawa can put in place the policies required to carry us toward the target, though he acknowledged that provincial support is crucial.

In a report this fall, the government-appointed Net-Zero Advisory Body urged the Liberal government to set a 2035 target of 50% to 55% below 2005 emission levels, saying the tougher goal was needed to meet the requirements of the Paris Agreement. However, it warned that Ottawa would need to not only finalize its existing policies – like the oil and gas cap – but come up with new measures to achieve the target.

The new 2035 goal “is a political target, not a realistic one,” says David McLaughlin, a Conservative strategist who recently published an essay on the need for more pragmatic and collaborative climate policy. “The government increased the 2035 target slightly to be able to say they are doing more but do not have a plan in place to achieve even the previous, less-ambitious target,” McLaughlin says in a text message. “What’s to say this target won’t be missed just like all the other ones?”

However, some environmental advocates argue that the 2035 target is too weak and will take Canada off course for achieving its fair share of global emission reductions in the bid to hold the increase in average temperatures well below 2°C.

“2024 has been the costliest year on record for weather disasters in Canada,” Caroline Brouillette, executive director of the Climate Action Network Canada, said in a release. “This is already affecting Canadians’ health, insurance premiums and grocery bills.” She said the problem isn’t with overly ambitious targets but with the lack of aggressive action needed to achieve them. She urged Ottawa to quickly finalize the oil-industry emissions cap and the clean electricity regulations.

The advocacy group Clean Energy Canada welcomed the 2035 target, saying it represents a balance between ambition and achievability. “Targets are meaningless without a roadmap to reach them,” executive director Mark Zacharias said in a release. Canadian emissions are at their lowest level in 27 years outside the pandemic, he noted. The Canadian Climate Institute has estimated that in 2023, GHGs were 8% below 2005 levels.

“To this end, the priority right now is to retain and finalize key policies and programs that will keep us within striking distance of these aspirations,” Zacharias said. “Measures that will make life more affordable for Canadians, in particular, should be at the top of the list.”

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The transition to net-zero is one done for the long-term health of ourselves and our planet. It is one that helps guarantee a livable world for future generations. Net-zero is a journey, one that will take trillions in new investments, continuous innovation and a shift in the way we procure and develop the goods we consume, the places we live and work, and the way we move about.

It’s a conscious decision for our future, one that involves making notable investments that will scale back our reliance our carbon-emitting fuel sources. These investments will affect every stage of project development, from design and procurement to construction and operation. Investments in low- or no-emissions technologies will be at the heart of the way we look at our infrastructure.

So how do we actually get there? What decisions should be made now to ensure that the journey toward net-zero is on the right path? As a company at the forefront of the transition to net-zero, helping companies and governments take action to meet this massive climate objective, WSP is working to introduce low- and no-carbon solutions that chart a course to eventual net-zero.

Consider emissions early

The carbon footprint of a project needs to be considered in the development of a hospital, house or high-rise condominium. Emissions savings must be factored at the earliest stages of all projects, as this is the best time for integrating the most impactful solutions in a cost-effective manner.

It’s important to set goals for overall emissions right from the start, and then look at the number of potential ways that emissions can be reduced as part of the project’s development. Here are some key questions to be asked that can lead to solutions that will reduce emissions:

• For building solutions, what materials will the structure, mechanical/electrical and building envelope systems be built with? Is mass timber an option? Can recycled steel be used? Could modular construction be considered to reduce material waste?
• There are also considerations related to energy: How can natural sunlight be used to heat or light the building? Can the building be electrified by using heat pumps instead of fossil-fuel-burning boilers? Is there an opportunity for on-site renewable-energy generation? Can the building envelope be improved to reduce how much heating and cooling is needed?

All of these, and more, are key considerations for the earliest stages of project development, having a lower financial impact when considered early. These questions can and should be applied to all forms of buildings, from residential and commercial towers to hospitals and transit stations. Each action can lead to a significant emissions reduction itself, but combined can help the project reach toward net-zero.

A plan for existing buildings

For existing building infrastructure, new approaches have been adopted for making significant strides in reducing the emissions footprint. More than 80% of existing buildings today will still be in operation in 2050. There is no path to net-zero without tackling existing buildings.

