More than 100 countries have either set or are considering commitments of carbon neutrality, with most – like Canada – aiming for a 2050 net-zero target date. They are joined by more than 800 cities, including Toronto, Montreal and Vancouver.

The private sector is also stepping up. Financial institutions around the world, including Canada’s biggest banks, are committing to net-zero investment and lending portfolios by 2050. At the same time, we’re seeing an outpouring of carbon-neutrality pledges from leading global corporations, including Walmart Inc., Ford Motor Company, Royal Dutch Shell and Canadian oil sands giants Cenovus Energy Inc and Suncor Energy Inc.

However, as carbon-neutral pledges mount, there are concerns about the credibility of those corporate targets and the strategies being proposed to reach them.

Companies are putting too much focus on the “net” part of the equation and not enough on the “zero.” There is a danger, as one policy researcher puts it, of getting trapped in the net.

Deep decarbonization

Corporate plans often rely heavily on “offset” systems in which they purchase emission credits from other firms or organizations that reduce carbon emissions more cheaply than the corporation can. On paper, such firms will be advancing toward net-zero; in reality, their own carbon intensity will remain stubbornly high.

Critics also worry that corporate strategists are pinning too much of their effort on nature-based solutions when there remains considerable debate about the credibility and permanence of the resulting GHG-reduction credits.

This is not to diminish the critical importance of climate-friendly practices in forestry, agricultural and nature conservation. Or the crucial contribution that will be required from negative emission technologies like “direct air capture” projects, which can suck carbon dioxide from the atmosphere and sequester it.

However, such strategies need to be in addition to not in lieu of deep decarbonization efforts that displace fossil fuel use in transportation, electricity, heating buildings and industry.

“We absolutely need to be focused on the ‘zero,’” says Catherine Abreu, executive director of Climate Action Network Canada. “Human beings are easily seduced by silver-bullet, technocratic fixes. And there is an aspect of the net-zero conversation that lends itself to that kind of seductive thinking, and a tendency in some quarters to manipulate the idea of net-zero and turn it into something that perpetuates the status quo.”

Still, it’s increasingly clear that success in limiting the carnage of climate change will require every mitigation tactic that is available. All the more so because we have failed until very recently to accelerate the low-carbon transition of the mainstream economy.

Safe bets and wild cards

In its groundbreaking 2018 report, the UN’s Intergovernmental Panel on Climate Change (IPCC) embraced the “net” in various scenarios for holding the average global temperature increase to 1.5°C. The IPCC laid out four “illustrative pathways” for achieving the 1.5° goal, and all of them featured some reliance on “negative emissions,” such as nature-based solutions or carbon capture and storage.

The Canadian Institute for Climate Choices (CICC) characterizes many of the negative emissions solutions as “wild cards” that could play an important role but face serious questions about effectiveness and commercial viability.

There is tendency in some quarters to manipulate the idea of net-zero and turn it into something that perpetuates the status quo.”

–Catherine Abreu, executive director of Climate Action Network Canada

In its February report, Canada’s Net Zero Future, the CICC warns that we cannot shirk on “safe bets” – such as energy efficiency, renewable power and electric vehicles – in order to rely on those wild-card technologies. They include direct air capture (DAC) technology and nature-based solutions.

Carbon capture, use and sequestration (CCUS) can play an important role, both in the short-term for highly concentrated emissions of carbon dioxide and, potentially, over the longer term with less-concentrated CO2 sources. Wild-card technologies like hydrogen, DAC and nature-based approaches are high-risk but may be high-reward in the push for net-zero by 2050.

Such technologies could “fundamentally change Canada’s path to net zero,” the CICC report says. “Wild cards are a potential complement to safe bets – not a substitute. They are important for unlocking the deeper, cost-effective reductions that can get Canada to its ultimate net-zero target.”

Offsets as regulatory compliance

Meanwhile, the federal and provincial governments are allowing companies to use offsets to meet some small portion of their regulated emission-reduction requirements. In March, Ottawa published draft regulations for its planned GHG-offset credit system. The proposal details how companies can use offset credits to meet up to 10% of the emission reductions required under regulatory schemes such as the industrial carbon-pricing system or the clean fuel standard, which will force refiners and importers to reduce the carbon intensity of the liquid fuels they sell.

They will have to demonstrate that the emissions reductions are in addition to what would have occurred in the absence of the credit purchase and that the GHGs will be stored permanently, Environment and Climate Change Canada says.

Nature-based strategies for mitigating climate change are increasingly being touted as a key element in national and corporate net-zero plans.

In keeping with accepted United Nations practices, Ottawa includes significant contributions from land-use and nature-based solutions in its plan to achieve up to 45% reductions in GHGs from 2005 levels by 2030. The federal government says it will plant two billion trees as part of its strategy and conserve 25% of Canada’s land mass as part of its climate mitigation strategy. In its April budget, the Liberal government also allocated $185 million over 10 years for an Agricultural Climate Solutions program, which aims to sequester carbon in soil and vegetation.

“There is less incentive for those firms to go after their own emissions because they can instead go after low-cost offsets, which are not always real emission reductions.”

–Nic Rivers, University of Ottawa

An international study funded by the U.S.-based Nature Conservancy concluded that nature-based solutions could provide 37% of the most cost-effective GHG reductions required by 2030 to keep the world on track to limit average temperature increases to less than 2°C.

However, the use of nature-based credits to offset emissions has drawn considerable flak because of concerns about accounting accuracy, additionality and permanence.

In an opinion piece published on CBC’s website in March, three leading climate academics (Nic Rivers, University of Ottawa; Kathryn Harrison, University of British Columbia; and Mark Jaccard, Simon Fraser University) said the use of offsets in regulatory systems “is likely to give the illusion of progress, even as it increases carbon emissions.”

They argue the carbon accounting is unreliable because it doesn’t assess actual emission impacts, but rather measures outcomes compared to some assumed baseline. In many cases, “emission reductions” are created by a change in activity – sustainable forestry practices or capturing methane from municipal waste sites – where business-as-usual baselines assume problematic practices that should be better regulated, they wrote.

Meanwhile, industrial emitters can offset a tonne of real GHG emissions from a smokestack against a tonne of offsets. “There is less incentive for those firms to go after their own emissions because they can instead go after low-cost offsets, which are not always real emission reductions,” Rivers said in an interview. He doesn’t question the importance of nature-based solutions but argues they should be pursued separately from regulatory compliance.

In its net-zero report, the Canadian Institute for Climate Choices says nature-based solutions present “enormous potential for the low-cost sequestration” of carbon and could be useful in offsetting emissions from hard-to-mitigate, emissions-intensive industries such as cement. However, the authors echo the concerns raised by the professors with regard to additionality and permanence.

Save a tree, store some carbon

The Darkwoods Forest Carbon Project in southwestern British Columbia is owned by the Nature Conservancy of Canada and is the largest verified offset project in North America. The Nature Conservancy – which is not affiliated with the international organization – purchased the 63-square-kilometre property in 2008 with plans to improve forestry management and other conservation practices and sell carbon offsets.

The Darkwoods Forest Carbon Project estimates it saves the equivalent of 125,000 tonnes of CO2 emissions each year. Since its inception, it has sold well over a million tonnes of carbon credits in the voluntary market in which corporations like Microsoft, Shell and United Parcel Service buy offsets to meet their own GHG-reduction targets.

The Nature Conservancy has had the emission reductions verified by third parties under the international Sustainable Development Verified Impact Standard. It includes precise calculations of the carbon stored in the various trees that make up the conservation area, as well as a reserve of credits that guard against unexpected losses such as forest fires.

However, the B.C. Auditor General criticized the Darkwoods offset accounting in a 2013 report. The report reflects many of the concerns that have been raised with regard to nature-based solutions. It concluded that the organization had already decided to purchase the property prior to any commitments for offsets, and so the assumed improvements to forestry management would have happened without the carbon credits. As a result, there was no additionality, it said. It also suggested that Nature Conservancy used overly aggressive assumptions about timber harvesting in the region for its baseline, against which it measures the carbon credits resulting from conservation.

Nature Conservancy rebutted the Auditor General’s report, arguing that the organization had always considered the revenue from carbon credits as an important component of its agreement to purchase and conserve the Darkwoods Forest. A letter from Verra president David Antonioli, whose company verifies the credits, complained of a series of errors and misunderstandings about the verification process that had been committed by the Auditor General’s team in preparing its report.

Rob Wilson, director of conservation finance for Nature Conservancy, notes that carbon storage is typically only one aspect of a conservation project that protects species habitat, maintains natural spaces for human enjoyment and, in some cases, provides greater resilience from the mounting impacts of climate change. “The revenue from the carbon credits has allowed us to support other conservation work across the country,” he says.

Other nature-based programs have also faced criticism. Verra’s Antonioli responded in May with charges of bias against a report from Greenpeace and The Guardian newspaper that concluded airlines were relying on “phantom credits” in a forestry project in Peru. A joint report from ProPublica and MIT Technology Review published in late April concluded that California’s forestry offsets program “creates the false appearance of progress.”

Corporate offsets: Financing solutions or paying to pollute?

Certainly, the purchase of offsets – whether nature-based or technological – is a key component in corporate net-zero targets.

In February, Royal Dutch Shell released its plan for achieving net-zero emissions by 2050, with declining crude production, investments in carbon capture and storage, and a hefty portfolio of nature-based offsets that would represent 120 megatonnes per year of CO2-equivalent emissions by 2030. (For scale, that’s equivalent to roughly two-thirds of all the emissions from Canada’s oil and gas sector in 2019.)

Shell’s Canadian subsidiary is purchasing credits from the Darkwoods project and is pursuing a reforestation project with the Tsilhqot’in First Nation in B.C. and a grasslands protection initiative with federal and provincial governments, both of which it says will yield carbon credits.

“At worst, these [portfolio] commitments and investments/divestments risk being a shell game where image-conscious companies shed their high-emitting assets in favour of low- or zero-emitting ones, only for less-visible or image-concerned players to snap them up.” 

–Jason Dion, Canadian Institute for Climate Choices

Similarly, Enbridge is purchasing and retaining renewable energy credits and investing in nature-based solutions and offsets.

Of note, few of the major oil companies in Calgary are pledging to reduce their overall emissions by 2030, despite the reality that oil and gas broadly accounts for 26% of the country’s total GHGs and the federal government has committed to slashing national emissions by 40% to 45% by 2030. On May 26, Suncor said it would reduce its GHGs by one-third by 2030 across its value chain, on the way to net-zero by 2050.

