On Dec. 9, after much deliberation and political theatre, the federal government, eight provinces and three territories signed the Pan-Canadian Framework on Clean Growth and Climate Change.

Saskatchewan and Manitoba were notably absent from the list of signatories.

But also absent was an explanation of just how and how much Canada will rely on emissions trading  — technically known as internationally transferred mitigation outcomes — to meet its 2030 target of cutting greenhouse gas emissions down to 524 megatonnes of carbon dioxide equivalent per year, a reduction of 30 per cent compared to 2005 emission levels.

In its framework Canada vaguely pledged to “continue to explore which types of tools related to the acquisition of internationally transferred mitigation outcomes may be beneficial to Canada.”

Yet Canada may be eyeing the offset tool as a fundamental part of achieving emissions reductions, especially if global resource prices rebound and the oilsands expand to production levels allowable under newly approved pipelines.

Simon Donner, climate scientist and assistant professor of geography at the University of British Columbia, says Canada was “definitely a leading part of the push to have a carbon trading market” included in the UN Paris Agreement, which aims to limit temperature increases to as close to 1.5 degrees Celsius as possible.

Dale Marshall, national program manager with Environmental Defence says emissions trading is “clearly something that’s being held up as not only an option but as a priority” for the Canadian government.

The new federal climate framework contains a gap, Marshall says, between expected emissions and climate targets.

“That gap can be filled by being more ambitious with regulations, it can be filled by ensuring the carbon price continues to rise…or it can be filled with the purchase of international credits.”

“The last option is certainly in the framework.”

However, emissions trading has developed a shoddy reputation over the years — which may account for the government’s decision to downplay the possibility of deploying it.

So, what exactly are emissions offsets or emissions trading schemes? How do they help reduce emissions? And what are the potential downsides?

How Does Emissions Trading Work?

If you’ve travelled on an airplane in recent years, you may have been invited to pay for offsets to mitigate the emissions associated with your flight. The money can be used to protect trees from deforestation, fund renewable power projects or cogeneration technology, or eliminate pollutants such as nitrous oxide and hydrofluorocarbon.

Governments have also participated in voluntary, one-time offsets, such as when the federal Conservatives spent $226,450 to make the 2010 Winter Olympics “carbon neutral.”

The purchase of offsets, whether personal, corporate or by government, basically amounts to a voluntary accountability mechanism.

An emissions trading scheme (ETS) is a different kind of beast, and one that arguably makes a bit more sense given there are now national climate commitments under the Paris Agreement that countries are expected to meet (as opposed to individuals who could ostensibly choose not to travel, for example).

Under a trading scheme, a jurisdiction can have an abatement opportunity “certified” by a governing body.

Investments in a wind farm or preservation of a peat forest designated for burning would be deemed equivalent to a certain number of tonnes of carbon dioxide equivalent. These tonnes are then represented in the form of certificates.

Other jurisdictions can buy those certificates and the seller can use the profits to fund further emissions abatements.

The seller can’t count the sold emissions reduction towards its national commitments — but the buyer can.

So How Does this Help Climate Change Again?

Ultimately, it’s about rooting out the cheapest ways to prevent a tonne greenhouse gas destined for the atmosphere from getting there.

If a country or a province can purchase cheaper offsets elsewhere, an international emissions trading scheme opens up the market to those purchases.

For instance, Ontario and Quebec are in the process of establishing cap-and-trade schemes that will link their emissions reduction efforts to inexpensive carbon offsets in California via the Western Climate Initiative.

Blake Shaffer, doctoral student at the University of Calgary with an expertise in energy economics, says it makes sense for provinces to seek out the least expensive carbon abatement opportunities.

He points to a recent study that found Ontario would require a $157/tonne carbon tax if it tried to achieve its emissions reduction target domestically, yet could achieve those same reductions by purchasing much cheaper offsets in California.

Shaffer says that means Ontario will get an equal amount of emissions reductions for a cheaper price. That same principle applies internationally.

“International offsets are an intriguing solution because in the end, a tonne is a tonne is a tonne,” he says.

“If a country like Indonesia has reduction opportunities for less than a dollar per tonne, it’s a fair question as to why we’re paying $50/tonne in Canada.”

The cost savings are potentially very large, he says, noting that if Canada is short 100 Mt in 2030, the difference between abating between $50/tonne or $10/tonne on international markets is $4 billion a year in savings (and there’s a likelihood Canada’s carbon price could be higher by then).

Shaffer also notes there are more emissions coming from Indonesia’s peat fires in one year than all of Canada so “there’s really big-sized potential” for reductions.