There are two key things to focus on when talking about the existing buildings:

1) Existing buildings contain a lot of embodied carbon that we cannot afford to waste by demolishing the building. Reusing an existing building, even if major retrofits are required, will most often if not always reduce embodied carbon compared to demolishing and building anew.

2) Making them as energy-efficient as possible and switching to clean energy sources, which has led building owners to consider using a deep energy retrofit.

A deep energy retrofit focuses on two key areas, building systems and building envelope, to create well-insulated, airtight and highly energy-efficient buildings. The result of the retrofit is a 50% or greater reduction in energy use and a 90% or greater reduction in operational carbon emissions. This means targeting envelope assemblies (windows, doors and insulation) and HVAC systems, to reduce the demand for energy as much as possible and enable the electrification of building systems.

While the focus has been on large-scale structures, such as office towers and older apartments/condominiums, there is also a drive to test the viability of deep retrofits at a smaller scale, including individual housing units. FortisBC recently conducted a deep-energy-retrofit pilot program to demonstrate its effectiveness and affordability. The program focused on 20 residential homes and four fourplexes, targeting the 50% threshold. The program is currently in the construction and evaluation phase and will provide valuable information on the fiscal/environmental value of deep energy retrofits for smaller buildings.

Regardless of the building’s footprint, a deep energy retrofit represents a notable investment for the property owner, but one that can be recaptured through energy and carbon tax savings, government grants (in some jurisdictions) and a higher resale value for the structure.

Considering district energy

The installation of district energy systems poses an opportunity for meaningful emission reductions, especially where clusters of buildings are owned by the same entity such as institutions, municipalities and business parks.

There are already several successful examples of district energy systems installed in communities across Canada, including Guelph, Ontario, and Prince George, British Columbia, but the flagship project is the ESAP program in Ottawa/Gatineau. ESAP, the Energy Services Acquisition Program, services multiple government structures on both sides of the Ottawa River, including the Parliament buildings. It is currently in the midst of the energy services modernization, an upgrade of the system to provide heating for 80 buildings and cooling for 67 buildings.

By sharing heating and cooling resources through a complex piping network served by four energy centres, an estimated 63% emissions reduction will be achieved compared to 2005 baseline emission levels, with further emissions reductions expected for stage two of the project.

In communities across Canada, where carbon-emitting energy solutions are still being used, there are investments that can be made today to drastically reduce the emissions footprint in buildings. And when the emissions are eventually removed from the energy mix, the energy savings will continue to provide economic benefit for the property owner.

To reach net-zero by 2050, it’s important to take strides now, be it during the earliest stages of project procurement or through retrofits to existing buildings. These emissions savings will be paramount in creating healthy, resilient communities for generations to come.

Need help taking the first step? WSP has experts in more than 100 cities across Canada, with additional resources around the world, that can help any asset owner better understand how to reduce the emissions footprint of any structure. For more information, visit: https://www.wsp.com/en-ca/services/green-building-design

The post Reaching for net-zero in Canada’s built environment appeared first on Corporate Knights.

At the heart of the climate change challenge is the dependence on fossil fuels that is built into every sector, from buildings and vehicles to power plants and farm equipment, steel mills and breweries. With that built-in fossil fuel dependence comes locked-in greenhouse gas emissions. Sure, policies and behaviour change can reduce fossil fuel use, buy time and facilitate growth of zero-emission solutions, but eliminating fossil fuel dependence requires a transformation of that capital stock. 

The capital investment needed to decarbonize the Canadian economy was first estimated by Corporate Knights at about $150 billion per year, and the federal government and others have since corroborated that finding. For context, this amounts to the annual total raised by sales taxes in Canada. Total capital spending in Canada runs around $650 billion per year, most of which is making the problem worse and some of which, perhaps 10%, is providing some incremental moderation of emissions. Unless and until the majority of capital spending is aligned with our climate change commitments, we will not get at the root cause of the heat waves, droughts, floods and wildfires that are eating away at our prosperity.

Such an alignment is possible. Scores of innovations in recent years have opened up pathways to zero emissions. Super-efficient and fossil-free buildings, electric vehicles, cold-climate heat pumps, smart building design and operation, electrification of industrial processes, energy storage, regenerative agriculture, circular industrial production systems, wind and solar electricity, battery storage – climate solutions are growing at unprecedented rates. 