Canadian oil sands giant Cenovus Energy also says it aspires to reach a net-zero target by 2050. However, it’s focused only on emissions that result from its own operations and the electricity it purchases from the grid. International standards, like those put forward by the Task Force on Climate-related Financial Disclosure, urge corporations to disclose and manage all the emissions related to the production, processing and consumption of their products – known as Scope 3 emissions.

In light of its merger with Husky Energy on January 1, Cenovus is reviewing its targets and plans. “We will be completing an analysis to set new near-term targets in 2021 that align with our revised long-term business plan,” says company spokesman Reg Curren.

In the sustainability report Cenovus released last July, the company said it would reduce the per-barrel, GHG-intensity of its operations by 30% between 2019 and 2030 and would aim to hold absolute emissions flat at 8.8 megatonnes of CO2 equivalent. Cenovus said its net-zero aspiration would rely on “technology solutions beyond those that are commercial and economic today.”

It’s unclear whether a rebalancing of Cenovus’s assets to include, for example, more renewable energy would result in a society-wide reduction in emissions.

“At worst, these [portfolio] commitments and investments/divestments risk being a shell game where image-conscious companies shed their high-emitting assets in favour of low- or zero-emitting ones, only for less-visible or image-concerned players to snap them up,” says Jason Dion, author of the Institute for Climate Choices net-zero report.

However, if overall oil and gas supply declines because of shifting capital expenditure decisions, and new investment is plowed into clean energy development, the shift in portfolio would represent substantial progress.

Long-term promises vs short-term realities

The oil companies aren’t alone in making long-term pledges that don’t align with their short-term business plans.

Three of Canada’s big banks – Toronto-Dominion, Bank of Montreal and Royal Bank of Canada – have pledged some form of net-zero target by 2050, either in their lending portfolios or total financing. RBC’s commitment, for example, relates to companies in its lending portfolio being, in aggregate, net-zero by 2050, spokesman Andrew Block says.

The big Canadian banks have also announced increased targets for sustainable financing.

The banks are working with the Canadian Standards Association and various industry groups to produce a standard for “transition financing” – an effort to promote “green” lending to energy-intensive companies for investments that result in emission reductions. The CSA-led committee hopes to release its transition taxonomies by summer, though they have been previously delayed over disagreements about what kind of investments would qualify.

“If you are going to meet those targets, you will have to stop financing fossil fuels very, very soon.”

–Eric Usher, head of the UN Environment Programme’s Finance Initiative

Meanwhile, Canada’s big banks remain major financiers for the global oil and gas industry, including recent oil sands expansion projects. Together, the large Canadian banks provided nearly US$400 billion in financing for fossil fuel companies between 2016 and 2020, says a report from the Rainforest Action Network and affiliated NGOs.

If they are going to meet net-zero lending targets, the banks will have to pivot away from the fossil fuel sector and their financial support for projects that will be spewing GHG emissions for decades, or the pipelines that enable growing oil and gas production.

As of late May, none of the major Canadian banks had joined the UN-convened Net-Zero Banking Alliance, which commits members to a net-zero pathway that includes science-based 2030 commitments and interim targets every five years. While membership in the Net-Zero Banking Alliance doesn’t formally require institutions to stop lending to the fossil fuel sector, the need for them to align with the 1.5°C goal will drive that result, says Eric Usher, head of the UN Environment Programme’s Finance Initiative.

“If you are going to meet those targets, you will have to stop financing fossil fuels very, very soon,” Usher told a webinar hosted by the Canadian Association for the Club of Rome on May 5. The principles for membership in the alliance also require that banks’ climate commitments focus on GHG reductions in carbon-intensive industries and “not rely heavily on negative emissions technology.”

National governments are not going to succeed with deep decarbonization strategies and net-zero targets unless their commitments are matched by global corporations in key sectors. That will require a mix of regulatory pressure and voluntary action.

There must be absolute clarity around the net-zero strategy. That is, we must drive as quickly and aggressively as possible to decarbonize our economies through active transportation and urban planning, energy efficiency and switching away from fossil fuels. Negative-emission, wildcard solutions – whether nature-based or technological – can be relied on to net out the most hard-to-eliminate emissions and, in the case of conservation, can provide important co-benefits that add value.

Offsets can yield some short-term benefits in terms of cost-efficient emission reductions. They are no substitute for fundamental transformation of emission-intensive industries.

Shawn McCarthy is an Ottawa-based writer who focuses on climate change and the low-carbon energy economy.

From Corporate Knights Summer Issue, in print June 30, 2021.

The post Are corporations getting trapped in net zero? appeared first on Corporate Knights.

Environment Minister Jonathan Wilkinson released Ottawa’s bulked-up plan in December, highlighted by a proposal to increase the federal price on carbon to $170 a tonne by 2030 from $50 a tonne in 2022. After the Supreme Court of Canada upheld the constitutionality of the federal carbon price in a March decision, the fate of the Liberals’ plan now hangs on whether they can return to power in the next election, which could come this year.

However, the plan’s success depends as well on the GHG mitigation efforts of provinces, municipalities, the corporate sector and even individual Canadians.
The new Liberal plan projects that the additional measures it has announced would result in Canada reducing its GHG emissions by 32% in 2030 from 2005 levels. That’s just slightly better than the 30% target the government adopted under the Paris Agreement. The United Nations has said we need global reductions of 55% by 2030 to have a reasonable chance of holding the increase in average global temperatures to 1.5°C.

With additional efforts from provinces and the private sector, the federal government said, Canada could achieve a 40% reduction from 2005 levels by 2030. The Liberal government is now working on a new 2030 target, to be announced in the run-up to the UN’s COP26 climate summit in Glasgow in November.

The target of net-zero carbon emissions by 2050 is widely shared by governments and corporations around the world. Federal Conservative Party Leader Erin O’Toole has endorsed it, as have provincial governments in British Columbia, Nova Scotia, Prince Edward Island and Newfoundland and Labrador. Quebec is reviewing its goal of at least an 80% reduction by 2050 and has indicated it will adopt the net-zero target.

However, three of the country’s largest provincial emitters – Alberta, Ontario and Saskatchewan – have not endorsed that long-term goal.

“There’s clearly a big role for provincial and territorial governments on the path to net-zero,” says Dale Beugin, research director for the Canadian Institute for Climate Choices, which in February released a report called Canada’s Net Zero Future. Meeting Canada’s climate goal will require “increasingly stringent, economy-wide policies such as carbon pricing in every province, complemented by provincial policies like stringent building codes and infrastructure investments,” Beugin says.

Provinces and territories also have a role in commercializing and deploying technologies like carbon-capture and green hydrogen that could play a major role in emissions-reduction strategies a decade from now.

Given that imperative, here is how the provincial governments are responding. It should be noted, however, that emissions trajectories reflect the combined efforts of federal, provincial and municipal governments, as well as publicly owned utilities and corporations.

Rubric: A letter grade was assigned to each province and territory based on the ambition of their GHG targets, the measures they’ve implemented to meet them and their overall support for climate change action.

The net-zero provincial report card was prepared with financial support from the Ivey Foundation.

Source: Based on 2018 figures from Environment and Climate Change Canada.  2019 GHG emissions figures were released at press time showing little change.

British Columbia

British Columbia is the fifth-largest emitter among the provinces and was headed in the wrong direction under the previous Liberal government. After winning a minority government with support from the Green Party in 2017, NDP Premier John Horgan committed the province to an aggressive climate agenda, which he began to implement. He won a strong majority after a fall 2020 snap election and has promised to increase B.C.’s climate efforts.

Current Emissions: 66 Mt in 2018, 5.6% higher than in 2005. Since hitting a low point in 2015, B.C.’s annual GHG emissions rose by nearly 12% – or 7 Mt annually – by 2018.

Emissions Per Capita: 13.2 tonnes

Climate Strategy: B.C. has a legislated target to reduce emissions by 40% below 2007 levels by 2030, and by 80% by 2050. During the 2020 election campaign, Horgan endorsed a net-zero target for 2050. The provincial government has tightened its clean fuel standard and building codes to ensure that all new buildings be net-zero ready by 2032 (see story on p. 53). It’s providing $6,000 rebates for EV purchasers and mandating that 30% of new vehicles sold in the province be zero-emission by 2030, and 100% ZEV by 2040.

Best Attempt at Curbing Carbon: B.C. was the first province to introduce an economy-wide carbon tax in 2008, and studies have concluded the levy succeeded in keeping a lid on emissions as the provincial economy grew. The B.C. tax was originally designed to be revenue-neutral, with offsetting reductions in other taxes when it was adopted in 2008. That is no longer the case. The rate of the B.C. levy will rise to match any federal increase in its carbon price.
Long Shot: B.C. is proceeding with the controversial Site C dam, which is substantially over-budget and plagued with geotechnical problems. The government argues that power from Site C can be used to electrify energy-intensive natural-gas processing plants in northeastern B.C. and reduce emissions from the gas fields.

Blind Spot: The measures outlined in B.C’s 2018 climate plan will achieve only 75% of the reductions the province has committed to by 2030. Horgan had promised to outline how it would achieve the other 25% but has not yet done so. The government will have to account for rising GHGs from the natural gas fields of northeastern B.C. and from the Shell-led liquified natural gas (LNG) export facility being built in Kitimat, which will be one of Canada’s largest single sources of carbon emissions.

Projected Emissions: Based on measures in place in 2019, the federal government projects B.C. emissions will fall by 6.3% between 2005 and 2030.

Grade: B+

Alberta

After two decades of aggressive growth in oil sands production, Alberta has widened its lead as the country’s largest emitter of greenhouse gases. In 2018, its GHG emissions accounted for 37% of Canada’s total, while its population represented 11% of the national total.

Current Emissions: 273 Mt in 2018, 18% higher than 2005

Emissions Per Capita: 63.4 tonnes

Climate Strategy: Premier Jason Kenney’s United Conservative Party (UCP) government has put forward few measures that would lower Alberta’s emissions. The province has no 2030 target or long-term goal for GHG emissions.

Best Attempt at Curbing Carbon: The UCP government has maintained the coal-power phase-out policy for the province’s power utilities that was put forward by previous federal and provincial governments. Armed with a $1.8-billion compensation plan put in place by the former NDP government, Alberta’s utilities are rapidly shedding their dependence on coal. GHGs from the province’s electricity fell from 50 Mt in 2015 to 33 Mt in 2018 and could hit 20 Mt by 2023. Kenney has replaced the NDP’s pricing system on large industrial polluters with a UCP version that will cost large emitters less than they would have paid under the NDP plan but was nonetheless approved by Ottawa.

