Canada: Canadian Carbon Politics Part Three: Canada After Paris

The conclusion of the Paris conference, which has resulted in what has been described as the world’s first comprehensive climate agreement (referred to often as the Paris Agreement) arguably marks the beginning of a global concerted action against climate change. International delegates from around 195 countries officially signed off on an agreement with an aim to keep the worldwide temperature increase well under the 2 degree Celsius threshold, surmised by some as a key limit necessary to avert disaster. The Paris Agreement also contains language which encourages member states to “pursue efforts” to limit the temperature increase to below 1.5 degrees Celsius, which has received support from scientists as the goal necessary to reduce many of the risks associated with climate change.

While the Paris Agreement contains no specific emission commitments, automatic sanctions or regulatory mechanisms to enforce compliance, it does require state parties to develop, file and adhere to their own emission schemes, which are defined in the Agreement as “Nationally Determined Contributions” or NDCs. Critics warn that the ambitious goals contained in the Agreement do not properly correlate with the individual NDCs made by each of the participating states, which, if left unaltered, would result in a global temperature increase well above the two degree limit. 

It has been argued that the power behind the Paris Agreement likely stems from its review and monitoring process, which requires the NDC of each state to undergo ongoing evaluation by a United Nation’s compliance committee and public reassessment every five years. Over each assessment period individual states must demonstrate “progression over time”, a mandate which requires them to publish and file successive NDCs, which, given the appropriate amount of public “naming and shaming”, aims to achieve the ambitious Paris Agreement goal of global carbon-neutrality sometime between 2050 and 2100.

The Paris Agreement also hopes to diminish the effects of climate change through adaptation and climate change resistance measures. In order to assist with this “Plan B” of sorts, the Paris Agreement encourages public and private funding to support enhanced climate change adaptation in developing countries. Such adaptation measures, which include funding for research and development of renewables and amounts to offset the cost of low-carbon technologies, are an important point of concern for developing nations.

Canada took an active role in the Paris discussions as the Liberal government aimed to further distinguish its carbon policy from the previous Conservative government. Canada’s Environment and Climate Change Minister Catherine McKenna voiced support for the lower 1.5 degree Celsius threshold and Canada has also promised up to $2.65 billion over five years for low-carbon technologies in developing countries, an amount which represents part of Canada’s contribution to the adaptation funding. Despite these promises, Canada remained committed to the original Conservative target of 30% below 2005 levels by 2030.

What is most interesting to us is what will likely follow the conference in Canada. The current state of Canadian carbon politics suggest that when the federal government meets with the provinces within the next 90 days to re-consider the country's emissions targets, it may be tempting to take advantage of this framework and work on an "adjustment" to the NDC previously filed by the Harper government.² The recent announcements from the new federal government and many of the provinces, including Alberta, Ontario and Manitoba, to move forward with material regulatory changes affecting carbon emissions, suggest that Canada considers the existing NDC to be a floor rather than a ceiling. Months of discussion will now inevitably follow as the federal and provincial governments attempt both to refine and possibly even reduce Canada's carbon emissions below the levels agreed to in Paris and then allocate the responsibility for achieving that target among the various provinces. 

The following table shows each province's carbon emissions as at the 2005 base year and projections for the 2020 target year under the current Copenhagen Accord. The table also shows our estimated 2030 targets for each province under the Paris Agreement (using a straight-forward 30% reduction from each province's 2005 emissions levels). While this is illustrative only and is not intended to be representative of the final allocation of Canada’s emissions reduction target, it is useful to illustrate the bargaining dynamics that will be on display during these up-coming federal/provincial negotiations.

Source: Environment Canada: Canada’s Emission Trends 2014

The level of emissions reductions necessary to meet the 2030 targets appears manageable in all provinces, with the exception of Alberta and Saskatchewan (which, on a per-capita basis, has emissions similar to that of Alberta). This result arises from the different circumstances that Alberta and Saskatchewan face, which were outlined in previous blog posts and recently identified and acknowledged by Alberta in its Climate Leadership Plan, where it expects its 2030 emissions to be approximately 270 Mt, or approximately unchanged from 2015.

The challenge for the forthcoming negotiations among the provinces and the federal government is that Alberta generates emissions at a level where it may be impracticable to reduce them sufficiently to meet the agreed national targets. The good news is that, with such high levels of emissions, even a modest carbon tax in Alberta, broadly applied, stands to raise a good deal of revenue. Alberta expects to generate between $3 billion and $5 billion per year, between 2018 and 2030, after the introduction of its carbon tax, and has said it intends to spend those revenues to promote renewables and/or low energy alternatives. This level of investment could conceivably be structured to acquire carbon credits or off-sets which could be sufficient, once netted against Alberta’s actual emissions, to achieve notional emissions reductions consistent with national goals, or at least to allow Alberta to come much closer.

Alberta’s difficult balancing exercise, between meeting broader carbon goals and maintaining the economic sustainability of a carbon hungry economy is a theme echoed in many different parts of the world and underlines the importance of efficient carbon pricing mechanisms for meeting the targets contained within the Paris Agreement. We expect that Canadian provincial governments, including in particular Alberta, may avail themselves of offsets and credits to meet some of the burden of the proposed targets.

While we anticipate a complex round of negotiations between the federal government and the provinces, the implementation of proven policy measures, such as carbon taxes in combination with offset credits, could lead to a principled and reasonable compromise which will potentially allow for Canada to meet its commitments under the Paris Agreement and beyond.

As a final word, we see the Paris Agreement as having implications more in the realm of moral suasion and reputation than hard legal obligations. If current indications hold, it may be that our federal government seeks to build on the favourable response it received from the delegates in Paris as it implements and promotes a national carbon strategy.

Footnote

The authors would like to thank Luke Sinclair, articling student at law, for his support and assistance with this blog submission.

2 Canadian carbon politics, carbon emissions and the like are discussed more fully in our November 26, 2015 blog post found http://www.canadianenergylaw.com/2015/12/articles/oil-and-gas/canadian-oil-and-gas-acquisition-and-finance-transactions-third-quarter-2015/

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