Globally, a post-fossil-fuel energy system is emerging, centred on efficiency, electrification and renewable energy. The carbon-free solutions often bring highly valued collateral benefits – better vehicle performance, healthier and more productive built environments, enhanced productivity and cost savings – that act as accelerants in the market uptake of the new technologies.

And yet, a yawning gap remains between current levels of investment in climate solutions and what it would take to get the job done. This “decarbonization capex (capital expenditure) gap” is the focus of the Climate Dollars research project at Corporate Knights. For each of the three most important sectors – buildings, transportation and power – there is an annual decarbonization capex gap of $30 to $40 billion, and the longer it takes to close it the more Canada will fall behind in the global energy transition that is underway, and the more disruptive will be the changes to our climate, our economy and our communities. 

The decarbonization gap is made up of stranded opportunities – investments needed to decarbonize that are technologically and economically feasible but that are left unrealized for a host of reasons. For many opportunities, the payback is too long for private investors or is out of scope for the traditional portfolio of the public investor. Other opportunities are stranded by perceived risk, incorrect or lack of information, lack of access to capital, regulatory roadblocks, and ineffective or conflicting public policies. Cementing the problem are underdeveloped supply chains, labour shortages, the inertia and entrenched advantages of the incumbent fossil fuel industry, as well as lacklustre rates of innovation in business models and a lack of public policies for clearing the financing and logistical barriers that are holding back progress. 

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Private investors account for 83% of all capital expenditures in Canada, and the private sector has the expertise for mobilizing capital on the scale needed to respond to the climate crisis. But timely decarbonization will require increased public investment in opportunities that are currently stranded in the gap. Corporate Knights has partnered with York University’s Schulich School of Business to develop a Canadian climate-finance index that tracks and measures private-sector climate-finance flows. 

Beyond the widely acknowledged need for more blended finance, closing the gap will require revising century-old utility mandates and regulatory frameworks, capturing inter-sector opportunities that are currently falling through the cracks, financing innovations to eliminate first-cost barriers, incentives and business models that avoid the half-measures that drive up costs in the long run, and a level of determination and cooperation across all sectors of society that has yet to materialize in Canada.

This is a big transition.  It is disruptive, messy and full of wicked complications and pleasant surprises. But the map to a low-carbon future is taking shape, the climate imperative provides a compelling destination, and pioneering explorers and innovators are finding pathways through the decarbonization capex gap.

Ralph Torrie is the research director at Corporate Knights.

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Drawing on longstanding pro-CO2 rhetoric in climate denialism, Policy Resolution #12 asks the government to scrap its decarbonization goals, remove the designation of carbon dioxide as a pollutant, and recognize the greenhouse gas as a “foundational nutrient for all life on Earth.”

“I think it has a very good chance of passing,” says Debra Davidson, a researcher in climate change impacts at the University of Alberta. “It’s not at all out of step with the position of Alberta’s United Conservative Party with respect to climate change mitigation and the energy industry for quite some time now.”

If it passes, the effect of the policy would be mainly symbolic, Davidson says, not only because it would be non-binding, but also because the Alberta government has already signalled that it has little intention of achieving its net-zero targets. Last year, for example, the province imposed a moratorium on large wind and solar projects, which led to 53 projects being cancelled and the estimated loss of $91 million in tax revenues. In the past five years, the UCP has also repealed the former NDP government’s carbon levy, opened the eastern slopes of the Rocky Mountains to coal mines, and withdrawn funding for a public transit project in Calgary.

As Stephen Legault, senior manager of Alberta energy transition at Environmental Defence, has said, the resolution is “already de facto policy.”

On the other hand, Alberta did release its Emissions Reduction and Energy Development Plan (ERED) in April 2023,  aiming for a carbon-neutral economy by 2050.  However, despite these commitments, “There is no evidence that Alberta has taken any action to regulate oil sands emissions as noted in the ERED plan,” says Simon Dyer, deputy executive director at the Pembina Institute. This summer, the Alberta Energy Regulator projected a 17% increase in oil sands production by 2033.

Instead, the provincial government “has focused on criticizing the federal plan to reduce oil and gas emissions,” Dyer says. Premier Danielle Smith is an outspoken opponent of Ottawa’s planned emissions cap and has launched a national “scrap the cap” ad campaign.