Long Shot: The Kenney government is also working on strategies to deploy potentially game-changing “wild card” technologies identified by the Institute for Climate Choices. Provincially funded Emissions Reduction Alberta and Alberta Innovates finance the development and deployment of technology that would lower GHGs and make industry more competitive. Alberta is urging the feds to commit $30 billion over the next decade in subsidies and tax incentives for carbon-capture projects. However, there are no guarantees that carbon-capture, hydrogen, carbon fibres or geothermal energy will ever be competitive on the massive scale needed to impact Alberta’s and Canada’s emissions challenge.

Blind Spot: Since taking office in 2019, Kenney has rejected pressure for a comprehensive climate strategy, seeing it as an attack on the province’s oil industry. He has fought the federal government over consumer carbon levies, scrapped provincial energy-conservation programs, and gone to war with environmental groups over the opposition to new pipelines and oil sands expansion. Fuelled by strong growth in the oil sands, industrial emissions increased by a staggering 82% since 1990.

While leading oil sands producers have announced targets to reduce GHGs, dramatic changes in Alberta’s emissions will occur only with large-scale investment in new technology (though that won’t negate Scope 3 emissions in whichever province/country consumes that oil in a combustion scenario). Weak crude prices, limits to market access and an increasing climate focus among investors will make it tough for companies to attract the capital needed to deploy that technology. The press secretary for Alberta Environment Minister Jason Nixon did not respond to several requests for comment.

Projected Emissions: In the biennial report submitted to the UN last year, the federal government projected Alberta’s emissions would grow by nearly 12% between 2005 and 2030.

Grade: D-

Saskatchewan

With its small population and heavy economic reliance on coal and oil, Saskatchewan has the highest GHG emissions per capita among Canadian provinces and is the fourth-largest emitter of all the provinces.

Current Emissions: 76 Mt in 2018, 12% higher than in 2005

Emissions Per Capita: 65.4 tonnes

Climate Strategy: The government hasn’t set out a 2030 target for emissions reductions, but it has adopted a climate plan that focuses on reducing dependence on coal-fired electricity, encouraging energy efficiency and supporting emerging technologies like small modular nuclear reactors (SMRs), which the province is hoping could eventually displace fossil-fired power on the grid and in industry.

Best Attempt at Curbing Carbon: While challenging the federal carbon tax to the Supreme Court, Saskatchewan introduced its own levy that covers all industrial emitters, with the exception of power producers and natural gas pipelines – roughly equivalent to Ottawa’s plan. The federal system applies where the province exempted industries.

Long Shot: Saskatchewan has been a leader in development of carbon capture and sequestration (CCS) and has been banking on it to reduce its fossil-fuel footprint. It supported a CCS project at one unit of its Boundary Dam coal-fired power station, as well as the Weyburn project that uses carbon dioxide to stimulate oil production but then sequesters the CO2 underground. Saskatchewan, which has large reserves of uranium to fuel nuclear power, has also joined Ontario and New Brunswick in an agreement to support the development of controversial SMRs, which have some major hurdles to clear if they are going to be widely commercialized.

Blind Spot: The province relies on coal for 30% of its electricity and is considering replacing coal with natural gas. The publicly owned utility SaskPower hopes doing so will help cut its emissions by 40% from 2005 levels by 2030. However, a reliance on gas will make it difficult to move beyond that 40% target.

Projected Emissions: Saskatchewan’s emissions are projected to decline by 14% from a 2015 peak by 2030, falling back to 2005 levels.

Grade: D+

Manitoba

Manitoba is the largest emitter of the smaller provinces, despite having a major advantage with its massive hydroelectric resources.

Current Emissions: 22 Mt in 2018, 8.3% higher than in 2005

Emissions Per Capita: 16.3 tonnes

Climate Strategy: Manitoba’s Progressive Conservative Premier Brian Pallister announced last March that he would implement a $25-per-tonne carbon tax in his province on July 1, 2020, but delayed that for a year because of the COVID-19 pandemic. The province has established what it calls a carbon savings account, a series of three five-year periods, each of which will have its own GHG reduction target. The goal for the current 2018 through 2022 period is a cumulative 1 Mt of emissions.
Best Attempt at Curbing Carbon: Manitoba’s biggest contribution could come by supporting interprovincial transmission with Saskatchewan, Ontario and even Alberta in order to move low-carbon hydroelectricity into those provinces.

Long Shot: Manitoba proposed a carbon tax plan that would have established a flat $25-per-year levy, unlike the federal tax that now applies, which sits at $30 per tonne and is due to rise to $50 in 2022. The federal Liberal government did not endorse Pallister’s plan.

Blind Spot: Agricultural emissions have increased since 1990, largely because of expansion of Manitoba’s hog and cattle industries. The province has the highest proportion of agriculture emissions in the country, at 30%, compared to only 8% for Canada as a whole.

Projected Emissions: The federal government projects Manitoba will reduce its emissions by 10% between 2005 and 2030, well short of the 30% national target.

Grade: C-

Ontario

With the country’s largest population, Ontario remains Canada’s second-largest GHG emitter. Climate change has been on the back burner since the Progressive Conservative government came to power determined to dial back the ambition of the previous Liberal government.

Current Emissions: 165 Mt of GHGs in 2018, down 19% from 2005 levels

Emissions Per Capita: 11.5 tonnes

Climate Strategy: After the 2018 election, Premier Doug Ford’s government killed the existing cap-and-trade plan and slashed the energy-efficiency efforts that it financed. In 2020, Ontario replaced the federal carbon price on industrial emitters with a provincial one that will be somewhat less costly to industry than Ottawa’s version. Ford remains a vocal critic of the Liberal carbon tax and rebate plan. The PC government released a review of its plans, but that focused on the carbon levy on industry as well as a marginal increase in the amount of biofuels mixed with gasoline or diesel. The March budget bolstered the province’s significant budget for transit and noted that the Ontario Securities Commission would be consulting on a recommendation to set a mandatory disclosure regime for climate-related financial risks.

Best Attempt at Curbing Carbon: Ontario’s big declines came between 2005 and 2014, when the province retired its coal-fired power stations, a policy that caused one of the largest declines in GHGs in North America. There’s been virtually no improvement since 2014, according to figures released by Environment and Climate Change Canada (ECCC).

Long Shot: The government has offered support for technologies like the new-breed SMRs and hydrogen fuel cells that could play an important role in transitioning the economy to zero-carbon. However, it’s uncertain if or when either of those technologies will be commercially competitive and scaled up. It’s unlikely either will have much impact before 2030. In a more certain bet, Ontario is subsidizing North American carmakers’ plans to build electric vehicles in Ontario.

Blind Spot: Ford’s government cancelled renewable energy projects that had been approved but not built, a move that will eventually require the province to rely more heavily on natural gas, which means higher emissions. In a review of the province’s climate strategy, the Toronto-based advocacy group Environmental Defence said the Ford government had failed to take meaningful action to reduce GHG emissions. A spokesman for Environment Minister Jeff Yurek did not respond to several requests for comment.

Projected Emissions: ECCC projects that, given current trends, Ontario will still be emitting 160 Mt in 2030, for a decline of only 22% versus the Conservatives’ own target of 30%.

Grade: C-

Note: Numbers may not sum to the total due to rounding. Source: Environment and Climate Change Canada Report 2020. Historical emissions data comes from National Inventory Report 2020.

Quebec

Quebec is Canada’s third-largest emitter, though decisive climate-action plans contributed to a significant GHG decline between 2005 and 2016. Emissions have since rebounded as a result of the strong economic growth the province experienced between 2016 and 2018.

Current Emissions: By 2018, GHG emissions were just 4.1% lower than they were in 2005.

Emissions Per Capita: 9.4 tonnes

Climate Strategy: Quebec Premier François Legault boasts that his province has the most ambitious climate plan in North America, with a target of reducing emissions by 37.5% below 1990 levels by 2030. The most recent plan released by the Coalition Avénir Quebec (CAQ) government would get the province only 42% of the way to its 2030 goal. However, the government will introduce additional measures and is expecting more ambitious action from Ottawa and municipalities to help close the gap, says Geneviève Richard, a spokesperson for Environment Minister Benoit Charette.
“Quebec’s plan is ambitious because it aims to initiate a real transformation of its economy towards a greener and more resilient economy, which is a necessary condition for achieving its climate objectives,” Richard says.

Best Attempt at Curbing Carbon: The province has one of the most aggressive climate plans in North America, especially in the area of electrifying transportation, with rebates for EVs and an aggressive program for building charging stations. Quebec administers its own cap-and-trade program and trades emission credits with California in the Western Climate Initiative, which Ontario had joined but pulled out of under the Ford government.

Long Shot: It remains to be seen how Quebec’s cap-and-trade plan – which is essentially a carbon-pricing measure – is affected by the Liberals’ proposed increase in the carbon tax to $170 a tonne. The issue is whether the increase in the federal price would require greater stringency from the province’s cap-and-trade system.

Blind Spot: The CAQ government tends to rely on incentives and subsidies for industries rather than regulations that would provide a more certain outcome.

Projected Emissions: Based on measures in place in 2019, ECCC projected Quebec’s emissions would be 16.3% lower than 2005 levels in 2030, though Richard says Quebec’s plans should reduce emissions by 37.5% below 1990 levels. That’s more than enough to meet the current federal target of 30% below 2005 levels. However, should the Liberals adopt a more aggressive target of 40% below 2005 levels, Quebec will be asked to do more.

Grade: A-

New Brunswick

New Brunswick saw the largest percentage decline in GHGs among all provinces between 2005 and 2018. The drop resulted from a combination of policy choices and a stagnant economy that saw major restructuring in the forestry industry.

Current Emissions: 13 Mt in 2018, down 34% since 2005

Emissions Per Capita: 16.9 tonnes

Climate Strategy: New Brunswick is working with the federal government and other provinces to decarbonize its electricity sector. It has funded energy-efficiency programs that have saved energy costs and emissions. The province’s 2016 climate plan calls for the province to reduce emissions to 10.7 Mt by 2030 from 20 Mt in 2005.
Best Attempt at Curbing Carbon: New Brunswick introduced its own carbon tax that was approved by the federal government in 2020, even though its system covering industrial emitters is far weaker than Ottawa’s own backstop approach. The federal government must approve provincial levies on a regular basis and will have to revisit the New Brunswick approval as federal prices rise.

