Resilient LLP (formerly DeMarco Allan LLP)
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DT Vollmer

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CFTC Seeks Comment on Climate-Related Financial Risk

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The U.S. Commodity Futures Trading Commission (CFTC) has released a Request for Information seeking public comment on climate-related financial risk (the RFI). The CFTC notes that the RFI will inform its understanding and oversight of climate-related financial risk relevant to the derivatives markets, underlying commodities markets, registered entities, registrants, and other related market participants. This bulletin briefly summarizes the RFI. The RFI is seeking comments on questions posed by the CFTC around the following topic areas: data; scenario analysis and stress testing; risk management; disclosure; product innovation; voluntary carbon markets; digital assets; financially vulnerable communities; public-private partnership/engagement; and capacity and coordination. The CFTC indicated that it may use the responses and comments received through the RFI to inform potential future actions including the issuance of new or amended guidance, interpretations, policy statements, or regulations, or other potential action by the CFTC. All of the CFTC’s commissioners voted in favour of the RFI. However, Commissioner Mersinger, in a concurring statement included in the RFI, indicated that several of the questions in the RFI were beyond the jurisdiction of the CFTC. Commissioner Mersinger asserted that the CFTC does not regulate commodity markets and does not have statutory authority to create a registration framework for participants within voluntary carbon markets nor the authority to regulate digital assets or distributed ledger technology outside of activities related to derivatives. In addition, Commissioner Pham stated that the CFTC should seek to harmonize any climate risk management framework with existing prudential and other regulatory regimes for registrants already subject to such regimes. The RFI follows the CFTC’s first Voluntary Carbon Convening (the Convening) which discussed issues related to the supply and demand for high quality carbon offsets, including product standardization and the data necessary to support the integrity of carbon offsets’ greenhouse gas emission avoidance and claims.…

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UK Faces Climate Lawsuit Brought by ClientEarth

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ClientEarth, an environmental advocacy organization active in climate litigation, together with Friends of the Earth and the Good Law Project, presented legal arguments before the UK High Court on June 8-9 in their challenge of the UK government’s net-zero by 2050 strategy. ClientEarth asserts that the UK government has not met its legal obligation under the Climate Change Act, which requires the government to set climate policies that satisfy the UK’s legally binding carbon budgets. ClientEarth argues that the UK is relying on unproven technologies instead of supporting opportunities for immediate impact, including recommendations for cutting emissions and reducing energy bills from the UK’s Climate Change Committee, such as increased insulation and low-carbon heating in buildings. ClientEarth notes that the UK’s current approach will require significant and drastic emissions reductions in the coming decades, with increased impacts on young people and future generations. Last month, ClientEarth, along with Dutch campaigners Fossielvrij Netherlands and Reclame Fossielvrij, delivered a letter to Dutch airline, KLM, stating their intention to file a legal claim if the demands set out in the letter are not met. The demands include calling for a ban on all fossil fuel advertising in the EU. ClientEarth intends for the ban to stop companies like KLM from misleading the public over what is needed to reduce emissions and the airline industry’s contribution to climate change. ClientEarth is targeting KLM’s ‘Fly Responsibly’ ad campaign and the airline’s offers for customers to purchase carbon offsets which will be used to fund reforestation projects or the purchase of biofuels to offset the emissions from their flight. ClientEarth states that such campaigns do little to reduce emissions and may instead undermine and delay urgent climate change action.

