Credits where credit is due: LNG exports and carbon credits

From the MacDonald Laurier Institute

By Jerome Gessaroli

Canada should announce its intent to use Article 6 as a tool to help meet its emissions reduction targets

In this new paper, LNG exports and carbon credits: Credits where credit is due, MLI Senior Fellow Jerome Gessaroli makes the case that Canada can earn ITMOs ( Internationally Transferable Mitigation Outcomes) based on exports of British Columbia-sourced Liquified Natural Gas (LNG). With the potential to significantly lower global carbon emissions and displace coal power in the Asia-Pacific region, such a strategic move by Canada to harness BC’s LNG offers a transformative solution.

Executive Summary

Under the basic current climate accounting rules to which Canada and all other UNFCCC parties have agreed, countries are responsible for reducing GHG emissions within their own national borders. If a country supported a project in another country, it would receive zero credit, no matter what help it may have provided. Therefore, countries have a big incentive to fund projects only within their own borders to help meet their own national carbon reduction goals. That is unfortunate for the planet’s emission reduction efforts. The focus on emission targets within national borders is a shortfall in the nationally based climate accounting system.

To address this shortcoming, the UNFCCC has adopted a framework covered in Article 6 of the Paris Agreement enabling countries to cooperate and share emission reductions. This framework allows carbon credits (known as internationally transferable mitigation outcomes, or ITMOs) to be transferred from the country where the reductions occurred to the country that helped undertake the emissions reduction project.

Sharing emissions reductions through Article 6 is possible when liquefied natural gas (LNG) replaces coal in power generation. This substitution is especially important because coal-fired power plants are expected to produce large amounts of the world’s energy (and GHGs) over the next several decades, even though coal emits much more carbon than other primary fuel sources. Even more troublesome is that new coal plants are still being built in significant numbers. Those new plants alone are expected to emit over 1,415 Mt CO2e (mega tonnes of CO2 equivalent) per year, which dwarfs Canada’s national targeted reductions of approximately 310 Mt CO2e per year by 2030.

Canada, meanwhile, is preparing to become a supplier of LNG. New LNG projects within British Columbia are amongst the least carbon-intensive sources of LNG in the world. BC’s LNG exports could lower global carbon emissions by displacing coal power, particularly in the Asia-Pacific region. Developing markets in Asia would welcome rapidly rising LNG imports. Realistically, BC LNG should be fully used as a substitute fuel to mitigate the carbon emissions impact of existing coal-based power plants, especially those currently used for heating.

While the concept of Article 6, where carbon credits are shared for collaboratively developed projects, is straightforward, the criteria and rules for implementing it are complex. This paper makes the case for how Canada can earn ITMOs based on exports of British Columbia-sourced LNG. An important criterion for making projects ITMO eligible is that the project would not have gone ahead without carbon credits being available. This suggests deals should be structured involving LNG exports along with some other value-added Canadian participation that assists a developing country in switching from coal to LNG as a fuel source. The ITMOs Canada receives could offset any incremental costs we would incur.

If Article 6 is used, the assertion that British Columbia’s pursuit of LNG production would prevent the province from meeting its emission reduction becomes inaccurate. Just over half of LNG Canada’s Phase 1 production capacity in British Columbia would result in approximately 1.2 Mt CO2e emissions annually. Using the same production capacity to replace coal for power generation in Asia has the potential to significantly reduce emissions, ranging from 14.9 to 35.2 Mt CO2e per year. Such outcomes underscore the importance of international collaborative efforts.

Canada should announce its intent to use Article 6 as a tool to help meet its emissions reduction targets. The federal government should then work with industry to identify candidates for bilateral agreements. Common methodologies for measuring, tracking, and verifying carbon mitigation outcomes would all need to be developed as would a registry for tracking and transferring ITMOs. These are complex issues, but we can learn from other countries that have already established processes for managing such projects.

Jerome Gessaroli is a senior fellow with the Macdonald-Laurier Institute and is the project lead for the British Columbia Institute of Technology’s Sound Economic Policy Project. He writes on economic and environmental matters, from a market-based principles perspective.

PDF of paper

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Premier Danielle Smith In Washington for Trump Inauguration Promoting a New Era of Partnership with the U.S.

Published on January 19, 2025

Government of Alberta

Premier Smith at dinner with Florida Republican Senator Rick Scott. Facebook

Premier Danielle Smith will travel to Washington, D.C. to solidify Alberta as the answer to North American energy, food and data security during the week of President-elect Trump’s inauguration.

While in the U.S. capital from Jan. 18 to 23, Premier Smith will meet with key decision makers, governors, members of Congress and private sector leaders. Alberta’s on-the-ground presence will help build relationships and start critical conversations that will lay the groundwork for collaboration with the new U.S. administration and reap benefits for Albertans, Canadians and Americans.

