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EU CBAM Enters Transitional Phase

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On October 1, 2023, the European Union’s Carbon Border Adjustment Mechanism (CBAM) became effective in its transitional phase until December 31, 2025. The European Commission (EC) noted that the transitional phase will serve as a pilot and learning period for stakeholders and will be used to collect information on embedded emissions to further refine and improve the CBAM’s methodology. We expect other countries to consider and adopt their own border carbon adjustments to avoid carbon leakage and to ensure the competitiveness of domestic emission intensive and trade exposed sectors of the economy (see our earlier bulletins on the development of BCAs in Canada and USA). This bulletin briefly highlights key information related to the transitional phase of the CBAM. CBAM Overview. The CBAM applies to importers of CBAM-covered goods. Importers of covered goods must register with national authorities, through which they will also able to buy CBAM certificates once the CBAM is fully in place on January 1, 2026. The price of certificates will be calculated depending on the weekly average auction price of EU Emission Trading System (ETS) allowances expressed in €/tonne of CO2 emitted. Importers into the EU are required to declare the direct and indirect emissions embedded in imports and, once fully operational, “surrender” the corresponding number of CBAM certificates each year; however, initially, importers will only be required to pay for direct emissions. Importers may reduce the number of certificates to be surrendered if they can prove that a carbon price has already been paid during the production of the imported goods and this price will then be deducted from the overall obligation. Applicability The CBAM will initially apply to the following imports of certain goods and selected precursors that are carbon intensive and at significant risk of carbon leakage: cement; iron and steel; aluminium; fertilisers; electricity; and hydrogen. The EC noted that…

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Canada Announces New Members of Global Carbon Pricing Challenge at Climate Week

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Prime Minister Justin Trudeau and Steven Guilbeault, Minister of Environment and Climate Change, yesterday welcomed Norway and Denmark as new members of the Global Carbon Pricing Challenge (the “Challenge”), and Côte d’Ivoire as a Friend of the Challenge. The Challenge, launched by Prime Minister Trudeau at COP26, is a partnership of countries committed to accelerating climate action by tripling the coverage of carbon pricing mechanisms around the world to reach 60 percent of global emissions by 2030. Colombia and Vietnam were also recognized among those nations that support the Challenge’s goals and objectives since they have both adopted domestic carbon pricing systems. The announcement was made at an event entitled Accelerating Global Climate Ambition and Decarbonization, held in the SDG Pavilion on the North Lawn of the United Nations Headquarters during Climate Week NYC. We anticipate further developments related to the Challenge to be announced at COP28 in Dubai later this year. For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.

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Canada Releases Draft Clean Electricity Regulations

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Canada’s Minister of Environment and Climate Change (the “Minister”), in collaboration with the Minister of Energy and Natural Resources, has announced the release of proposed Clean Electricity Regulations (the “Proposed Regulations”) (see our earlier bulletin on prior consultations here). The Proposed Regulations would establish significant and ambitious emission performance standards (“EPS”) to reduce greenhouse gas (“GHG”) emissions from fossil fuel-generated electricity generation facilities in all provinces and territories across Canada starting in 2035. Environment and Climate Change Canada (“ECCC”) estimates that the Proposed Regulations would result in a net reduction of 342 million metric tonnes (Mt) of CO2e emissions between 2024 and 2050 and a net benefit to society of $28.9B. The Proposed Regulations also impose significant registration, record keeping, and reporting obligations on covered electricity generation facilities. The Proposed Regulations represent a significant foray by the federal government into electricity policy, which has traditionally been an area of provincial jurisdiction. In their current form, the Proposed Regulations are expected to attract opposition from some provincial governments, and potential constitutional legal challenges. ECCC is seeking feedback on the Proposed Regulations. Interested stakeholders are encouraged to review the Proposed Regulations and submit detailed comments by no later than November 2, 2023.  We anticipate that policy developments are being targeted for announcement before or at the UNFCCC Conference of the Parties meetings (COP28 Paris Agreement negotiations) that start on November 30, 2023, in Dubai, UAE. This bulletin briefly summarizes key details of the Proposed Regulation: Application. The Proposed Regulations would apply to any “unit” (defined as an assembly comprised of any equipment that is physically connected and that operates together to generate electricity, and (a) must include at least a boiler or combustion engine and (b) may include duct burners and other combustion devices, heat recovery systems, steam turbines, generators, emission control devices and carbon capture and storage (“CCS”) systems) that meets the three following criteria:…