Have Emissions Offsets Been Used Before?

Emission offsets have been used before — with seriously mixed results.

Donner says that although emissions offsets had been discussed since the early 1990s, it was under the Kyoto Protocol — with its binding emissions limits that entered into force in 2005 — that the idea really gained steam.

“It’s not a new idea, “ Donner says. “And there are mechanisms in place, like Kyoto. Under previous governments, under the Chretien government and then the Harper government, when we were part of the Kyoto Protocol it was assumed for a long time that the only way we could meet our targets was to purchase offsets on a trading market.”

It’s those binding limits that really give rise to market approaches. If a nation or province isn’t close to meeting its own targets, the option exists to buy your way to the finish line.

The Kyoto Protocol spawned the European Union Emissions Trading System, the largest of its kind in the world. The system had certain “flexibility mechanisms” built into it to help countries purchase different kinds of offsets to meet their targets.

But the system was plagued with problems, like the so-called Clean Development Mechanism which has been accused of inefficiency, the undermining of Indigenous rights and fraud.

Donner says a major controversy under the mechanism involved companies purposely creating hydrofluorocarbon and other human-made gases only to destroy them for money.

In a similar vein, the whole trading system was marred by major issues such as a massive oversupply of allowances on the market and huge price spikes.

In 2015, it was found that the Joint Implementation scheme created in Russia and Ukraine following Kyoto led to “significant criminal activity” and the release of 600 million tonnes of emissions that should have been abated.

Many smaller offset initiatives have hit similar pitfalls.

In February 2013, it was found that many public institutions in B.C. had been paying $25/tonne for certificates only worth between $9/tonne to $19/tonne; later that same month, conflict flared up “over the appropriateness of counting credits in [Great Bear Rainforest] where it was understood that large swaths of land would be protected anyway.”

Indigenous groups have also voiced opposition to emissions offsets, due to the historic displacement of communities for privatization and commodification of nature into property.

The #Carbon Offset Question: Will Canada Buy its Way to the #Climate Finish Line? https://t.co/L2p32ArBS9 #cdnpoli #emissions

— DeSmog Canada (@DeSmogCanada) December 13, 2016

So Why Are We Still Considering Emission Offsets?

The UN Paris climate conference changed everything.

Specifically, Article 6 of the Paris Agreement changed everything, allowing for the use of emission offsets to achieve national targets.

Former CEO of the International Emissions Trading Association, Andrei Marcu, called its unlikely inclusion a “major success and minor miracle.”

The recent UN climate summit in Marrakech expanded on that opportunity, effectively making decisions about the process for making the decisions about implementing it (that’s international geopolitical bureaucracy for you).

Marshall, who attended the climate talks in Marrakech as part of the Canadian delegation said the emissions trading scheme under Article 6 is undetermined as of yet.

“What we don’t have all the information on is how Article 6 will be articulated [in the Paris Agreement]. We still have two more years of negotiations to determine what the market mechanisms are and what the non-market mechanisms are as part of Article 6,” he says.

“Those will also determine to what extent Canada can rely on [emissions trading] as an option.”

Despite uncertainties, Canada was eager to have the option included in the agreement. Canada’s climate and environment minister Catherine McKenna chaired the negotiations on Article 6 in Paris and Canada’s senior negotiators described the element as “very dear” to them, Marshall says.

Emissions trading is expected to play an important and positive role in the way the Paris Agreement influences international climate policy.

So why such optimism?

For one, unlike with Kyoto, China is a full participant in the Paris Agreement. Shaffer suggests the momentum from its inclusion is resulting in an acknowledgment that global integrated action is cheaper than individual unilateral action.

Having China on board increases the potential of eventually equalizing abatement opportunities across the globe.

Amin Asadollahi, lead on climate change mitigation for North America at the International Institute for Sustainable Development, says the Paris Agreement specifically called for a detailed measurement, reporting and verification process.

While such a process has yet to be developed at the international level, some more localized systems, like the one serving the Western Climate Initiative, could serve as models.

Donner is also confident that we won’t see a repeat of previous problems with emission offsets.

Canada, he adds, pushed for guaranteed accounting to ensure incremental reductions that wouldn’t otherwise be performed and avoids double counting (in which both parties, buyers and sellers, take credit for emissions reductions).

“The good news is that by making mistakes in the past, the world can maybe figure out a better system this time,” he says.

Downsides of Emissions Trading

Of course, there are potential downsides associated with an international emissions trading scheme.

George Hoberg, environmental policy professor at the University of British Columbia, worries an over-reliance on offset measures could draw down ambitious climate leadership.