Premier Smith will champion Alberta as the largest exporter of oil and gas to the U.S. and highlight the unprecedented opportunity that lies ahead for Alberta to work collaboratively with the new administration to develop secure supply chains and strengthen energy security for the U.S. and Canada. Alberta’s approximately USD $100 billion in energy exports to the U.S. are upgraded into USD $300 billion in value-added products by American workers at refineries in Ohio, Indiana, Michigan and other states, and then sold by American companies all over the world.

“Given the serious threats of tariffs, it is imperative that we do everything we can to engage directly with the incoming administration, members of Congress and key officials to emphasize Alberta’s critical role in North American energy security and economic prosperity. In all my meetings and events in Washington, D.C. I will work to ensure Alberta is recognized as a partner of choice for establishing North American energy security, to reinforce our century-long friendship and to further solidify our trade relationship that greatly benefits both Americans and Canadians.”

Danielle Smith, Premier

This visit will build on the Premier’s previous discussions with the President-elect, key members of his cabinet and other elected officials. With the ongoing threat of tariffs on all Canadian products, including those from Alberta’s leading industries, meeting with officials face-to-face is crucial. This work is a continuation of the efforts that were discussed by all Premiers to do all they could to build bridges with the U.S.

Conversations will also focus on highlighting the deep economic ties that underpin our economies and how they contribute to creating jobs and prosperity on both sides of the border in industries like energy, agriculture, forestry, manufacturing and technology.

Premier Smith will travel with five staff members. Mission expenses will be posted on the travel and expense disclosure page.

Quick facts

The U.S. is Alberta’s largest trading partner and Alberta is the second-largest provincial exporter to the U.S.
In 2023, Alberta’s exports to the U.S. totalled USD $115.58 billion, accounting for about 90 per cent of total provincial exports in 2023.
- Energy products accounted for about USD $94.4 billion, or 82 per cent, of the province’s exports to the U.S.
- Other important export sectors included plastics, forestry, meat and machinery.
Alberta’s government has also launched the Alberta is the Answer campaign, a targeted advertisement campaign focused on reaching key decision makers in the U.S. and amplifying Alberta’s message on the energy partnership it has with the U.S. and how this partnership can grow.

Itinerary for Premier Smith*

Jan. 18	Travel to Washington, D.C. Engage with key U.S. decision makers at an event hosted by Florida.
Jan. 19	Meet with energy sector leaders. Engage with key U.S. decision makers at an event hosted by the Texas State Society.
Jan. 20	Attend the presidential inauguration on Capitol Hill. Participate in the Inauguration Day event at the Canadian Embassy. Engage with key U.S. decision makers and government officials at a Republican Governors’ Association event and evening reception.
Jan. 21	Meetings with U.S. governors and industry leaders. Participate in a round table discussion with thought leaders.
Jan. 22	Meetings with key U.S. decision makers and elected officials. Participate in a networking event focused on solutions for responsible energy development.
Jan. 23	Travel to Alberta.

Why Alberta?

Alberta is one of the most reliable and secure energy partners for the U.S.

Alberta and the U.S. share the same values – and a border. Alberta is the friendly, freedom-loving democracy right next door.

Alberta has the fourth largest oil reserves on earth, and significant natural gas resources. Alberta already accounts for 56% of all oil imports to the U.S. – twice as much as Mexico, Saudi Arabia and Iraq combined – which is helping to drive job creation and prosperity on both sides of the border. The U.S. must import crude oil in order to refine it and produce light oil, which they export around the world, and Alberta believes that we are a far better trading partner than Iran, Iraq, or Venezuela.

Alberta is also the largest producer of natural gas in Canada and remains positioned to support the U.S. in filling their domestic supply gaps, currently accounting for nearly 60% of U.S. total annual natural gas imports. The reliability and security of those imports cannot be understated.

Furthermore, Alberta has a stronger environmental record, stronger democratic institutions and stronger human rights standards than other energy producers.

This is a win-win relationship. Alberta’s approximately U.S. $100 billion in energy exports to the U.S. is upgraded into U.S. $300 billion in value-added products by American workers at refineries in Ohio, Indiana, Michigan, and other states, and then sold by American companies all over the world.

More than 450,000 kilometres of pipelines already link Canada and the U.S. – enough to circle the Earth 11 times. The province also has ambitions to double its oil production by 2050, and increase its pipeline capacity significantly. Enabling Alberta to export even more crude oil to the U.S. This will help the U.S. achieve global energy dominance and increase energy affordability for Americans.

Alberta is a global leader in responsible oil and gas production

Alberta is the top foreign supplier of energy products to the United States. Alberta has been a global leader in responsible energy production for decades, leveraging cutting-edge technologies that allow the province to continue increasing production while protecting our air, water, and land for generations to come.