Long Shot: The province is in discussions with Ottawa and other provinces about a proposed “Atlantic loop” that would connect the four eastern provinces – and possibly Quebec – in a single power market. The additional transmission capacity could help New Brunswick reduce its dependence on the Belledune coal-fired station, though the government worries about the loss of jobs and revenue at provincially owned New Brunswick Power.

Blind Spot: On the consumer side, the province introduced a carbon levy but reduced the sales tax on gasoline and other fuels, meaning the pump price rose by only two cents a litre. Given that a quarter of its emissions come from transport, they’ll have to try other ways of curbing carbon in a heavily rural province where people rely on their vehicles.

Projected Emissions: New Brunswick is on a path to see its emissions fall by 50% between 2005 and 2030, according to ECCC.

Grade: B-

Nova Scotia

Nova Scotia has been a leader in climate action in Atlantic Canada. Recently elected Liberal Premier Iain Rankin promises to put in place new measures to drive a clean-energy transformation.

Current Emissions: 17 Mt in 2018, down 26%
since 2005

Emissions Per Capita: 17.7 tonnes

Climate Strategy: The province implemented its own cap-and-trade system, which the federal government accepted as equivalent in ambition to its own backstop.

Best Attempt at Curbing Carbon: The province has adopted aggressive energy-efficiency programs, expanded renewable power and slashed its dependence on coal for electricity from 76% in 2007 to 53% in 2018. Rankin initiated a program to provide up to $3,000 in rebates for buyers of electric vehicles.

Long Shot: The province has been touting the potential of tidal power for years without much result, in terms of actual electricity flowing. It now has a goal of generating 300 MW from Bay of Fundy tides.

Blind Spot: Nova Scotia still relies on coal-fired electricity and plans to phase it out well after 2030, when more hydroelectric power from Newfoundland and Labrador becomes available. Rankin, who became premier in February, vowed during the leadership campaign to end coal use by 2030. Despite that promise, Nova Scotia Power plans to spend $30 million on improvements to its coal-fired generating units to keep them running smoothly.

Projected Emissions: Nova Scotia is on track to reduce its emissions by 56% between 2005 and 2030, according to projections from ECCC.

Grade: A

Newfoundland and Labrador

Newfoundland and Labrador’s economy remains tied to its offshore oil industry and the much-troubled Muskrat Falls hydroelectric power project.

Current Emissions: 11 Mt in 2005, up 5.6%
since 2005

Emissions Per Capita: 20.9 tonnes

Climate Strategy: The Liberal government in Newfoundland and Labrador has committed to achieving net-zero carbon emissions by 2050.The Liberals, under Premier Andrew Furey, won a slim majority in the general election that was disrupted by the COVID-19 pandemic and concluded in late March.

Best Attempt at Curbing Carbon: The provincial government is counting on low-emitting power from the Muskrat Falls project, which began flowing electricity last fall after delays and massive cost overruns. Newfoundland and Labrador will reclaim ownership in 2040 of the Upper Churchill hydro development, which has been owned by Hydro-Québec under a deal that Newfoundland has sought to reopen for years.

Long Shot: The offshore oil industry association endorsed the government’s commitment to a net-zero target. However, it said producers will not be able to completely eliminate GHG emissions and will have to purchase credits to offset what they can’t avoid.

Blind Spot: Transportation remains the largest source of emissions on the Rock, at more than one-third of the total. With a commitment to increased hydroelectric supplies, the financially strapped province could find innovative ways to encourage a move to electric vehicles.

Projected Emissions: Newfoundland and Labrador is on pace to reduce emissions by 10% between 2005 and 2030, compared to a 30% national target.

Grade: C

Prince Edward Island

Prince Edward Island has relatively low emissions given the lack of large industrial sources, but its household emissions per capita are the highest in the country.

Current Emissions: 1.7 Mt in 2018, down 19%
since 2005

Emissions Per Capita: 11.4 tonnes

Climate Strategy: P.E.I. has adopted a plan to become net-zero by 2040, with a vision to become the country’s first province to essentially eliminate GHG emissions, though that includes the use of offsets. The province has invested significantly in renewable power.

Best Attempt at Curbing Carbon: In December, the legislature unanimously approved the Net Zero Carbon Act, which enshrines the target in law and requires yearly accounting to track progress.

Long Shot: Much of P.E.I.’s emissions come from the transportation sector. Policies like gas-guzzler taxes and preferential parking and rebates for EVs could help reduce that figure.

Blind Spot: To meet its lofty goal, it will need more aggressive programs to decarbonize transportation, agriculture and buildings. As an island province particularly vulnerable to rising water levels, P.E.I. has to accelerate its efforts to prepare for the impacts of climate change.

Projected Emissions: P.E.I. had GHG emissions of
2 Mt in 2005 and is projected to reduce them by less than 1 Mt by 2030, according to the federal government.

Grade: B+

Yukon

Yukon has seen a big increase in emissions from transportation in the last decade, with GHGs in the transportation sector up 14%
between 2009 and 2017. Overall emissions in the territory remained flat over that period.
Current Emissions: 0.6 Mt in 2018, a 14% increase since 2005

Emissions Per Capita: 14.8 tonnes

Climate Strategy: Yukon has set a target to reduce emissions from key sectors – including transportation, heating and electricity generation – by 30% below 2010 levels by 2030.

Best Attempt at Curbing Carbon: The territory is working with the federal government to support energy efficiency and renewable-energy projects in remote communities to lessen their dependence on diesel by 30% by 2030, including meeting 50% of heating needs from renewable sources.

Long Shot: Yukon is investing in transmission and micrograms with the aim of decarbonizing its grid to become 97% fossil-free by 2030.

Blind Spot: Thawing permafrost could release huge amounts of methane into the atmosphere. Mining is a major driver of Yukon’s energy demand, and, as the Canada Energy Regulator notes, the opening and closing of mines can dramatically affect electricity consumption.

Projected Emissions: The federal government projected Yukon could reduce its emissions
by more than half between 2005 and 2030.

Grade: B

Northwest Territories

The Northwest Territories relies heavily on GHG-emitting diesel for heating, power and transportation. It will have to cope with the impacts of a climate that is warming faster than the global average.

Current Emissions: 1.2 Mt in 2018, a 22% decline since 2005
Emissions Per Capita: 26.9 tonnes

Climate Strategy: The N.W.T has a target to reduce its carbon emissions by 30% from 2005 levels by 2030. Many communities rely heavily on diesel and are investing in renewable-power projects to lessen that dependency.

Long Shot: Some nuclear industry advocates argue that remote communities will benefit from the commercialization of small modular reactors.

Blind Spot: Thawing permafrost could release huge amounts of the powerful GHG methane into the atmosphere.

Projected Emissions: The federal government projects N.W.T. emissions could fall by nearly half between 2005 and 2030.

Grade: B

Nunavut

Inuit hunters and community leaders say they are already seeing changes in the Arctic climate that will disrupt traditional land-use practices. The territory’s household and land-based emissions are also rising.
Current Emissions: 0.7 Mt in 2018, a 24% increase since 2005

Emissions Per Capita: 18.2 tonnes

Climate Strategy: Nunavut aims to displace some of that reliance on diesel, in particular with community-led renewable-energy projects.

Long Shot: With rapid population growth, Nunavut has seen its use of fossil fuels climb, with every community dependent on diesel for electricity, heat and transport. In the 2019 election, the Liberal Party promised to end the territory’s dependence on diesel by 2030.

Blind Spot: Thawing permafrost could release huge amounts of methane into the atmosphere.

Projected Emissions: ECCC projects Nunavut emissions, which were 0.7 Mt in 2018, will grow to 1 Mt by 2030.

Grade: B-

Shawn McCarthy is an Ottawa-based writer who focuses on climate change and the low-carbon energy economy.

From Corporate Knights Spring Issue, available April 21, 2021.

The post Net-zero report card: How future-friendly are Canadian provinces? appeared first on Corporate Knights.

They have also rejected a call for rules that would require public companies to set diversity targets for their boards of directors.

The province’s Capital Markets Modernization Taskforce published a discussion document last summer in which it proposed mandatory disclosure of material environmental, social and governance (ESG) information in a format consistent with international standards bodies.

In submissions filed last fall, the Canadian Bankers Association (CBA) said that, while it supports the principle of heightened climate-related disclosure, it would be premature to mandate a specific framework as there are several that are still under development.

Blake, Cassels & Graydon LLC filed a submission on behalf of major Canadian corporations opposing what it characterized as a “one size fits all” approach to climate-related disclosures. The submission was signed by top legal officers from a dozen companies, including Power Corporation of Canada, George Weston Ltd. (Loblaw’s parent company), Onex Corp., Fairfax Financial Holdings Ltd. and Corus Entertainment Inc.

The task force’s recommendations are now in the hands of Ontario Finance Minister Peter Bethlenfalvy, who has deep experience in capital markets. The Ontario government is reviewing the task force’s report amid growing evidence of the cost of global inaction on climate change. Canadian insurers last year paid out $2.4 billion in losses due to extreme weather events, one of the highest totals on record.

Canadian banks are already facing a move by the Office of the Superintendent of Financial Institutions to require more robust assessing and reporting on the risks they face from worsening climate change. The Bank of Canada has warned that the climate crisis represents a systemic risk to the country’s economy.

While many companies already provide ESG disclosures, the task force noted that “both issuers and investors have expressed concerns about the lack of a standardized framework for this disclosure.” It added that enhanced ESG disclosure can “set the basis for improved access to global capital markets and enable an equal playing field for all issuers.”

SHARE – a non-profit research group that works with institutional investors, including some of the banks’ investment arms – argued in a submission that mandatory climate-risk disclosure and adherence to international standards is essential for Canada to “remain an attractive market for global investors.”

In its letter filed to the task force, the CBA said further work needs to be done before decisions can be made on what framework should be adopted. The bankers’ group also said any Canadian disclosure standard “must consider the importance of oil, gas and other resource-heavy industries to the Canadian economy.”

CBA spokesman Mathieu Labrèche said January 18 that all large banks are working on implementing the climate-related disclosures developed by the Task Force on Climate-Related Financial Disclosures (TCFD), an international group that was headed by former New York City mayor Michael Bloomberg.

The TCFD proposes that companies should not only disclose material risks, but also include analysis as to how they will manage those risks and what impact a successful transition to a zero-carbon economy would have on their businesses.

The CBA position contrasts with the stand taken by asset management operations owned by Royal Bank, the Bank of Montreal and the Bank of Nova Scotia. They signed off on a submission by SHARE that supports the task force’s proposal to mandate adherence to disclosure standards set by the TCFD and the Sustainability Accounting Standards Board.

In the Blakes letter, the companies said they support increased corporate focus on ESG issues and agreed there is a growing interest among investors in those matters. However, they noted that companies are already required under Ontario law to disclose material ESG information: “Accordingly, we do not think it is necessary to incrementally mandate such material disclosures.”

Former Bank of England and Bank of Canada governor Mark Carney – who is currently a special envoy for the United Nations on climate action and finance – is also urging a mandatory approach to climate-risk disclosure.

On the diversity issue, the task force noted that TSX-listed companies are already required to disclose their policies and progress on adding women to their boards and senior executive ranks. However, progress has been slow, it said. According to an Ontario Securities Commission survey, total board seats of a sample group of companies rose to 17% in 2019 from 11% in 2015.

The task force proposed amending the Ontario Securities Act to require companies to set targets for women and Black, Indigenous and people of colour (BIPOCs) and to annually report on progress in meeting those targets.

In the Blakes letter, the corporate legal counsels say they are “mindful” of the need to increase representation among historically under-represented groups. But, they added, the mandating of targets “serves as a blunt instrument to address a myriad of nuanced issues that should instead be tackled within a flexible system” managed by a company’s board and its senior officers.

“One-size-fits-all regulatory directives are problematic and companies should have the freedom to adopt an approach to diversity that is appropriate for their particular context,” the letter said.

Shawn McCarthy writes on sustainable finance and climate for Corporate Knights. He is also senior counsel for Sussex Strategy Group.

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The federal government is increasing its efforts to reduce greenhouse gases and meet tough new targets on the way to the country having net-zero carbon emissions by 2050. However, it has taken relatively little action to prepare for the catastrophic physical threats that climate change poses to the nation’s people, businesses and ecosystems, warns the Canadian Institute for Climate Choices. 

Provinces, municipalities and businesses have also been disregarding the coming impacts of increasingly severe floods, forest fires and droughts, the CICC said in a report released in early December.

In many cases, governments are making matters worse by approving infrastructure and other projects that reduce our resilience to climate change. A case in point: the Ontario government’s bill that could allow more construction on wetlands and other ecosystems that serve as natural flood management systems and store carbon that would otherwise be released into the atmosphere. The bill would give the minister more power to approve development in conservation areas, and faces a backlash from environmental groups who say it will result in the loss of important nature preserves across the province.

“It’s time that adaptation and resilience is seen as part of an integrated approach [along with emissions reductions] that is needed fundamentally,” the institute’s CEO Kathy Bardswick said in an interview. The institute is a federally-funded, arm’s-length think tank that provides analysis to help Canada move towards clean growth and address the impacts of climate change on the economy.

Adaptation received only modest mention in the updated climate plan released on December 11 by Federal Environmental Minister Jonathan Wilkinson which, among other measures. proposed steep increases in the carbon prices along with rebates to households. Two pages of the plan’s 79 were devoted to adaptation with few new measures announced. 

Instead, Wilkinson pledged to work with provinces, territories, municipalities and Indigenous communities to produce a National Adaptation Strategy that would guide future spending. The federal government previously endowed a $2-billion disaster mitigation fund to finance local adaptation projects.

The slow-motion response to climate adaptation has similarities to the COVID-19 pandemic. Politicians and business leaders were long warned and provided with credible scientific evidence that there was a high probability of a devastating viral pandemic, but failed to devote sufficient resources to prepare.

There is a growing awareness in government and business of the need for greater resilience in the face of the climate emergency, but action remains spotty. Far too often, required investments are put off for another day while development proceeds under a business-as-usual approach. 

Recognition of the staggering costs of climate change – economic as well as to our health and security – should propel an even-greater national and global effort to transform to a net-zero-carbon society.  

Climate risk consultant Laura Zizzo neatly summed up the need for a strategic approach in the Globe and Mail: “We have to work hard to avoid the unimaginable and manage the inevitable.”

Bardswick said many of the investments required to prepare for climate impacts provide additional benefits, including reducing GHG emissions, improving public health and providing natural water filtration and flood prevention systems.

The Institute’s report says the “known and measurable” costs of climate change to Canada are “only the tip of the iceberg” of what should be expected. It notes that catastrophic weather events have cost the insurance industry $18-billion over the past decade, with the number of catastrophic events three times higher than occurred in the 1980s.

The report noted that a changing climate is impairing prosperity and well-being through lost productivity, lower asset values, impaired health and loss of biodiversity.

In many cases, impacts like thawing permafrost and rapidly changing ecosystems will be difficult to quantify but are no less critical for the well-being of Canadians. Indigenous communities are particularly at risk given that their economies, identities and spiritual lives are more closely connected to the land. 

The effort to put financial value on nature is useful if it drives investment to protect and recover natural assets, but it shouldn’t ignore the non-material benefits that the natural world provides for humans and all the species with whom we share this Earth.

The Institute’s report urges governments at all levels to dramatically scale up public investment in adaptation, given economic and other benefits. It encourages Ottawa to coordinate with provincial governments to improve the effectiveness and efficiency of resilience strategies. 

And it calls for the government and private sector to enhance disclosure of physical climate risks in order to drive to planning and investment decisions. 

In the private sector, central bankers and other institutional investors are urging companies to do a better job disclosing their climate-related financial risks. Those risks include transition impacts that arise from government climate policies and competition from new, low-carbon technology; legal risks from lawsuits that charge corporate boards and executives with ignoring climate-related threats; and physical risks from extreme weather, rising sea levels and changing precipitation patterns.

Discussions around climate risk disclosure have tended to focus on the impacts of shifting climate policy and other transition risks rather than on the physical risks that climate change poses to infrastructure, supply chains and asset values, said Natalia Moudrak, director for climate resilience at the Waterloo-based Intact Centre for Climate Adaptation.

The Intact Centre has produced a guide for investors and portfolio managers to assess the physical risks that climate change poses to companies in various sectors – including energy, transportation, utilities and agri-food – and the risk mitigation measures companies in those sectors should be undertaking. The centre is funded by Intact Insurance Group.

The insurance industry is the loudest corporate advocate of greater adaptation effort, driven by increasing weather-related losses that it ascribes, to a large degree, to a changing climate.

Ahead of its release of a flood risk management report last week, The Geneva Association, an international insurance think tank, said Canada is “on the right path,” pointing to recent federal and provincial government commitments to expand flood insurance, enhance flood risk mapping and create programmes for relocation from very high-risk zones.

“However, further reform is needed to increase incentives for risk reduction and prevent measures for new buildings and retrofitting existing buildings and public infrastructure,” Geneva Association’s Maryam Golnaraghi said. 

As we’ve seen with the COVID-19 pandemic, coping with a crisis after it has hit is not only more expensive but also more disruptive to people’s lives than undertaking reasonable measures to prepare for it. 

Shawn McCarthy writes on sustainable finance and climate for Corporate Knights. He is also senior counsel for Sussex Strategy Group.

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Finance Minister Chrystia Freeland made a down payment on clean-energy stimulus in her fall economic statement on November 30, but the $6.64-billion package of new measures over 10 years was far smaller than some clean-energy advocates had called for.

Corporate Knights calculates that the funding announced for a climate-focused recovery plan represents only 20% of the federal investment needed to meet the government’s own commitment to reduce greenhouse gas emissions.

In the government’s first major financial update since the COVID-19 pandemic shut down the economy last March, Freeland maintained a focus on support programs for individuals and businesses.

She promised a future budget with a more robust stimulus plan worth up to $100 billion over three years. It’s uncertain how much of that will be allocated to climate-change mitigation, given competition from other post-pandemic priorities such as a national daycare program to boost women’s participation in the workforce.

The federal green recovery plan, to date, falls well short of the commitments made by more ambitious national governments, including that promised by U.S. President-elect Joe Biden, who has pledged a US$2-trillion green recovery plan, subject to Congressional approval.

Numerous groups have urged the Liberal government to match the efforts of countries in Europe and East Asia that have announced major green stimulus plans, even as some of those nations remain in the grip of the pandemic.

As part of a green recovery plan endorsed by 50 business leaders, Corporate Knights proposed a 10-year, $108-billion program that would be front loaded to ensure that Canada can re-start the economy on a greener footing that it argues will be essential to tapping into global growth markets.

In a series of virtual roundtables hosted by Corporate Knights and the Embassy of Germany in Canada this fall, speakers pointed to opportunities in areas such as deep retrofits for buildings, the emerging hydrogen economy, and potential markets for non-combustible products from the oil sands that would trap carbon rather than emitting it into the atmosphere.

Corporate Knights publisher Toby Heaps described the Liberal plan as “meek,” saying, “I think the government’s response to the pandemic shows us what an emergency response looks like, and one cannot help but notice how different that looks from their response to the climate emergency.”

In a report this fall, another group, the Task Force for a Resilient Recovery, urged the federal government to adopt a five-year, $55.4-billion plan that would allocate $27.4 billion to deep retrofits of buildings.

As of the fall update, the Liberal government has allocated $12.6 billion over 10 years to climate-related action, including $6 billion already allocated to the Canada Infrastructure Bank. That figure will climb when Freeland unleashes her stimulus budget, likely next spring. The budget, she said in her speech, “will advance our progress on climate action and promote a clean economy.”

In the mini-budget released November 30, the minister allocated $6.64 billion in three key areas, though some of that money will be spent over 10 years: $2.6 billion over seven years for home retrofits; $150 million to install electric-vehicle charging stations; and $3.9 billion to plant two billion trees, preserve wetlands and boost sustainable agriculture.

The building-retrofit plan consists of $5,000 grants, which the government hopes will be used to improve the energy efficiency – and lower carbon emissions – of 700,000 homes. Freeland said the government will also fashion a plan for low-interest loans to support more expensive, deeper retrofits.

The grants alone will be insufficient to provide enough incentive for homeowners and landlords to make the deep retrofits needed to dramatically reduce greenhouse gas emissions from buildings, which account for 17% of the country’s total, said Ralph Torrie, co-author of a Corporate Knights white paper called Building Back Better with a Green Renovation Wave.

“At a time when the urgent need is to stimulate the business and logistical innovations for implementing mass, deep retrofits, we get instead $5,000 grants for households to go it alone,” Torrie said. “This will create lost opportunities by triggering halfway measures and upgrades that fall short of what is required for an effective emergency response to climate change.”