“Sharing technology and climate financing are also important indications of leadership, but only if they are a supplement to, not a substitute for, meeting domestic emission reduction obligations internally,” Hoberg says.

Asadollahi agrees: “Longer term, if you just rely on that and your emissions continue to go up, you’re not preparing your economy for this changing world.”

Marshall adds it is still important to focus on the hardline domestic policies and sectors that influence Canada’s emissions.

“I think the priority for those who want to see as much domestic action as possible is to continue to push for more ambitious emission reductions at home and for Article 6 to be relied on only to get Canada beyond its 2030 target, which we know is a weak target,” he says.

Critics also worry emissions trading could potentially be used to cover poor policymaking at the expense of public coffers.

Shaffer notes that offsets result in capital outflow — money leaving jurisdictions for specific reduction targets — unlike a carbon tax which results in a higher per-tonne price retained in the jurisdiction for possible investments in renewables, energy efficiency measures, rebates or tax cuts (that very debate surfaced at the Pan-Canadian Framework negotiations).

He says that requires governments to compare the trade-offs between a lower price per tonne and keeping all the money in the province.

Possibly the greatest danger of all — and this is something near impossible to assess as the federal government still hasn’t released the specific math of its 2030 plan — is the chance of overbetting on the availability of cheap offsets.

If many other countries manage to greatly reduce their emissions in the next decade-and-a-half due to strong climate policies and the falling price of renewables, the number of offsets on the global market may be fewer than expected.

That low supply of sellable certificates could drive up the price, the inverse of what happened under the European Union Emissions Trading System.

None of this takes into account the fact that the world’s combined national climate commitments don’t result in enough emissions reductions to stay within 1.5 degrees Celsius of warming.

“There are real accounting challenges in doing this,” Donner acknowledges.

With files from Carol Linnitt.

Image: Emissions rise from a processing plant in the Alberta oilsands. Photo: Kris Krug/DeSmog

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

A new report recently released by InfluenceMap shows a number of oil and gas companies publicly throwing their support behind climate initiatives are simultaneously obstructing those same efforts through lobbying activities.

The report, Big Oil and the Obstruction of Climate Regulations, comes on the heels of the Oil and Gas Climate Initiative, a list of climate measures released by the CEOs of 10 major oil and gas companies including BP, Shell, Statoil and Total.

According to InfluenceMap the initiative is an attempt by leading energy companies to “improve their image in the face of longstanding criticism of their business practices ahead of UN COP 21 climate talks in Paris.”

“The big European companies behind the OGCI…will come under ever greater scrutiny, as the distance between the companies’ professed positions and the realities of the lobbying actions of their trade bodies grows ever starker,” InfluenceMap stated in a press release.

The group’s analysis shows a major disconnect between climate rhetoric and action among three key policy strands: carbon tax, emissions trading and greenhouse has emissions regulations.

The findings show companies like Shell and Total publicly support carbon pricing while at the same time support trade organizations that systematically obstruct the legislation’s implementation.

Oil majors BP, Chevron and Exxon also support these lobby groups but spend less time publicly supporting a price on carbon.  

Dylan Tanner, executive director of InfluenceMap, said industry is becoming more cautious of public oversight and as a result, has become subtler with its efforts to subvert climate progress. 

“Companies like Shell appear to have shifted their direct opposition to climate legislation to certain key trade associations in the wake of increasing scrutiny,” Tanner said.

“Investors and engagers need to be aware that these powerful energy and chemicals-sector trade bodies are financed by, and act on the instruction of, their key members and should thus be regarded as extensions of such corporate-member activity and positions."

The report shows Shell’s official messaging is wildly inconsistent with the positions of its trade associations.

Shell, for example, states on its website, “we support an international framework that puts a price on CO2.” However, green taxation working group BusinessEurope warned against such measures, suggesting they could threaten the “international competitiveness of EU industry.”

Shell executive An Theeuwes is chair of BusinessEurope's Green Taxation Working Group.*

Excerpt from InfluenceMap report shows disconnect between Shell's corporate statements and those of trade organizations supported by Shell.

Shell is also on the board of a powerful chemicals trade body in Europe, the CEFIC, that lobbied aggressively against the European Emissions Trading Scheme.

Shell is also a member of the American Petroleum Institute and the Canadian Association of Petroleum Producers, North America's two most powerful industry lobby groups actively involved in opposing climate legislation. API's CEO recently criticized the UN climate talks as driven by a “narrow political ideology” and CAPP has previously disregarded opposition to the Alberta oilsands as merely "ideological" while arguing against new emissions standards. 