Alberta is unapologetic in its goal to increase oil and gas production to meet the world’s basic needs and maintain the quality of life we all enjoy in North America. The province is doing so responsibly and will continue to lead the way with new technologies that support this ambition.

Reliable Alberta energy will fuel the technologies of the future

As the world becomes increasingly electrified, the need for reliable energy is growing and Alberta has the resources to meet that demand.

The province is home to world-class energy industry leaders with the expertise developers are looking for to find innovative solutions to meet their energy needs. Coupled with Alberta’s competitive power market structure, natural incentives for cost-savings and a government committed to reducing red tape, Alberta is a premier destination for AI data centres.

Alberta’s AI data centre strategy arose from a pressing need for AI data centres in North America – a need that is in fact global. With the rapid growth of AI and machine learning, global demand for data centre capacity is expected to triple by 2031.

Alberta is a trusted and safe partner of the U.S. that has the capacity and resources to support these data centres and ensure that U.S. companies remain on the forefront of AI technology and that the U.S. maintains its technology dominance.

Business

Our energy policies have made us more vulnerable to Trump’s tariffs

Published on January 19, 2025

Todayville

From the Fraser Institute

By Elmira Aliakbari and Jason Clemens

As Donald Trump, who will be sworn in as president on Monday, threatens to impose tariffs on Canadian exports including oil and natural gas, the calls from some Canadian politicians and analysts for greater energy trade diversification grow louder. However, these calls highlight a hard truth—Canada has repeatedly foregone opportunities to reduce our dependence on the United States by cancelling already approved pipelines and failing to approve new pipeline and LNG projects that could have increased our access to global markets.

The U.S. is not just Canada’s largest energy customer—it’s nearly our only customer. In 2023, 97 per cent of crude oil exports and virtually all natural gas exports were sent south of the border. This dependence on the U.S. for exports leaves Canadian producers and the Canadian economy exposed to policy shifts in Washington and even state capitals.

Consider Energy East, a pipeline proposed by TransCanada (now TC Energy) to transport oil from Alberta and Saskatchewan to refineries and export terminals in Atlantic Canada. The pipeline would have reduced Atlantic Canada’s reliance on imported oil and opened export markets for Canadian oil to Europe.

However, in 2017 the Trudeau government introduced new criteria for evaluating and approving major pipeline projects, and for the first time assessments included not only the greenhouse gas (GHG) emissions from constructing the pipeline but also emissions from producing and using the oil it would transport. Later that year, TransCanada suspended its application for the project, effectively cancelling it. The CEO of TransCanada blamed “changed circumstances” but many observers recognized it was a combination of the new regulations and opposition from Quebec, particularly the City of Montreal. Consequently, the refineries in Atlantic Canada continue to rely on imported oil.

A year earlier in 2016, the Trudeau government cancelled the already-approved Northern Gateway pipeline, which would have connected Alberta oil production with the west coast and created significant export opportunities to Asian markets.

Canada is even more dependent on the U.S. for natural gas exports than oil exports. In 2023, Canada exported approximately 84 billion cubic metres of natural gas—all to the U.S.—via 39 pipelines, again leaving producers in Canada vulnerable to U.S. policy changes.

Meanwhile, Canada currently has no operational infrastructure for exporting liquified natural gas (LNG). While LNG Canada, the country’s first LNG export terminal, is expected to become operational this year in British Columbia, it’s long overdue.

Indeed, several energy companies have cancelled or delayed high-profile LNG projects in Canada due largely to onerous regulations that make approvals uncertain or even unlikely, including the $36 billion Pacific NorthWest LNG project in 2017, the $9 billion Énergie Saguenay LNG project in 2020, Kitimat LNG in 2021 and East Coast Canada LNG in 2023.

This all adds up to a missed opportunity, as global demand for LNG increases. If governments in Canada allowed or even facilitated more development of LNG facilities, Canadian companies could supply high-demand regions such as Asia and Europe. Indeed, during Europe’s 2022 energy crisis, Germany and several other countries turned to Canada for reliable LNG supply, but the Trudeau government rejected the requests.

The contrast with the U.S. is stark. Since 2011, 18 LNG export facilities have been proposed in Canada but only one—LNG Canada Phase 1—is nearing completion, more than 12 years after it was announced. Meanwhile, as of January 2025, the U.S. has built eight LNG export terminals and approved 20 more, securing its position as a global LNG leader.

Years of inaction and regulatory roadblocks have left Canadian energy producers overly dependent on a single trading partner and vulnerable to shifting U.S. policies. The looming threat of tariffs should be a wake-up call. To secure its energy future, Canada must address the regulatory barriers that have long hindered progress and prioritize the development of infrastructure to connect our energy resources to global markets.