The fall economic statement is only part of the government’s plan, with other measures either recently announced or due to be released by the end of December.

Environment Minister Jonathan Wilkinson will soon be releasing an updated climate plan, while Natural Resources Minister Seamus O’Regan will release federal strategies on hydrogen and small modular reactors.

On the hydrogen market, the federal government lags several competitors who have already announced major strategies to be suppliers of “green” hydrogen, an emissions-free source that is derived from renewable power. Australia is fast-tracking a $36-billion hydrogen plan, while Germany and France are moving full steam ahead with plans to develop industrial uses for the clean-burning fuel.

Corporate Knights has proposed that Ottawa spend $1 billion on research and development efforts over the next five years and another $8 billion over the decade to deploy hydrogen technology across the Canadian economy.

Corporate Knights also recommended that the feds provide $1.4 billion in funding over five years to help the industry commercialize lightweight carbon-fibre production as part of a “bitumen beyond combustion” strategy, but the November 30 statement lacked any sign of a plan for shifting Canadian oil and gas economics.

How does Fall Economic Statement stack up against Corporate Knights’ Building Back Better Green Recovery Plan?

	Federal Contribution 2021-2030
	CK BBB ($M)	FES BBB ($M)	% Shortfall
Building Back Better Homes	14656	2600	82%
Building Back Better Workplaces	6000	2000	67%
Greening the Grid	6700	2500	63%
Building Back Better EV Uptake	11949	1650	86%
Building Back Better Active Mobility	2000	-	-
Building Forest Natural Capital	16000	3791	76%
Building Agriculture Natural Capital	6000	98	98%
Natural Resources and EV Innovation	40500	-	-
Building Back Better Industry	4800	-	-
Sum for all programs (2021-30)	108605	12639	TBD

Sources: Fall Economic Statement 2020 

Building Back Better with a Bold Green Recovery Synthesis Report

Earlier this fall, the Build Back Better Together roundtable heard compelling evidence that economic recovery strategies that aim to return to business as usual will reignite the growth in greenhouse gas emissions, as happened after the 2008/09 recession.

If governments want to ensure that they can fund the green recovery to avert the worst impacts of the climate crisis, they’ll have to collaborate with private-sector financial institutions, another roundtable session heard.

While there is growing focus on the importance of harnessing capital markets to address climate change, government action remains critical, said Sean Kidney, CEO of the London-based Climate Bonds Initiative, an international non-governmental organization working to mobilize debt markets for climate solutions.

“It is not possible for private markets to do this. That is a total fallacy,” Kidney said. “This is not something that is going to be solved by the private market. This is something that is going to be solved by close collaboration between public and private markets.”

In her fall statement, Freeland announced support for a Sustainable Finance Action Council, which will begin work in the new year with the goal of “developing a well-functioning sustainable finance market in Canada.” Pension funds and other investors have been urging corporations in Canada to provide greater clarity around climate-change-related risks and opportunities, and experts are urging governments to show leadership.

However, Canada still lags some of its peers in terms of financial commitment to a green recovery that will fund the transition to a net-zero economy.

The government estimated that its $100-billion stimulus package would be equivalent to 3 to 4% per cent of gross domestic product, but it is unclear how that figure was calculated. Spread over three years, the spending would represent more like 2% of GDP, and only a portion of that will go to green projects.

Many of Canada’s trading peers, including Germany, France and the EU, have already earmarked 30% or more of post-pandemic stimulus for climate action.

In partnering with Corporate Knights on the Building Back Better Together virtual roundtable series this fall, German Ambassador Sabine Sparwasser said her government is committed to a strategy that focuses stimulus spending on building back better.

“We’re not going to get out of the current crisis just by giving people social benefits,” Sparwasser said during one session. “We need to invest in new technology in order to address the other crisis that is out there and is even bigger: climate change.”

The post Feds’ fall economic statement shortchanges climate appeared first on Corporate Knights.

The endeavour will require concerted action from governments, banks and other lenders, asset managers, developers, landlords and tenants, and individual homeowners.

“Buildings are the biggest source of emissions in cities and so a huge opportunity for meeting our climate targets … but we have to get on with this with alacrity,” Julia Langer, chief executive of Toronto-based Atmospheric Fund, told an online panel Wednesday. “We certainly see things from the perspective of ‘all hands on deck.’ ”

Langer was one of several speakers at Financing the Green Building Wave. The virtual roundtable was the last in a series called Building Back Better Together that Corporate Knights co-hosted with the Embassy of the Federal Republic of Germany in Canada.

Like Canada, Germany – and, more broadly, the European Union – is targeting emissions reductions for new structures and existing ones, including industrial, commercial, institutional and residential buildings.

In Canada, buildings account for 12.7% of annual greenhouse gas (GHG) emissions, with most of that coming from the burning of fossil fuels for heat. In Canadian cities, buildings can account for 50% of annual emissions, Langer noted.

The federal government has committed Canada to achieving net-zero emissions by 2050 and on November 19 introduced legislation that enshrines that commitment, with a number of transparency and accountability measures built in. The Liberal government has also pledged to adopt a new target for 2030 that will be more ambitious than the current pledge to reduce GHGs by 30% from 2005 levels by that year.

To meet that goal, Finance Minister Chrystia Freeland is expected to announce a number of measures in the fall economic update she will deliver on Monday, including the likelihood of grants and zero-interest loans for homeowners to invest in energy efficiency.

Earlier this fall, the Canada Infrastructure Bank (CIB) announced that it’s allocating $2 billion to help the owners of large buildings finance energy-efficiency retrofits, whether in the private or public sector.

The CIB will cover upfront costs for audits and feasibility studies to reduce risks for other investors to pursue deep retrofit projects, the bank’s managing director for investment, Frederic Bettez, told the webinar on Wednesday.

It will look to bundle projects in order to kickstart a market for project aggregators and then securitize loans and sell them off as green bonds or other sustainable finance products. Bettez said the CIB is hoping that, within five years, the market for financing large-building retrofits will develop to the point that banks and other lenders will no longer need that federal risk-sharing.

Until now, it has been energy utilities or Crown corporations that have supported energy-efficiency programs, said Brendan Haley, policy director for Efficiency Canada, a non-profit advocacy group.

Often, those efficiency efforts were meant to avoid the need for new and more expensive sources of energy supply, such as new power plants, he said. However, the appeal was limited because the goal was low-cost energy savings, rather than deep emissions reduction.

That’s changing.

Last year, the federal government allocated $1 billion to municipalities through the Federation of Canadian Municipalities, which has launched a community energy-efficiency program that supports residential retrofits. Some jurisdictions are also allowing homeowners to finance home retrofits through their property taxes.

Haley said it is critical to connect national institutions that finance deep retrofits with emerging local and regional funders, such as green banks and municipal programs, to forge a coordinated approach and a well-functioning retrofit financial market.

In Germany, 20% of the country’s annual GHGs come from buildings, Ambassador Sabine Sparwasser said. Retrofits can reduce the energy consumption of older buildings by some 80%.

“Retrofitting has become a very important part of our German climate strategy,” she said, adding that the EU is insisting its member states adopt aggressive policies. The country expects to see 200,000 jobs created over the next decade through its retrofitting policy.

It’s not just a matter of improving the energy efficiency of old buildings, but also switching fossil-fuel-based heating with heat pumps and other electric options, noted Sabrina Schulz of Berlin’s Das Progressive Zentrum.

She noted that zero-interest loans are an ineffective policy tool when rates are already so low. Similarly, tax rebates can provide benefits for higher-income homeowners who are willing to finance the work themselves, but those programs provide little guarantee that the money spent will yield real emissions reductions. Grants are critical to ensure a broad program of deep retrofits, Schulz said.

Last spring, Corporate Knights produced analysis recommending that the federal government spend $20 billion over the next two years to kickstart a self-sustaining deep retrofit ecosystem that could save $20 billion in annual fuel and electricity costs by 2030.

Langer argued that governments at all levels need to be part of the effort. Ottawa tends to provide financing, while the provinces control building codes and home building standards, and municipalities deal with zoning issues and some green standards.

While an investment in energy efficiency may pay for itself over time, there are plenty of challenges to making it happen, Langer noted. Energy costs in Canada are low by global standards – especially for natural gas – “which means retrofits and efficiency haven’t been priorities,” she said. At the same time, the disaggregated nature of the building sector – with millions of owners of individual properties – can make it difficult to achieve economies of scale.

Despite that, “the business case for deep retrofits and net-zero new buildings is positive,” Langer said. “There is a return on investment.”

While there is a lot of focus on retrofits, Canada still has a long way to go to ensure new buildings are built with energy efficiency in mind in the first place, said Andrea DelZotto, executive vice-president at Tridel, one of Toronto’s largest condominium developers.

She said building an energy-efficient condo tower can add anywhere from a 1 to 6% premium on construction costs, and the developer then has to find ways to recoup it. “There is no mechanism for developers to get back the capital they’re putting in to make these buildings work better,” she said.

Clearly, grants and other market incentives won’t be enough to decarbonize the building sector. Governments at all levels will have to adopt stricter codes and standards to drive the industry to innovate and invest.

The post How to trigger a net-zero building wave appeared first on Corporate Knights.

Alberta Innovates – a Crown agency – says the biggest opportunity lies in the production of carbon fibre, a high-strength material that can be used in wind turbines, automotive applications and the aerospace industry. The agency has launched a $15-million “Grand Challenge” in which 20 laboratories around the world are participating in research to commercialize the production of carbon fibre from the heavy asphaltenes contained in bitumen, in the so-called bottom of the barrel.

“We are finding new ways to use bitumen not as transportation fuel but as value-added non-combustion materials that are worth more than transportation fuel but with a low GHG emissions – products like carbon fibre,” said John Zhou, vice-president of clean resources at Alberta Innovates.

Zhou participated Wednesday in a virtual roundtable hosted by Corporate Knights and the German embassy in Canada, part of a series on rebuilding a cleaner, more sustainable economy as we recover from the COVID-19 pandemic.

He said that while technological challenges remain “very, very significant” to a commercializing bitumen-derived carbon fibre industry, progress is being made.

There are skeptics, however. Wolfgang Seeliger heads up Leichtbau BW, a German consortium of companies developing and deploying lightweight materials that reduce costs and greenhouse gas emissions in transportation and industrial processes. He said that carbon fibre production cannot compete with other lightweight materials on either cost or environmental footprint, noting that it takes more energy to produce auto parts from carbon fibre, for example, than is saved by the use of the lighter material.