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ECCC Releases Inefficient Fossil Fuel Subsidies Assessment Framework and Guidelines

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The Minister of Environment and Climate Change on Monday announced the release of the Inefficient Fossil Fuel Subsidies Government of Canada Self‑Review Assessment Framework (the Assessment Framework) and the Inefficient Fossil Fuel Subsidies Government of Canada Guidelines (the Guidelines). The Assessment Framework and Guidelines were jointly developed by Environment and Climate Change Canada (ECCC) and the Department of Finance Canada and are intended to support Canada’s 2009 commitment alongside other G20 countries to phase out and rationalize inefficient fossil fuel subsidies over the medium-term while providing targeted support for the poorest. The Assessment Framework also builds on Canada’s commitment under the Statement on International Public Support for the Clean Energy Transition (the Glasgow Statement) in 2021 at COP 26 in Glasgow, to end new direct public support for international unabated fossil fuel, except in limited and clearly defined circumstances that are consistent with the 1.5°C warming limit and the goals of the Paris Agreement. This bulletin briefly summarizes key information and criteria provided in the Assessment Framework and Guidelines. Assessment Framework. ECCC noted that the Assessment Framework is the “first transparently published methodology worldwide” and that it will be used to determine which tax and non-tax measures constitute an “inefficient fossil fuel subsidy”. The Assessment Framework defines “measures” as including: (i) expenditure programs (i.e., grants, contributions, transfers); (ii) intramural research and development; (iii) tariff and duty reliefs; and (iv) tax expenditures that support fossil fuel consumption or that can be claimed by the fossil fuel sector and that represent alternatives to expenditure programs (i.e., tax credits, accelerated capital cost allowances, flow-through shares), and utilizes the World Trade Organization’s definition of “subsidy” as set out in Article 1.1 of the Agreement on Subsidies and Countervailing Measures. The international carbon markets provisions of Article 6 of the Paris Agreement will have an…

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Federal Government Releases 2023 Budget Long on Clean Economy Investment

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Deputy Prime Minister and Minister of Finance Chrystia Freeland today released Budget 2023: A Made-in-Canada Plan (Budget 2023). Resilient’s bulletin outlines key climate, energy, and Indigenous highlights from Budget 2023.   Clean Electricity, Clean Economy Budget 2023 introduces “Canada’s Plan for a Clean Economy” (the Clean Economy Plan) with the following priorities: electrification; clean energy; clean manufacturing; emissions reduction; critical minerals; infrastructure; electric vehicles and batteries; and major projects. The Clean Economy Plan is centred on three tiers of federal financial incentives: (i) an anchor regime of clear and predictable investment tax credits; (ii) low-cost strategic financing; and (iii) targeted investments and programming to respond to the unique needs of sectors or projects of national economic significance.   Clean Electricity. Budget 2023 notes that Canada’s electricity demand is expected to double by 2050 and will require electricity capacity to increase by 2.2 to 3.4 times compared to current levels and proposes the following new funding and investments to support clean electricity in Canada: Canada Infrastructure Bank (CIB) will invest at least $10B through its Clean Power priority area, and at least $10B through its Green Infrastructure priority area, at least $20B to support the building of major clean electricity and clean growth infrastructure projects; $3B over 13 years to Natural Resources Canada to: Recapitalize funding for the Smart Renewables and Electrification Pathways Program to support critical regional priorities and Indigenous-led projects, and add transmission projects to the program’s eligibility; Renew the Smart Grid program to continue to support electricity grid innovation; and Create new investments in science-based activities to help capitalize on Canada’s offshore wind potential, particularly off the coasts of Nova Scotia and Newfoundland and Labrador. funding to advance the Atlantic Loop and support ongoing negotiations with provinces and utilities to identify a clear path to deliver the project by 2030. Clean Economy. Budget 2023 proposes the following new funding and support for…

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