The New Broker - Carbon
What
started out as a germ of an idea, has grown like a weed! Carbon Taxes has become one of the hottest
topics in business. There is no way we
can cover the whole Carbon Tax issue in one blog, so there will be series looking
at different business sectors and how this issue affects them.
This
first blog is a quick overview of what is a Carbon Tax. I encourage you to look for and share
information through comments etc.
Alberta was the first province in Canada to develop
legislation regulating greenhouse gas emissions requiring large industrial
emitters to report their emissions and take actions to make mandatory
reductions.
In order to meet the reduction
targets, regulated facilities have the following compliance options:
1. Reduce internal
on-site Emissions (Carbon Units);
2. Contribute to the Technology Innovation and Emissions
Reduction Fund;
3. Purchase and use Alberta-based Emission Offsets;
4. Purchase or use Emission Performance Credits;
Lets take a look at what the terms all mean:
A
carbon credit (or carbon offset) is a unit of measurement that is
equivalent to one tonne of CO2. The unit is used to facilitate transactions
designed to reduce the climate impacts of human activities.
Each
company is issued X number of credits.
If they go over those numbers, they must pay an additional Carbon Tax or
purchase credits from another company. This
is where the new brokers come in!
Carbon
Neutral
Carbon neutrality means
having a balance between emitting carbon and absorbing carbon from the
atmosphere in carbon sinks.
Removing carbon oxide
from the atmosphere and then storing it is known as carbon sequestration.
The largest storehouse we have is our
land.
According
to the Western Producer March 2021, agriculture will play a large role in the
sequestration of Carbon in Canada and the USA.
“Only
a minute into his speech on March 1, U.S. agriculture secretary Tom Vilsack
mentioned carbon sequestration and paying farmers to store greenhouse gases in
the soil.
Vilsack,
who spoke virtually to the U.S. National Farmers Union annual convention, said
he will be “very active” on climate change and is determined to create new
streams of revenue for American farmers….
“We
want to establish a system that’s designed by farmers, for farmers,” he said to
the NFU members, noting American farmers need new sources of revenue.
A
viable carbon market can generate “more income for farmers,” said Vilsack, who
served as agriculture secretary under President Barack Obama….
…Vilsack’s
comments are a strong signal that a carbon sequestration market for agriculture
may become a reality in America.
Should
that happen, it would put pressure on Canada’s federal government to follow
America’s lead. “
In order to achieve net
zero emissions, all worldwide greenhouse gas emissions will have to be
counterbalanced by carbon sequestration.
Companies will get extra
Carbon Credits by showing they have implemented new ways of becoming
Carbon Neutral – Carbon Offsetting.
Carbon offsetting
Another way to reduce emissions and to
pursue carbon neutrality is to offset emissions made in one sector by reducing
them somewhere else. A contribution towards carbon offsets is an
investment in renewable energy, energy efficiency and other pro-climate
projects designed to reduce the level of greenhouse gases (GHGs) in the
atmosphere.
These incentives,
for Albertans, allow all areas of the economy to be creative in innovation. Investment
in these activities that will reduce greenhouse gas emissions - from farmers to
municipalities to small renewable energy industry developers.
This
is where the brokerage of Carbon Taxes comes into the equation. There are a number of Energy companies that
offer this service
Anova; David Suzuki Foundation; PlanetAir ;
RBC, to just name a few…
Statistics
Canada found that Canada’s low carbon economy was already generating more than
$66 billion and jobs for more than 317,000 Canadians in 2018. Imagine what it is generating now 3 years on!
According
to The Mining Association of Canada, there is a natural synergy between mining
and a low carbon economy. Canada has all
the ingredients—sustainably-sourced minerals, metals and energy products—needed
for energy technologies that are powering imaginations and enabling the
transition to a low carbon future. For example,
Canada has 14 of the 19 metals/minerals that are needed to make a solar PV
Panels,
Agriculture
is a major player in the offsetting market.
(more
to come on these markets in future blogs)
We
all see the effect of Carbon Taxes at the gas pump, in the grocery store, etc.
So,
does the Carbon Tax program reduce the amount of Carbon in our atmosphere?
Let’s
take a look:
Company
(A) is issued 25 Carbon Units.
It
utilizes 50 Carbon Units to produce their product.
To
offset the additional 25 units, they can:
- Buy credits from another company.
- This does not reduce emissions;
it just moves them from another company {B}. Once Company B has sold them, the
credits are removed from their profile. They do not revert at the end of
the year. If Company B increases or changes practices and uses more
Credits, then they now have to utilize one of the offset procedures.
- Contribute to the Technology Innovation and
Emissions Reduction Fund
- This
does not reduce emissions; it provides funding to help find ways to improve
emission control and green energy.
- In
Alberta the Low Carbon Economy Fund is an important part of the
Pan-Canadian Framework on Clean Growth and Climate Change. This Fund supports investments in
projects that will:
·
generate
clean growth
·
reduce
greenhouse gas emissions
·
help
meet or exceed Canada’s Paris Agreement commitments
Federally, the $2 billion Low Carbon Economy Fund (LCEF) is an
important part of the Pan-Canadian Framework on Clean Growth and Climate Change
(the Framework).
The Fund supports the Framework by leveraging
investments in projects that will:
·
generate clean growth
·
reduce greenhouse gas
emissions
·
help meet or exceed
Canada's Paris Agreement commitments
The Fund is helping to:
·
create jobs for
Canadians for years to come
·
deliver clean, sustained
growth
·
support innovation
·
reduce energy bills
The Fund has two parts:
·
Low Carbon Economy
Leadership Fund
·
Low Carbon Economy
Challenge
- Reduce your emissions on-site by changing processes/practices.
- This will reduce emissions
but can be more costly.
Any of these options includes a cost, that will certainly be passed along to the consumer. Carbon Units are a new and prosperous investment. Not only for the future of our climate, but financially as part of an investment protfolio.
In the next of the series, we will take a closer look at Agriculture and Carbon.....