December 2023

Canada Growth Fund (CGF) today announced that it has completed its first transaction under its mandate to use nearly half of its $15B budget for carbon contracts for difference (CCfDs) and offtake agreements. CGF is the federal agency (a subsidiary of Canada Development Investment Corporation) with a mandate to “build a portfolio of investments that catalyze substantial private sector investment in Canadian businesses and projects to help transform and grow Canada’s economy at speed and scale on the path to net-zero.” PSP Investments acts as the investment manager for CGF through a wholly-owned subsidiary. Via a hybrid security, CGF has agreed to invest $200M in Entropy Inc., a Calgary-based developer of carbon capture and sequestration (CCS) projects. Alongside the investment, CGF and Entropy have entered into a “carbon credit offtake commitment” agreement (CCO) whereby CGF has committed to purchase up to 9M tonnes (up to 600K tonnes per annum (tpa) over a 15-year term) of TIER or equivalent carbon credits from Entropy projects. The initial project to benefit from the CCO is intended to be the Advantage Glacier Phase 2 project, drawing up to 185K tpa at an initial price of $86.50 per tonne, for a total of approximately 2.8M tonnes over the 15-year term. Upon successful deployment of the initial 600K tpa of CCO, CGF may make available a further 400K tpa of CCOs for additional Entropy CCS projects in Canada. This initial transaction notably appears to be in the form of an offtake agreement, rather than a contract for difference. The Globe and Mail reported that other project proponents, including larger oil and gas producers and members of the cement and chemical industries, have been attempting to negotiate contracts with the CGF at rates higher than the initial price of $86.50 per tonne agreed in this initial transaction. For further information or to…

The United Nations Environment Programme (UNEP) recently published its annual emissions gap report: Emission Gap Report 2023: Broken Record (the Report). The Report provides an assessment of the gap between pledged and actual greenhouse gas (GHG) emissions reductions and the reductions required to align with the long-term temperature goal of the Paris Agreement and is published annually in the lead-up to the UN Climate Change Conference. COP 28, set to start Thursday in Dubai, will mark the conclusion of the first Global Stocktake under the Paris Agreement, which is very likely to acknowledge that current Nationally Determined Contributions (NDCs) are insufficient to achieve the goals of the Paris Agreement. The UNEP Report highlights the need for immediate implementation of solutions to the emissions problem. Article 6 of the Paris Agreement represents a viable mechanism to channel capital at the levels required in the time available. The Public Policy Forum, together with Resilient LLP and the International Emissions Trading Association, released a report last week titled The Missing Article: How to get Canada back in the game on Article 6. This bulletin briefly summarizes the key findings of the Report. The emissions gap in 2030 remains high. The Report indicates that current unconditional NDCs result in a 14 GtCO2e gap for a 2°C goal and a 22 GtCO2e gap for the 1.5°C goal. Full implementation of unconditional and conditional NDCs would reduce these estimates by 3 GtCO2e. Figure: GHG emissions under different scenarios and the emissions gap in 2030 and 2035 Source: UNEP, Emissions Gap Report 2023, Figure 4.2 Likelihood of limiting warming to 1.5°C remains low. The Report found that there is only a 14% likelihood of limiting warming to 1.5°C and that current policies are likely to see temperature rise by 3°C compared to pre-industrial levels. However, implementing all unconditional and conditional pledges by 2030…

Canada Growth Fund Announces First Transaction under CCfD and Offtake Mandate

UNEP Releases 2023 Emissions Gap Report