"If oil and gas companies calling for a price on carbon want to be taken seriously it is imperative that they commit both to calling on governments to implement such a policy and at the same time ensuring that all their lobbying is 100 per cent consistent with this objective,” Anthony Hobley, CEO of Carbon Tracker, said.  

“This is a strong line to take that has to be held accountable by investors, shareholders, governments and the public."

Carbon Tracker recently released a report that finds energy companies rely too heavily on industry scenarios that project high fossil fuel consumption in the future. The analysis shows industry uses high demand assumptions “to justify new and costly capital investment to shareholders.”

Companies that are inconsistent in what they say publicly and do behind the scenes don’t deserve to be taken seriously, Hobley said.

This kind of disingenuous activity “should be seen for what it is,” he said: “a cynical attempt to manipulate public opinion and create the perception amongst shareholders that the company is taking the issue of climate change seriously."

* This article was updated to reflect An Theeuwes' position as chair of BusinessEurope's Green Taxation Working Group.

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This week, Natural Resources Canada released a major report on climate change and its potential impacts in Canada. The report is novel-thick, the first significant NRCan missive on climate change since 2008, and it rattles off a list of near-future worries that will be familiar to anyone watching climate news closely — heavier rains, more extreme weather events, rising sea levels and acidifying oceans.

You can be forgiven if this is the first you heard of it, since the report was published without so much as a press release. I can only assume this is because the report represents a straightforward, data-driven, thoughtful analysis of the status of the planet’s climate and the likely impact of a changing climate on Canada’s environment, economy and society. And this kind of serious talk is just not how you talk about climate change in Ottawa these days.

I speak often to a wide range of Canadian audiences – from conventional and renewable energy professionals to academic crowds to municipal officials – about the status of the green economy’s vanguard, much of which is situated in western Europe. And I frequently encounter some variation on the same question: Why has Canada lagged so far behind in building a low-carbon society? There’s no single answer, but when I’m in need of a shorthand, I say that we’ve failed for the most part to develop and maintain a serious public conversation about climate change. We talk about climate change – a ubiquitous, universal problem of epochal scale – as something distant in time and space, self-contained and inconsequential, unworthy of intense and sustained scrutiny. Sometimes, our government doesn’t even tell the public when it has issued a major report on the subject.

Another textbook example of Canada’s stunted climate conversation transpired just days before the NRCan study’s launch, when Australian Prime Minister Tony Abbott paid a visit to Stephen Harper in Ottawa. It was a perfunctory state visit for the most part. Harper and Abbott had no big announcements to make, no agreements to sign or policies to peddle. There was a photo op, then a press conference at which a joint statement was delivered. The media, in Harper’s preferred style, were strictly limited to four questions, two from the Aussies and two from the Canadians. Later in the evening, there was a formal dinner, which the Aussie press corps didn’t bother sticking around for. As Colin Horgan put it in a Guardian post-mortem, the whole thing was “a lesson from political message makers on how to create nothing out of something.”

And yet there was some news generated by this Seinfeldian summit. It emerged when one of the Australian reporters who’d been granted the rare privilege of a question asked about Barack Obama’s recently unveiled climate plan. Abbott and Harper, who take evident pride in being two of the world’s least enthusiastic climate change warriors, used the question as an opportunity to lecture the rest of the world on its irrationality and hypocrisy regarding the climate file.

A shrug and a sneer at climate change

The full responses of the respective prime ministers to this question are in this post from Mike De Souza if you’d like to read the whole thing. The takeaway was a two-parter, a shrug and a sneer at taking action on climate change. Abbott handled the shrug. “It’s not the only, or even the most important problem that the world faces,” he said. Then he aimed his rhetorical sneer at do-gooder wastrels like the ones who’d passed a carbon tax in Australia. “We shouldn’t clobber the economy and that’s why I’ve always been against a carbon tax or an emissions trading scheme because it harms our economy, without necessarily helping the environment.”

Harper, not to be outdone, switched into the smug lecturing mode that has become his default approach to international policy discussions of this sort. “No matter what they say, no country is going to take actions that are going to deliberately destroy jobs and growth in their country. We are just a little more frank about that.” He also indulged in a dusty old NDP-bashing talking point, thanking Abbott for cutting taxes, “most notably the job-killing carbon tax.”

A shrug – climate change? No big deal, guys – and then a sneer at treehugging lefties who’d rather have us wreck the economy to do barely anything at all about climate change anyway. The daily press dutifully reported on the limited story they’d been given, the CBC explaining that both PMs “took a hard line” on climate change and the Globe & Mail noting the “unapologetic tone” both shared on the subject. The Globe story placed the exchange in the context of the forthcoming Northern Gateway pipeline decision, while the Ottawa Citizen filled out its story with a bit of background on Harper’s relationship with previous Australian leaders.

All in all, though, nothing much to see here. Move along.

But let’s be just a little more frank, shall we, about what actually transpired in this summit about nothing. The leaders of two G7 countries met in the wake of a major climate plan rollout by the United States – a policy package that appears to be the signature initiative of the president’s second term – and just ahead of a G20 summit in Australia at which one of them (Abbott) is doing everything he can to keep climate change off the agenda. Both of them glibly dismissed the very notion of taking meaningful action on an issue that the other of them (Harper) once called “perhaps the biggest threat to confront the future of humanity today.”

Reporters transcribe glib comments … and that's about it

And Canada’s mainstream press, conditioned to ignore that which official Ottawa shrugs at, filed the most rote and routine of stories. They transcribed the glib comments, padded them with a bit of vaguely relevant context. And, like the hapless stormtrooper convinced by Obi-Wan’s dismissive Jedi hand wave that these aren’t the droids he’s looking for, they moved along.

Try to imagine this response in another context. Let’s say Abbott and Harper were discussing national defence and the global security situation. Someone asks about the Middle East, the Syrian civil war and the rise of ISIS. Abbott says really it’s all been overblown, nothing to worry about. Harper says devoting government resources to something as trivial as the conquest of Iraq by jihadists would get in the way of higher priorities, then takes an offhand dig at Trudeau.

In this context, is it plausible that any reporter would file a story with no contextual detail at all about, for example, the actual situation on the ground in Iraq? Would there be barely a word about previous policy positions on the Middle East or the strategic importance of the region or the rather shockingly indifferent tone being taken regarding such a grave crisis? Would the coverage marvel at what a non-event this was? Of course not. War is serious business. Global security issues are always a top priority.

But climate change? ¯_(ツ)_/¯

Consider each PM’s soundbite comment on the subject, the ones that marked off that “hard line” and struck such an “unapologetic tone.”  Abbott: “We shouldn’t clobber the economy.” Harper: “No country is going to take actions that are going to deliberately destroy jobs and growth.” Both of them are referring to a carbon tax. The one Australia has, which Abbott is dead-set on repealing (though his government hasn’t yet, despite Harper’s suggestion otherwise, which not a single report on the summit bothered to correct). And the one Harper wields as a Question Period bludgeon, that “job-killing” threat which is just one reason why only his government should be trusted with the keys to the treasury.

Here's a thought: how about verifying climate change claims?

In the midst of this non-story, how is it that not one reporter thought to verify these claims? Given that both PMs spoke explicitly about carbon taxes, why didn’t reporters fill out their stories with detail on what carbon taxes are and what they do? Does a carbon tax actually clobber the economy and destroy jobs and growth? Australia’s economy has operated under a carbon tax for nearly two years. British Columbia’s had one for three times that long. Do either of these economies resemble a punchdrunk boxer in the late rounds of an epic beating?

Well, actually, Australia’s GDP has grown by three per cent or so in 2012 and 2013. Electricity prices are up a bit, but the carbon tax is not the sole cause of that. And at the same time, Australia saw its biggest drop in greenhouse gas emissions in 24 years, refuting Abbott’s claim that such policies don’t help. Similarly, B.C.’s carbon tax has utterly failed to kill jobs or clobber economic growth. Again, fuel prices are up a bit, but B.C. consumers have responded, as expected, by consuming less. And this week a new World Bank report actually indicated seriously tackling climate change could increase GDP.

But hey, maybe carbon taxes are too esoteric, too wonky, too “inside baseball.” What about at least some discussion of the state of the planet and what climate change is doing to it and what the costs might be – today and in the future – if we continue to shrug at the problem and accept as fact the unproven argument that dealing with it would wreck the economy?

With the exception of Aaron Wherry at Maclean’s, who at least quoted an NDP MP talking about current climate change costs, the Canadian press was again mostly silent. Or what about that perennial Hill reporter’s favourite – the reading of the Harper tea leaves? To go from claiming (falsely) that the government will meet its climate change targets to saying they don’t really matter represents a significant shift in rhetoric if not necessarily in policy. Wouldn’t that warrant a bit more substantial discussion? Evidently not.

This is, after all, not the only or even the most important problem the world faces. Why bother reporting on it like it matters at all?

Image Credit: RHL images via Flickr.

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