Alberta Innovates estimates that diverting 30% of oil-sands production to industrial uses would reduce GHG emissions by 126 megatonnes (Mt) a year. That’s because the carbon from the thick, asphalt-like component of the bitumen would be locked in the industrial material, rather than combusted as transportation fuel or petroleum coke.

It also estimates the industry could earn $84 billion by 2030 from those industrial markets – including $44 billion from carbon fibres – while reaping $27 billion from the sale of the remaining crude.

However, the “bitumen beyond combustion” strategy would not lower emissions from oil-sands extraction and processing in Alberta. The sector currently produces more than three million barrels per day. It accounted for 77 Mt of GHG emissions in 2018, or 10.5% of the country’s total.

Canada has pledged to reduce GHGs by 30% from 2005 levels by 2030, and the federal Liberal government now says it will introduce an even-tougher 2030 goal along with its commitment to get to net-zero emissions by 2050.

Seeliger said carbon fibre will be relegated to a niche market for some time because carbon fibre is expensive and its introduction into markets like automotive, construction and aerospace will require complicated changes to certification standards. However, Zhou said the opportunities will expand dramatically if the province succeeds in driving down the cost and the environmental footprint of producing it. Alberta Innovates believes industry can reduce the cost of producing carbon fibre by more than 50% below that of current methods and reduce the carbon intensity of production by up to 90%. It estimates that a 50% cost reduction in carbon fibres would boost demand tenfold.

Suncor’s Carrie Fanai said Wednesday that Canada’s largest oil and gas producer is focused on the “need to transition to a greener economy.” Suncor has pledged to reduce the emissions intensity of its oil and petroleum products by 30% by 2030, while other companies, notably Cenovus Energy and Canadian Natural Resources Ltd., have set “aspirational” goals to have net-zero emissions at their oil-sands plants.

“For us at Suncor, that has meant not only focusing on improving the GHG intensity of our existing production but looking at new products, energy sources and related lines of business,” said Fanai, who is the company’s lead on bitumen value-chain optimization.

She noted that it is still early days in the journey to commercialization and that producers will have to work with chemical companies and manufacturers to ensure they maintain focus on potential customers.

Marcelo Lu, president of BASF Canada, said the opportunities for carbon fibre “are very large if we can crack the innovation to take the impurities out of the bitumen stream,” which is heavy in sulphur and metals. He said the massive bitumen resource represents a high concentration of low-cost feedstock for carbon fibre that could drive market developments in a way not seen before.

Alberta Innovates hopes to see a commercial-scale demonstration plant for producing carbon fibre from bitumen by the end of 2024.

If it succeeds in reducing the cost of production, the province could produce 326,000 tonnes per year of carbon fibres from the asphaltenes contained in one million barrels per day of bitumen, which would be worth an estimated $44 billion annually in today’s prices, the agency estimates. It says there is also potential to produce activated carbon and asphalt binder from the asphaltenes in another two million barrels per day of production.

The total value of the “non-combustion” products would be $84 billion. At the same time, industry would sell higher-quality crude, “de-asphalted” oil for $27 billion. Total value: $111 billion a year, compared to the $27 billion a year the sector expects to earn by selling three million barrels a day at $25 per barrel.

As part of its Build Back Better series last spring, Corporate Knights recommended that the federal government provide $1.4 billion in funding over five years to help the industry commercialize carbon-fibre production. Environmental groups have called for an end to subsidies for the fossil fuel industry, arguing that government efforts should be focused on the transition off oil.

Shawn McCarthy writes on sustainable finance and climate for Corporate Knights. He is also senior counsel for Sussex Strategy Group.

With the support of the Embassy of the Federal Republic of Germany in Canada.

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As governments in Europe, North America and around the world announce trillions of dollars in stimulus to revive moribund economies, many experts are urging them to focus on climate-related efforts that will help the world avert the worst impacts on climate change.

This is a sentiment that has moved from the sidelines to becoming a key recommendation of the International Monetary Fund (IMF). The IMF’s recently released flagship publication in advance of its annual meeting emphasized the power of public investment in uncertain times, noting that raising public investment by 1% can increase private investment by more than 10%. It also noted that “the goal of bringing net carbon emissions to zero by 2050 in each country can be achieved through a comprehensive policy package that is growth friendly (especially in the short term).”

At the same time, institutional investors and asset managers are deepening their commitments to sustainable financing by increasing their investments in the green economy and providing fuller disclosure of their climate-related risks and opportunities.

It’s critical that government officials and business leaders have mutually reinforcing strategies in order to maximize the impact of both public and private financial efforts. Otherwise, governments could pursue investment plans that gain little traction among corporate strategists, while institutional investors may miss out on opportunities created by government programs that would reduce the risk of investing in the emerging clean economy.

While there has been growing focus on the importance of harnessing capital markets to address climate change, government action remains critical, says Sean Kidney, CEO of London-based Climate Bonds Initiative, an international non-government organization working to mobilize debt markets for climate solutions.

“It is not possible for private markets to do this. That is a total fallacy,” Kidney says. “This is not something that is going to be solved by the private market. This is something that is going to be solved by close collaboration between public and private markets.”

Kidney will join a panel of financial experts on Wednesday in a webinar, “Financing Green Stimulus: Opening the Purse Strings,” co-hosted by Corporate Knights and the German embassy in Canada. The virtual conference is part of a series sponsored by the German government; called Building Back Better Together, it looks at green recovery plans in Canada and Europe and highlights risks, opportunities and best practices to ensure those plans are practical and effective.

In a series of white papers released this spring, Corporate Knights advocated that Ottawa allocate $109 billion over the next decade to climate-related spending, with some 40% of that money earmarked over the first two years as part of a green stimulus plan.

That investment would generate an additional $681 billion of spending from private sector sources, for a 7-to-1 ratio of private sector/public sector contribution, according to analysis by Corporate Knights; Ralph Torrie, president of Torrie Smith Associates; and Céline Bak, president of Analytica Advisors. Together, that spending would reduce Canadian greenhouse gas emissions by 242 megatonnes annually by 2030, setting the course for a net-zero-carbon economy by 2050.

Similarly, the Task Force for a Resilient Recovery issued its report this summer, calling for Ottawa to embark on a $55.4-billion green recovery package over five years that would focus on building retrofits, electric vehicle production and infrastructure, clean power, natural infrastructure and adoption of clean technology.

On October 1, the Liberal government announced a $10 billion “growth plan,” which will see the Canada Infrastructure Bank (CIB) focus on five key areas. Some $6 billion of that will go to clean-energy infrastructure, the adoption of EV buses and charging networks, and energy retrofits for buildings. The CIB’s chief investment officer, John Casola, will participate in Wednesday’s web conference on climate-related financing.

The federal infrastructure bank was established to provide public-private collaboration in the financing of major projects in strategic areas of the Canadian economy. “Every dollar of public investment capital from the CIB will increase impact because we attract additional investment from the private sector,” says David Morley, the agency’s head of corporate affairs, policy and communications.

The CIB hasn’t indicated what level of private sector investment it requires before approving financing for a project, or what leverage of additional investment is expects with the $10 billion growth fund.

For the $2-billion building retrofit plan, the CIB indicated it would focus on large real estate owners, both public and private, to help them modernize their buildings and improve energy efficiency. However, residential homeowners – who have seen energy retrofit programs in the past – will likely require grants rather than loans to persuade them to do “deep retrofits,” says Corporate Knights publisher Toby Heaps, adding that a significant early push to scale up residential retrofits would be imperative to bringing the costs down through modularization, so that the momentum can be sustained without hefty public supports.

To pay for the green recovery programs, governments will rely on a mixture of new debt and tax measures. In Europe, there are proposals to tax internet giants like Facebook and Netflix, tax financial transactions, impose carbon border taxes, and extend carbon levies on shipping.

Ottawa could end tax breaks in a number of areas, particularly in high-GHG-emitting sectors, the Corporate Knights Building Back Better proposal said. It identified $240 billion in tax breaks per year, including $40 billion that amounted to “naked examples of corporate welfare, with almost no evidence of increased investment as a result.” As governments move to attract private sector investment in new electric-vehicle plants and other low-carbon industries, offering permanent tax breaks (rather than short-term grants) may prove fiscally unsustainable as clean industry supplants traditional industries as the locus of economic activity.

However, eliminating a tax break rarely results in a gain of $1 in revenue for every $1 “loophole” closed. These tax measures were put in place to help stimulate economic activity. If that activity ends as a result of the loss of a tax incentive, the tax revenue will also be lost.

Most of Europe’s green recovery will be financed through debt, taking advantage of rock-bottom interest rates that central bankers have said will remain in place for the next few years, at least. Canada’s Liberal government has also indicated that it’s prepared to borrow heavily to finance the recovery, though it has not released a budget that would provide such detail. (Finance Minister Chrystia Freeland is due to release a financial update this fall.)

There is growing interest in green bonds, which appeal to institutional investors and other asset managers that have made commitments to reduce the carbon intensity of their portfolios. Germany issued its first sovereign green bond in September; the €6-billion, 10-year offering was wildly over-subscribed. The EU plans to issue €225 billion green bonds to finance its recovery.

Last year saw a record US$263-billion in green bonds issued globally, up from just US$1 billion a decade ago, according to Moody’s Investors Service. The bond-rating service projects that up to US$225 billion in green bonds will be issued this year, despite a COVID-19-related slump in the second quarter.

There are two caveats concerning green bonds: some critics argue they provide little benefit in terms of financing costs and are essentially a marketing exercise, though there is emerging evidence that green bonds allow issuers to get even cheaper cost of debt. As well, there need to be clear guidelines as to what type of investments qualify as “green,” a standard-setting process known as taxonomy.

There are clear benefits to having an explicit connection between institutional investors and the sustainable projects they are financing, says the Climate Bonds Initiative’s Sean Kidney. But, he adds, a rigorous taxonomy is critical to ensure that green-bond issuers are truly financing sustainable activity. “That provides science-based guidance for what we have to do.”

As governments look to partner with the private sector to allocate capital to drive a zero-carbon transition, the need for better disclosure of carbon-related risks and opportunities is critical, including by any companies that want to have their bonds purchased by central banks. A network of central banks is currently pursuing further work to foster international disclosure and the standardization of data, says Henner Asche, who represents the German central bank in that exercise. He will also be joining the Corporate Knights panel on Wednesday.

Better disclosure is “a prerequisite for better climate-risk pricing,” Asche says. “Only on the back of better climate risk data can the financial system become a true driver of the transformation in the real economy.”

