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June 2021

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Report Indicates Forest Carbon Finance Has More Than Doubled in Last 4 Years

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The Ecosystem Marketplace, an initiative of Forest Trends, in collaboration with the Forest Carbon Partnership Facility of the World Bank, yesterday released its report on the state of forest carbon finance in 2021 titled “A Green Growth Spurt: State of Forest Carbon Finance 2021” (the Report). The Report indicates that forest carbon financing remains inadequate to support increased climate ambition and counter global deforestation, noting that 23% of all anthropogenic GHG emissions are a result of the inefficient and destructive use of forests, farms, and fields. This bulletin summarizes the Report’s key findings:   Funding for forests. Funding for forests through carbon markets and results-based payments for REDD+ has more than doubled since 2017, including $5.9 billion to forest carbon offset projects and an additional $1.3 billion for “REDD+ readiness” in developing countries.    Compliance-driven forest carbon markets. Compliance carbon markets have provided over $3.9 billion to forests and sustainable land use. This is expected to further increase as a result of new compliance mechanisms such as CORSIA and the still-to-be-finalized markets provisions under Article 6 of the Paris Agreement.   Natural climate solutions. From 2017-2019, approximately $400 million was generated in transactions through global voluntary carbon markets (VCM), representing 105 MtCO2e of carbon credits from forest and land use natural climate solutions (NCS), as well as generating an overall transaction value of over $1 billion in demand for NCS offsets.     Voluntary carbon markets. The Taskforce on Scaling Voluntary Carbon Markets (TSVCM) estimates that VCMs must grow 15-fold by 2030 and 100-fold by 2050 to meet the goals of the Paris Agreement (read our earlier bulletins on the TSVCM here and here). The Report notes that most forest carbon offset buyers in VCMs are concentrated in Europe and the US, with companies in France and the UK accounting for almost a third of all offsets purchased in 2019.  …

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Canadian Net-Zero Emissions Accountability Act Passes Third Reading

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Bill C-12, the Canadian Net-Zero Emissions Accountability Act, (the NZ Bill) passed third reading in the House of Commons late yesterday evening. The NZ Bill was introduced last November, and if enacted will require national targets for the reduction of greenhouse gas (GHG) emissions on the pathway to net-zero emissions by 2050. This bulletin provides a brief overview of the NZ Bill and next steps:   Emissions reduction targets and plans. The NZ Bill provides for emissions reduction targets to be set by the Minister of Environment and Climate Change (the Minister) every five years, starting in 2030. The Minister must also establish an emissions reduction plan for each milestone year, indicating how Canada will meet the corresponding target. Each plan must also, inter alia, provide a description of relevant sectoral strategies, how international commitments are taken into account, and emissions reduction strategies for federal government operations; and provide projections of annual GHG emission reductions for each economic sector that Canada includes under the United Nations Framework Convention on Climate Change.  Net-Zero Advisory Board. The NZ Bill would establish the Advisory Board to provide independent advice to the Minister on achieving net-zero emissions by 2050 and each five-year milestone. The Advisory Board will provide advice on GHG emissions targets; GHG emissions reduction plan, including measure and sectoral strategies that the government could implement to achieve GHG emissions targets; and any other matter referred to it by the Minister. The Advisory Board is to be composed of members with expertise in, or knowledge of climate change science; Indigenous knowledge; relevant physical and social sciences; climate change and climate policy at the national, subnational, and international levels; energy supply and demands; and relevant technologies. Commissioner of the Environment and Sustainable Development. At least every five years, the Commissioner of the Environment and Sustainable Development will be required to examine and report on the government’s implementation of measures to…

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Network for Greening the Financial System Releases Updated Climate Risk Scenarios for the Financial System

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The Network for Greening the Financial System (NGFS) last week released an update to their climate scenarios which assist financial institutions with analysing climate-related risks to the economy and financial system (the Study). The NGFS is a group of 91 central banks (including the Bank of Canada, US Federal Reserve, and European Central Bank), supervisors, and observers that seek to share best practices and contribute to the development of climate risk management in the financial sector, and to mobilize mainstream finance to support the transition toward a sustainable economy. This bulletin provides a high-level summary of the Study’s key findings: Transition risks: Emission prices. The Study indicates that a price of $160/tonne CO2e will be required by 2030 to incentivise the transition to net zero by 2050. Energy investment. Greater investments in renewable energy and storage will be necessary to meet net zero goals by 2050, with substantially reduced investments in fossil fuel extraction. The Study suggests that, by 2050, renewables and biomass will account for 68% of global energy needs, with fossil fuels (coal, oil, and gas) providing close to 25%, down from approximately 80% in 2020. CO2 removal. The Study assumed low to medium availability of carbon removal technology and storage such as increasing forest cover, soil sequestration, and growing crops for bioenergy with carbon capture and storage (BECCS). The Study suggests that CO2 removal would help to accelerate decarbonization goals and lower warming outcomes but on a limited scale. Agriculture, forestry and land use. Changes in land use will be important for the pathway to net zero by 2050, including increasing forest cover and bioenergy cropland and reducing cropland for food production and pasture land. The Study notes that CO2 emissions are anticipated to decline more quickly than other greenhouse gases including N2O and CH4. Physical risks:…

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Major Oil Sands Companies Announce Net Zero Initiative

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Five of Canada’s largest oil sands producers operating 90% of oil sands production, including Suncor Energy, Canadian Natural Resources, Cenovus Energy, Imperial, and MEG Energy, today announced the Oil Sands Pathways to Net Zero initiative (the Initiative). The Initiative aims to work collectively with the federal and Albertan governments to reach net zero greenhouse gas (GHG) emissions from Canadian oil sands operations by 2050 and help Canada to meet its Paris Agreement and 2050 net zero commitments.  This bulletin provides key highlights from the announcement. Carbon Capture, Utilization and Storage. The Initiative proposes collaborating with industry and government to create a Carbon Capture, Utilization and Storage (CCUS) CO2 trunkline system connecting oil sands facilities in the Fort McMurray and Cold Lake regions to a sequestration hub in Cold Lake with the potential for future links to the Edmonton region, modeled on similar systems in Norway and CCUS projects in the Netherlands, U.K., and U.S. Investment. The Initiative will require significant investment by industry and government in research and development for new and emerging technologies, such as direct air capture, aimed at reducing and removing GHG emissions as well as deploying GHG reduction technology, including hydrogen, process improvements, energy efficiency, fuel switching, and electrification. Indigenous Partnerships. The Initiative will seek to partner and work with the federal and Alberta governments, to ensure that local Indigenous communities benefit from both emissions reductions and Canadian resource development. For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.

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ECCC Proposes Amendment to the OBPS Regulations

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Environment and Climate Change Canada (ECCC) has published proposed amendments to the Output-Based Pricing System (OBPS) Regulations (the Regulations) under Part 2 of the federal Greenhouse Gas Pollution Pricing Act (GGPPA) (read our earlier bulletin on the GGPPA here). The proposed amendments seek to maintain the incentive to reduce greenhouse gas (GHG) emissions in the OBPS and increase the accuracy of the values output and GHG emissions and emissions limits calculated by covered facilities. In addition, the proposed amendments are an attempt to clarify certain provisions of the Regulations to ensure compliance is consistent with the policy intent of the OBPS and GGPPA. This bulletin briefly summarizes the proposed amendments: Rules relating to surplus credits and payments. The proposed amendments provide new rules for when a province is removed from the OBPS including: increasing the circumstances that allows the Minister to suspend surplus credits; limiting the use of surplus credits by not allowing them to be used to meet a compensation obligation -for a compliance period during which a province is not participating in the OBPS; and providing for the lifting of the suspension of surplus credits, provided they are still eligible for use, when they are used to meet a compensation obligation for a compliance period during which a province was part of the OBPS. Rules relating to quantification and verification. The proposed amendments will: repeal the provisions related to improved precision in a covered facility’s assessment of GHG emissions and replace it with a requirement that the difference between a covered facility’s GHG emissions during a compliance period and its emissions limit during that same period be rounded to the nearest whole number; update emission factors used in the quantification of GHG emissions from fuel combustion by incorporating the emission factors from the 2020 version of Canada’s Greenhouse…

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