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Canada Officially Launches GHG Offset Credit System

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Environment and Climate Change Canada (ECCC) today announced the launch of Canada’s Greenhouse Gas Offset Credit System, with the publication of the final regulations in Canada Gazette II. As part of the announcement, ECCC also announced that municipalities and other landfill operators will now be able to generate offset credits under the finalized Landfill Methane Recovery and Destruction protocol (see our earlier bulletins here and here) for recovering landfill gas from their operations and either destroying it or repurposing it into energy with technologies such as flares, boilers, turbines, and engines. ECCC is currently developing the following federal offset protocols: Reducing GHG Emissions from Refrigeration Systems; Improved Forest Management; Enhanced Soil Organic Carbon; and Livestock Feed Management.  ECCC has also indicated that over the summer it will begin development of a Direct Air Carbon Capture and Sequestration protocol, after which it will start work on the following new protocols: Improved Forest Management on Public Lands; Bioenergy Carbon Capture and Sequestration; Livestock Manure Management; and Anerobic Digestion. ECCC also announced that it is looking for interested individuals to provide input as external technical experts and assist with the development of the Direct Air Carbon Capture and Sequestration protocol. Interested individuals are invited to visit the GHG Offset Credit System website for more information on how to submit their candidacy packages by July 31, 2022. For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.

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UNFCCC Secretariat Publishes Informal Reports on Article 6.2

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The UNFCCC Secretariat today published informal reports on the technical workshops on Article 6.2 of the Paris Agreement that were held virtually between May 16 and 19, 2022. The technical workshops were held further to the Article 6.2 Guidance on cooperative approaches agreed at COP 26 in November 2021. The technical workshops focused on Article 6.2 reporting rules and related infrastructure requirements, which are expected to influence how countries operationalize Article 6 through domestic legislation. Two informal reports and three supporting slide decks were published on the following topics:  Tables and outlines for reporting required Article 6.2 information (informal report): Outlines for the initial report and regular information annex to the biennial transparency report (slide deck); and Agreed electronic format for annual information (slide deck) Options for implementing Article 6 infrastructure requirements (informal report): Registries and the international registry; The Article 6 database; and Centralized accounting and reporting platform (slide deck). The Subsidiary Body for Scientific and Technological Advice (SBSTA) will consider the outcomes of the technical workshops at its intersessional meetings set to take place in Bonn between June 6 and 16, 2022. The SBSTA is then expected to forward its recommendations for consideration and adoption at COP 27 in Sharm el-Sheikh, now set to begin one day earlier, on November 6, and run until November 18, 2022. For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.

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B.C. Proposes Significant Changes to Low Carbon Fuel Standard

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The Government of British Columbia (B.C.) has introduced Bill 15, the Low-Carbon Fuels Act (LCFA), to replace the Greenhouse Gas Reduction (Renewable and Low Carbon Fuel Requirements) Act (the GGRA) and update the Renewable and Low Carbon Fuel Requirements Regulation, which together are known as B.C.’s low carbon fuel standard (LCFS). The government indicated that the new LCFA is meant to make its greenhouse gas (GHG) reduction legislation easier to understand, administer, and enforce. This bulletin briefly highlights key changes to the LCFS. Proposed changes to the LCFS include: Fuel for Aviation and Marine Use. The LCFA would include fuel supplied for aviation and marine use, thereby ensuring that all fossil-derived transportation fuels supplied in B.C. are subject to carbon-intensity requirements and generate market opportunities for a wider range of low-carbon fuels. Direct Air Capture and Sequestration. The LCFA would authorize the provision of compliance credits for direct air-capture and permanent sequestration of GHGs, which is intended to support investments in technologies that remove CO2 from the atmosphere. Increase Use of Low-Carbon Products, including EVs. The LCFA would require some utilities to use a portion of their revenues from the sale of low-carbon fuel credits for programs dedicated to increasing the use of low-carbon products. This is intended to further supports the purchase of electric vehicles. Expand Access for Credit Trading. The LCFA would expand access for earning low-carbon fuel credits and engaging in credit trading to persons other than fuel suppliers. The government indicated that this will provide a new funding mechanism for businesses, communities, academic institutions, and others that may commercialize new fuel production methods or develop clean-energy technologies that reduce GHG emissions. Provide Clarity. The LCFA is intended to make the LCFS easier to administer and enforce, enhance understanding, and provide regulatory certainty for fuel suppliers and those making investments in low-carbon fuels. The LCFA includes several transitional provisions including affirming that…

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