However, the business leaders in the “real economy” must be ready to change, says Sabrina Schulz, of Berlin’s Das Progressive Zentrum (The Progressive Centre). She notes that Germany and the EU are allocating hundreds of billions of euros to drive the structural transformation of the economy. “Right now, the structures are not there to absorb the money, to spend it wisely and to spend it on future-proof projects.”

Shawn McCarthy writes on sustainable finance and climate for Corporate Knights. He is also senior counsel for Sussex Strategy Group.

With the support of the Embassy of the Federal Republic of Germany in Canada.

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“Directors should recognize that the courts, regulators and investors accept that climate change poses real risks,” veteran lawyer Carol Hansell wrote in a 25-page legal opinion released on June 25.

“They expect that management teams and boards are alert to those risks and opportunities, and are reflecting their assessment of that risk in their strategic thinking and risk management practices.”

Hansell is one of Canada’s top experts on corporate governance. In addition to her distinguished legal career, she has served on corporate boards, and as fellow with the Institute of Corporate Directors and adviser to the Corporate Laws Committee of the American Bar Association.

In her analysis, she states unequivocally that corporate directors have a duty to assess the degree to which climate change will impact a company over the long-term, not just its short-term profits or business plans. They must also ensure that, where risks and opportunities are material to the firm’s business, management must come up with strategies to address them.

Hansell prepared the legal opinion for the Canadian Climate Law Initiative, which is housed at University of British Columbia Allard School of Law and York University’s Osgoode Hall Law School. It is the first in-depth legal analysis of directors’ duties in a corporate governance context by a senior Canadian lawyer.

It comes as the global business community is focusing more closely on the climate crisis and its impacts, both in terms of physical impacts, such as extreme weather, drought and flooding, as well as government policy response and technological changes.

The Bank of England, for example, published its own climate-change disclosure report on June 18, in which it outlines how it will address the impact on the British economy and the financial institutions which it supervises.

“Climate change creates financial risks that are far-reaching in breadth and scope,” the Bank of England noted. “They will affect all agents in the economy and arise through two primary channels: the physical effects of climate change and the impact of changes associated with the transition to a net zero emissions economy.”

The Bank of Canada, the federal Office of the Superintendent of Financial Institutions and the Canadian Securities’ Administrator have all warned about the expected impact on the economy from climate change and efforts to reduce greenhouse gas emissions. Companies in the energy sector are particularly vulnerable, but impacts extend far beyond oil and gas and utilities sectors.

A federally-appointed expert panel on sustainable finance recommended last June that climate-change related risk and opportunity should be a mainstream concern among Canadian business managers and their boards. That panel was chaired by Tiff Macklem, who has since been named at Governor at the Bank of Canada.

Still, a recent report from the Chartered Professional Accountants of Canada and consulting firm Mantle314 show relatively few publicly-listed companies are meeting the standards for climate-related financial disclosure that have been laid down by international advisory groups.

In her legal brief, Hansell made it clear that boards that fail to address climate change risk potential legal liability. She said directors cannot let their personal beliefs about climate science impede their duty to the corporation.

“Canadian courts have accepted climate change and the risks it presents as self-evident and uncontroversial, as has the investment community,” she wrote. It would be nearly impossible for a director to dismiss climate change risk out of hand.”

Nor can directors dismiss the need for action in the belief that the climate crisis will not impact the immediate fortunes of the corporation. The Supreme Court of Canada has ruled that directors must look after the long-term interests of the business.

“The fiduciary duty of the directors to the corporation is a broad, contextual concept. It is not confined to short-term profit or share value. Where the corporation is an ongoing concern, [fiduciary duty] looks to the long-term interests of the corporation.”

Corporate directors have a duty to not only assess climate risk, but to ensure that assessment is clearly communicated to shareholders and investors. That disclosure should include the board’s role in climate-change management.

“Above all, understand that it remains the responsibility of the board to be satisfied that it is properly informed about the climate change risks facing the organization and the way in which those risks are being managed,” she concluded.

Shawn McCarthy writes on sustainable finance and climate for Corporate Knights. He is also senior counsel for Sussex Strategy Group.

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After spending six years as vice-president for sustainability at pipeline giant Enbridge Inc., Coady took up the reins at the Pembina Institute environmental think tank at the end of March.

Environmental advocates have long regarded Enbridge as a public enemy because of its proposed Northern Gateway pipeline, the current expansion of its mainline oil pipeline in the U.S., and its fight over refurbishing a pipeline in Michigan where it had a major spill into the Kalamazoo River a decade ago.

For its part, Calgary-based Pembina has been in the crosshairs of oil industry defenders, including Alberta Premier Jason Kenney, who allege Pembina has used funding from American foundations to undermine the province’s leading industry. (Last July, Kenney launched a $2.5 million official inquiry into “foreign funded defamation” of the oil industry.)

Coady is well positioned to navigate in the acrimonious arena, having spent her career working to find common ground between corporate interests and environmental organizations.

Early in her career, she was vice-president of environmental affairs at a B.C. forestry company (later bought by Weyerhaeuser). In 1993, she played a central role in ending the so-called war in the woods when environmentalists clashed with forestry companies over clear-cutting in Clayoquot Sound on Vancouver Island. A stroller run-in between Coady and another new mother – her “arch nemesis,” then-Greenpeace activist Karen Mahon – led to breakthrough talks between the two sides. As Clayoquot blockade organizer Tzeporah Berman wrote in her autobiographical account of that era, “I think [Coady] was the first person I met from a logging company who really talked to us, and about the issues instead of trying to spin them.”

That experience led Coady to accept a position with WWF-Canada as the wildlife organization’s western vice-president. She went on to lead sustainability efforts with the 2010 Vancouver Olympics before joining Enbridge. She also co-chaired the federal Liberal government’s Generation Energy council that, in 2018, provided a roadmap for Canada to pursue the decarbonization of the economy.

The B.C. native will need all her diplomatic skills to bridge the current divide, which has escalated from an environmental issue to a fight that is deeply cultural, political and economic, in which both sides perceive existential threats.

Pembina’s board chair, David Runnalls, acknowledged in an interview that some of the institute’s young, idealistic staff members were apprehensive about the appointment of a former pipeline executive.

He said Pembina has always been focused on finding common ground and solutions to environmental problems rather than simply opposing industrial development. It has, however, taken stands on the need for robust environmental protection with strong regulations that are strictly enforced.

“Pembina has never been particularly popular with the Alberta government,” he said. “And some of the other NGOs don’t like us because they consider us vendus and too close to industry.”

Former Pembina executive director Ed Whittingham applauded Coady’s appointment. “She is one of those people who can flit seamlessly between the private sector and the NGO sector,” he said. He knows well that such dexterity can become uncomfortable given the politically fraught battle between oil industry supporters and environmental activists in Alberta.

After leaving Pembina, Whittingham was appointed by the former NDP government as a board member for the Alberta Energy Regulator. He became a whipping boy in the 2019 provincial election when Kenney accused him – and Pembina generally – of taking foreign funding to engage in “economic sabotage” against the industry.

Whittingham called the attack “an unprecedented smear campaign,” noting that contributions from U.S. foundations represented a small fraction of Pembina’s revenues. Runnalls said the organization has, over the years, received more revenue working with Calgary’s oil companies than it ever did from American foundations.

Coady believes the polarization may still yield opportunity to work on solutions to the industry’s environmental challenges.

In an interview from her Vancouver home, the new Pembina executive director said she has already been in contact with Alberta government officials, including Energy Minister Sonya Savage. The two worked together at Enbridge before Savage joined the Canadian Energy Pipeline Association as vice-president for government relations. “I’ve reached out to people in the Alberta government, including Minister Savage, and have had a very warm reception,” Coady said. “So, so far, so good.”

“Oil and gas is part of the problem on emissions, and there is a real opportunity for Canadian oil and gas companies to be part of the solution.”
—Linda Coady

 

Coady maintained that the fossil fuel industry will continue to produce energy for the world for a period of time, and therefore companies must work to reduce emissions. She sees a role for Pembina in assisting in that process.
“Oil and gas is part of the problem on emissions, and there is a real opportunity for Canadian oil and gas companies to be part of the solution,” she said.

She pointed to federal support to clean up abandoned oil wells and assist industry in reducing methane emissions as examples of efforts in which government, industry and NGOs can cooperate.

Coady endorses Canada’s goal of “net zero” greenhouse gas emissions by 2050, a target that requires deep decarbonization but also expanding technological and natural means to remove carbon dioxide from waste streams and the atmosphere.

The oil industry can contribute to that effort by driving down its emissions for each barrel of crude produced and by developing technologies like carbon capture and storage and the use of hydrogen as an alternative fuel, she said.
Critics argue, however, that those approaches fail to take into account the GHG emissions associated with the use of the oil and gas produced. The industry essentially needs to be wound down over the coming decades, said Berman, now international program director for Stand.Earth.

Coady “may be looking for a technological fix or just emissions-intensity reductions coming from industry, and that won’t be enough to protect Canada’s economy or ensure a stable climate,” Berman said.

While the fate of Canada’s oil and gas sector remains the most fraught area of debate, Pembina is active in other sectors where governments and industry are pursuing the low-carbon transition.

In B.C., for example, the institute is working with the provincial government and the City of Vancouver to develop standards for commercial wood buildings. In Ontario, it’s engaged in efforts to promote low-carbon transportation options and environmentally friendly urban planning.

Coady said she is also looking for Pembina to take a prominent role in the push for more sustainable financing practices.

With leadership from Mark Carney, former governor of the Bank of England, the United Nations is encouraging financial market regulators to require companies to report to investors on their carbon risks and opportunities, including how well they would fare if the world succeeds in making the transition to a low-carbon economy. Such practices would drive investment capital away from activities with high climate-related risks and toward those activities that can benefit from opportunities created by the transition.

Coady noted the federal government is gearing up for a major stimulus program that will finance low-carbon projects and technologies. But she said that must be matched with incentives for the private sector to complement that government spending.

“I see an opportunity for groups like Pembina to try to connect those dots between the public investment and the private investment and to help make the case for return on investment in projects that can further drive decarbonization.”

She said Pembina’s “got an important role to play in the transition of energy systems to a lower-carbon economy.”
“So when they asked me about joining the organization, I pretty well leapt at the opportunity.”

Shawn McCarthy writes on sustainable finance and climate finance. He is also senior counsel for Sussex Strategy Group.

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