Energy
Why Canada should get carbon credits for LNG exports
From the MacDonald Laurier Institute
By Jerome Gessaroli
Generating carbon credits from LNG exports is potentially a cost-effective way to reduce GHGs globally while helping to meet our carbon reduction goals
It stands to reason that Canada should get carbon credits for replacing dirty coal-fired energy sources in Asia with our cleaner natural gas, preventing the release of many megatonnes of greenhouse gas emissions. But as the issue currently stands, we won’t.
However, there’s hope for reason.
A recent paper I wrote for the Macdonald-Laurier Institute sheds light on the confusion surrounding this matter. Based on the 2015 Paris Agreement, specifically Article 6, and the subsequently developed guidelines for the sharing of carbon reduction credits, liquid natural gas exports should be eligible to generate such credits for Canada — just not in a way envisioned by provincial leaders.
Former B.C. premier Christy Clark and successive premiers have argued since 2013 that LNG exports alone should be counted toward carbon credits for Canada and its provinces. Researchers estimate that if Asian countries replace coal with natural gas in their power plants, emissions would fall by 34 to 62 per cent.
However, each time this argument resurfaces, it faces criticism from various quarters.
The confusion over sharing carbon credits arises from the disconnect between the idea’s simplicity and its complex implementation.
Carbon credit eligibility is based on the principle that only emission reduction projects that would not have proceeded without access to carbon credits meet a so-called “additionality” criterion. While there are other criteria, the additionality criterion is the heart of credits sharing regime.
A straightforward LNG export contract with an Asian utility that substitutes gas for coal would probably not be eligible to generate any carbon credits for the Canadian side. While the deal does lower GHG emissions, those reductions are not “additional” and the deal would go ahead with or without the availability of emissions credits.
However, there is another scenario that would likely qualify to receive carbon credits. In this scenario, in addition to selling LNG, the Canadian company helps the Asian utility convert its coal-fuelled plant to a natural gas plant. In this case, the utility’s motivation is to avoid prematurely shuttering its power plant and losing its investment due to stricter emission standards.
On the Canadian side, support may involve providing technical services, financing or other assistance. While more costly for Canada, those extra expenses could be more than offset by the value of carbon credits transferred by the Asian side. Canada would win by accruing revenue from the sale of LNG, providing additional Canadian-based services, and receiving valuable carbon credits to help meet our emissions targets. This deal is “additional” – its feasibility is contingent on its eligibility for carbon credits.
Critics warn that selling LNG abroad will “lock in” fossil fuel use and delay the transition to renewables. The reality is that the average age of Asian coal-fuelled power plants is only 13 years (with a lifespan of up to 40 years) and that over 1,000 new coal plants have been announced, permitted or are currently under construction.
These are the facts, whether we like them or not. This reminds me of the quote often attributed to John Maynard Keynes, “As the facts change, I change my mind. What do you do, sir?” What we can do is assist in switching some of these plants from burning coal to LNG, which will substantially reduce GHG emissions over the short and medium term; not to mention help energy workers keep their jobs.
Critics also assert that producing LNG in British Columbia creates emissions which could prevent the province from meeting its own emission reduction targets. Yet studies estimate that using just over half of LNG Canada’s annual Phase 1 production capacity to replace coal could reduce international GHG emissions by 14 to 34 Mt while increasing yearly emissions in B.C. by less than two megatonnes.
Creating the infrastructure to transfer carbon credits under the Paris Agreement is a complex and relatively new endeavour. Earning carbon credits is also a non-trivial task. It will require the federal government to initiate bilateral agreements and negotiate common policies and practices with any partnering country for calculating, verifying, allocating and transferring credits. Alberta and B.C. are already co-operating.
Generating carbon credits from LNG exports is potentially a cost-effective way to reduce GHGs globally while helping to meet our carbon reduction goals.
Jerome Gessaroli is a senior fellow at the Macdonald-Laurier Institute and leads The Sound Economic Policy Project at the British Columbia Institute of Technology
Quick Hit:
President Trump on Monday warned oil producers not to raise prices in the wake of U.S. strikes on Iranian nuclear facilities, cautioning that a spike would benefit America’s enemies. “EVERYONE, KEEP OIL PRICES DOWN. I’M WATCHING!”
Key Details:
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Trump posted on Truth Social: “YOU’RE PLAYING RIGHT INTO THE HANDS OF THE ENEMY. DON’T DO IT!”
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Oil prices fell after the post, with Brent Crude and West Texas Intermediate both slipping by about one percent following earlier gains driven by Middle East tensions.
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In a follow-up message, Trump told the Department of Energy: “DRILL, BABY, DRILL!!! And I mean NOW!!!”
— Rapid Response 47 (@RapidResponse47) June 23, 2025
Diving Deeper:
President Donald Trump issued a blunt warning to oil producers Monday morning following a weekend of U.S. military action against Iran, urging them to keep prices under control amid rising geopolitical tensions. His message, posted on Truth Social, was clear and emphatic: “EVERYONE, KEEP OIL PRICES DOWN. I’M WATCHING! YOU’RE PLAYING RIGHT INTO THE HANDS OF THE ENEMY. DON’T DO IT!”
The timing of the post was significant. Over the weekend, U.S. forces struck three major Iranian nuclear facilities—Fordow, Natanz, and Isfahan—in a bold escalation that raised fears of a broader regional conflict and potential threats to global energy infrastructure. Initial market reactions were swift, with Brent Crude jumping over 5 percent and briefly breaking above $81 a barrel. West Texas Intermediate followed, climbing to its highest level since January.
However, after Trump’s post circulated Monday, both benchmarks began to pull back, each falling by about one percent. Traders appeared to interpret Trump’s comments as a call for restraint, especially as domestic producers weigh output decisions amid a softening price environment and a looser global supply picture.
While Trump didn’t name names, his message seemed clearly aimed at American oil companies, some of which have recently floated the possibility of scaling back production due to lower margins. Meanwhile, OPEC+ continues its efforts to bring previously curtailed output back online, further complicating the global supply-demand dynamic.
In a second post, Trump added: “To The Department of Energy: DRILL, BABY, DRILL!!! And I mean NOW!!!”
Despite the military flare-up, markets have largely stabilized, suggesting that investors are waiting to see how Iran will respond. Tehran’s parliament has called for the closure of the Strait of Hormuz, a critical chokepoint for global oil shipping, but such a move would require the approval of Iran’s Supreme National Security Council and Ayatollah Ali Khamenei.
For now, traders appear cautious but unconvinced that supply routes will be disrupted in the immediate term. Trump, however, has made it clear that if oil producers try to capitalize on the crisis by raising prices, he’ll be watching—and he won’t be quiet.
Business
The U.S. Strike in Iran-Insecurity About Global Oil Supply Suddenly Makes Canadian Oil Attractive
From Energy Now
By Maureen McCall
The U.S. strike on three nuclear sites in Iran is expected to rattle oil prices as prices change to include a higher geopolitical risk premium.
Anticipated price rises range from a likely rise of $3-5 per barrel forecast by Reuters to predictions of a “knee-jerk” reaction price spike with Brent crude, currently at $72.40, possibly rising to $120+ in a worst-case scenario, according to JPMorgan.
Whatever the choice of action Iran will take in response- it is creating fears of reprisals striking U.S. oil infrastructure. Impacts on the Strait of Hormuz are feared as a senior Iranian lawmaker was quoted on June 19th as saying that the country could shut the Strait of Hormuz as a way of hitting back against its enemies.
In a recent interview, ExxonMobil CEO Darren Woods said there is sufficient supply in the global oil market to withstand any supply disruption to Iranian exports.
“There’s enough spare capacity in the system today to accommodate any Iranian oil that comes off the market,” Woods told Fox News “The bigger issue will be if infrastructure for exports or the shipping past the Strait of Hormuz is impacted.”
The Strait of Hormuz is considered the world’s most important oil chokepoint, according to the Energy Information Administration (EIA). Iran voted late Sunday to shut down the Strait through which about 20% of the world’s daily oil supply flows. The resulting oil supply risk leaves countries contemplating their options as they look for more long-term capacity.
We could be facing a return to the identification of “Conflict Oil”, a term Ezra Levant first coined in his book “Ethical Oil: The Case for Canada’s Oil Sands” to describe oil-producing countries with dismal human rights records, such as Iran. Conflict oil would now signify oil sourced from areas of the world subject to political conflict, instability and supply disruption. Levant used the term originally to argue that Canadian Oil Sands production should be considered a more ethical alternative to oil from countries with oppressive regimes. However, the argument could now be made that oil supply and pricing from conflict-free countries like Canada would be more reliable. Canadian oil could come into focus as conflict oil once again becomes a concern.
Katarzyna (Kasha)Piquette, CEO, of Canadian Energy Ventures (CEV), an organization formed to connect Canada’s energy with Europe’s growing needs in the face of the Russian-Ukrainian conflict, foresees dramatic changes in global energy trade.
“The consequences of the US strike on Iran are a potential game-changer, not just in terms of pricing, but in how countries think about long-term energy security,” Piquette said. “In the short term, