Monday, June 27, 2022

The Canadian carbon offsets scheme explained

The Canadian government is introducing new legislation on carbon offsets, as part of its ongoing fight against carbon emissions and climate change, and it's complicated. The most recent episode of CBC'S What On Earth attempts to simplify, explain (and critique) it . The relevant section begins at minute 18:15 of the podcast audio, and ends at 26:30.

Industry has been given carbon intensity targets, but not all companies will be able to achieve these targets by changing their processes and actually emitting less carbon. So, as a workaround, companies can pay the federal government a fee, essentially a carbon tax, which it is hoped companies will be so averse to doing that they will renew their efforts to reduce their carbon footprint. So far, so straightforward. Not a perfect system, but certainly a step in the right direction.

Canadian companies can also now buy carbon offsets to "make up" for their continued carbon emissions. The changes are being introduced piecemeal, over a period of time, industry by industry. This month's new rules, for example, specifically target garbage landfills, which emit quantities of harmful methane. Some landfills already capture their methane emissions, but many don't. If these emitters can prove to the government that they are capturing or destroying greenhouse gases, then under the new rules they can earn an offset credit, which they can then sell to other companies that are not meeting their emissions targets. Other carbon reduction areas include planting trees, sequestering carbon in soil, direct air capture, etc.

The problem is that, while emissions can be measured, measuring and proving a REDUCTION in emissions is really hard. It can only be measured by comparing actually emissions with some hypothetical emissions that might have applied if the activity were not in force. 

The scheme also requires what is known as "additionality" - credit can only be earned for something that would not have been  done anyway, in the normal course of business. This is also hard to prove.

Also required is "permanence" - the offset can not be something that is capable of being reversed later, and, of course, it is really hard to guarantee how long a carbon reduction is going to remain in force. This is particularly an issue in the forestry sector, e.g. planted trees may later burn down, or be harvested, or be infected by an insect and die.

All of this is very much a carrot, rather than a stick, approach. It is intended, in the government's words, to provide "a market-based incentive to undertake innovative projects to reduce greenhouse gases". Arguably, direct regulation may be more effective, but the government is clearly trying to tread softly around industry and give them the chance (and the appropriate conditions, encouragement and regulatory environment) to do the right thing. Whether we have the time to take this approach is debatable. 

And, of course, the whole idea of carbon offsets is a tricky one anyway. Non-conforming wealthy companies can effectively just pay their way out of trouble, and can even increase their carbon emissions if they so choose. Arguably, offsets don't reduce emissions at all, they just balance them out between different companies and sectors. Can we afford the time to play around with this complicated stuff for so little benefit?

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