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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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Canada Releases 2030 Emissions Reduction Plan

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Environment and Climate Change Canada (ECCC) today released the 2030 Emissions Reduction Plan (the Plan) under the Canadian Net-Zero Emissions Accountability Act (the Act; read our earlier bulletin on the Act here). The Plan sets out current actions, additional funding of $9.1B, and several new initiatives to meet Canada’s emissions reduction target of 40-45% below 2005 levels by 2030, as provided last year in an update to Canada’s Nationally Determined Contribution (NDC) under the Paris Agreement (read our earlier bulletin on Canada’s updated NDC targets here).   The Plan also sets a new interim objective of reducing GHGs by 20% below 2005 levels by 2026, noting that this interim objective is not an official target akin to Canada’s 2030 NDC, but that progress towards achieving the objective will be a cornerstone of progress reports associated with the Plan in 2023, 2025, and 2027.   This bulletin highlights key parts of the Plan and summarizes the newly announced funding and initiatives, across the following categories: Carbon pricing Clean fuels Clean growth funding Methane Buildings Electricity Heavy industry Oil and gas Transportation Agriculture Waste Nature-based solutions Clean technology and climate innovation Sustainable finance Jobs, skills, and communities Prime Minister Justin Trudeau launched the Plan in an address at the GLOBE Forum in Vancouver earlier today.  Carbon pricing. The Plan notes the measures undertaken to address economy-wide emissions including the federal fuel charge and the Output-Based Pricing System for industrial emitters under the Greenhouse Gas Pollution Pricing Act. Escalating the federal benchmark price to $170 by 2030 is meant to further support the 2030 targets of the federal government along with continued consultations on a possible border carbon adjustment (read our earlier bulletin here). Very significantly, the Plan puts forward the concept of investment approaches, like carbon contracts for differences, which enshrine future price levels in contracts between the federal government and low-carbon…

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Climate Finance Momentum Builds in Lead-up to COP 26

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COP Presidency Publishes Climate Finance Delivery Plan The UK COP26 Presidency yesterday published the long-awaited Climate Finance Delivery Plan (the Delivery Plan) led by Canadian Environment Minister Jonathan Wilkinson and German State Secretary Jochen Flasbarth. The Delivery Plan seeks to provide clarity on the commitment by developed countries to provide $100 billion in climate finance per year. The Delivery Plan is informed by recent OECD analysis to 2025, which indicates that by 2023 the $100 billion per year goal will be met and the mobilization of funds for climate finance is likely to surpass $100 billion each year afterwards. The Delivery Plan provides ten key actions that should be taken by developed countries to deliver on the $100 billion pledge, including: Increasing the scale of climate finance; Increasing finance for adaptation; Prioritizing grant-based financing for the poorest and most vulnerable; Addressing barriers in accessing climate finance; Strengthening the financial mechanism of the UNFCCC and Paris Agreement; Working with multilateral development banks to increase and improve climate finance; Improving the effectiveness of private finance mobilized; Reporting on collective progress transparently; Assessing and building on lessons learned; and Taking into account the broader financial transition needed to implement Article 2.1(c) of the Paris Agreement (making finance flows consistent with a pathway towards low GHG emissions and climate-resilient development). In 2009, developed countries first pledged to mobilize $100 billion in climate finance annually by 2020. This goal was reaffirmed under the Paris Agreement in 2015. In June 2021, Canada pledged to double its international climate finance commitment to $5.3 billion. Germany has pledged to increase its climate finance to €6 billion per year by 2025. RBC Releases Canada Net-Zero Transition Report RBC recently released a report titled “The $2 Trillion Transition: Canada’s Road to Net Zero” (the Report), which analyzes the opportunities and…

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Energy Charter May Put Paris Agreement at Risk

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The Globe and Mail reports on growing support in Europe for withdrawing from the Energy Charter Treaty (ECT) as the threat of multibillion-euro lawsuits by fossil fuel investors intensifies. The increasing costs associated with claims under the ECT may also put the ambitions of the Paris Agreement at risk if signatories choose to allow fossil fuel companies to continue to emit greenhouse gases (GHGs) instead of paying compensation for lost investments.   The ECT was drafted and signed, as the Soviet Union was dissolving, to protect European energy firms entering Russia and former Soviet Republics. The intent of the ECT was to allow investors to sue governments for policies affecting their new investments. The ECT is quickly becoming a vehicle for claims by fossil fuel companies to attempt to recoup losses from their investments as a result of climate action and the decarbonization of economies across Europe. It is estimated that claims brought by fossil fuel companies seeking compensation for climate policies could reach €1.3 trillion by 2050. Remaining subject to the compensation mechanism of the ECT could result in large payouts to fossil fuel companies unless countries choose to allow them to continue to emit GHGs for at least another decade under the terms of the ECT.   Four claims have already been brought under the compensation mechanism of the ECT, with a combined total of more than €2.5B.  A similar claim, against the US government for $15B USD, was brought by TC Energy for the cancellation of the Keystone XL pipeline as a NAFTA legacy claim. For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.

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IPCC Releases Report Indicating Global Temperature Rise to Exceed 1.5-2ºC

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The Intergovernmental Panel on Climate Change (IPCC) yesterday released the IPCC Working Group 1 report, “Climate Change 2021: The Physical Science Basis” (the Report), part of the Sixth Assessment Report, providing an updated assessment of the physical understanding of the current state of the climate system and climate change. The Report predicts that global temperatures are likely to continue to increase beyond the 1.5-2°C target of the Paris Agreement without widespread and steep global reductions in greenhouse gas (GHG) emissions. This bulletin summarizes the Report’s key findings. The current state of the climate. The Report reiterates that the warming of the atmosphere, oceans, and land are human-caused, with rapid changes being observed in the atmosphere, ocean, cryosphere, and biosphere. In addition, the Report confirms that anthropogenic climate change is globally affecting weather and climate extremes, with increased heatwaves, heavy precipitation, droughts, and tropical cyclones more readily attributed to human influence. Possible climate futures. According to the Report, under all emissions scenarios, global surface temperatures will continue to increase until mid-century, with temperatures predicted to exceed 1.5-2°C this century without deep reductions of GHGs. As the climate warms, changes in climate systems will become larger, increasing the frequency and intensity of hot extremes, marine heatwaves, heavy precipitation, droughts, intensity of tropical cyclones, and reductions in Arctic sea ice, snow cover, and permafrost. The Report indicates that changes in the ocean, ice sheets, and global sea levels, resulting from past and future GHG emissions, will likely be irreversible for hundreds of years. Climate information for risk assessment and regional adaptation. The Report indicates that all regions are expected to increasingly experience concurrent and multiple changes in climatic impact-drivers amplified at 2°C compared to 1.5°C, with greater increases at even higher global temperatures. The Report also indicates that even “low-likelihood” outcomes such as…

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