Even if the policy proposal mainly serves to underscore existing inaction on emissions, what’s truly notable, Davidson says, is “the degree to which it indicates a full-scale legitimation of disinformation.”

An energy policy based on fiction

The rationale for the proposal is largely erroneous. It takes a few grains of truth – that the carbon cycle is necessary and that carbon dioxide benefits plants – and couches them in the mistaken ideas that current CO2 levels are near their lowest in more than 1,000 years and that “the earth needs more CO2 to support life.”

But the carbon in our atmosphere isn’t even close to being at its lowest levels, says James Miller, a researcher on global climate change at Rutgers University–New Brunswick.

“Except for the recent period of increase, CO2 levels have been below 300 ppm for thousands of years,” he writes in an email to Corporate Knights. The atmospheric reading of CO2 reached 420 parts per million last year, according to the World Meteorological Association, which notes in a press release that “the last time the Earth experienced a comparable concentration of CO2 was 3–5 million years ago, when the temperature was 2–3°C warmer and sea level was 10–20 meters higher than now.”

And while increased carbon dioxide can be helpful for plants when everything else is equal, Miller explains, “everything else is not equal, and adding more CO2 leads to increasing temperatures, which can lead to less plant productivity.”

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Davidson calls the argument that more CO2 will be good for plants “absolutely preposterous,” not only because global warming leads to more droughts, but also because crops are temperature-dependent. Above certain thresholds, plant productivity declines precipitously, she says. NASA has predicted that factors including temperature stress from climate change could lead to a 24% decline in global maize crops as soon as 2030, which the study’s author says “could have severe implications worldwide.”

The type of CO2 boosterism expressed in the UCP policy proposal isn’t novel. Climate-denying think tanks like Alberta’s Friends of Science Society have been promoting it for many years. But the inclusion in a formal policy document represents a new development.

Climate denialism has grown significantly more entrenched in Alberta’s UCP party, political commentator David Climenhaga writes in an email to Corporate Knights. “Since Smith became premier, to a significant degree the UCP has become more like a comment thread on social media and less like a conventional political party,” he says.

Climenhaga thinks that the odds the resolution will be adopted are “extremely high, like 100%.” If so, it will create a problem for Smith, who is “heavily invested in carbon capture, both as a subsidy to the fossil fuel extraction industry and as a way to win social licence for more extraction.”

“Carbon capture is a real solution – one of the best we know of,” Smith said in November, adding that “Alberta fully intends to lead the world in this critical field.” Last year, she launched an incentive program to cover some of the capital costs associated with new carbon capture, utilization and storage (CCUS) infrastructure in the province.

But according to Climenhaga, the people behind the policy proposal are “increasingly suspicious of carbon capture, not because they think it’s a boondoggle necessarily, but because they believe, as per the resolution, that CO2 is good.”

Alberta’s self-inflicted economic wounds

Abandoning its net-zero targets would set Alberta on a lonely path, marking it as an outlier in the global economy. “A commitment to net-zero is table stakes, in terms of the bare minimum,” Dyer says.

The policy proposal may be mainly symbolic, but “it’s a symbolism that is damaging to the investment climate in Alberta,” Dyer argues. Calgary and Edmonton are home to many entrepreneurs in the decarbonization space, he says, and policies that discourage investment would be economically harmful.

Even Texas, Alberta’s oil-loving American counterpart, has embraced the renewables boom and rapidly ramped up its solar and wind capacity. Three-tenths of its net electricity in 2023 was generated from renewable sources, according to the U.S. Energy Information Administration.

The proposed measure to abandon its net-zero targets would also put Alberta out of step with its own energy sector. Most oil and gas companies see a need for energy diversification and have made commitments to reduce greenhouse gas emissions. “The industry has been very good cutting back the use of diesel and methane emissions, carbon capture – they’re very active on that side,” says Josef Schachter, president of Schachter Energy Research, in an interview with the CBC.

It was economic factors and not climate change that drove the shift toward renewables in Texas, and the same could theoretically be true in Alberta. Even if the province doubles down on science denial, that doesn’t mean it has to deny cheap renewable power.

Mark Mann is an associate editor at Corporate Knights.

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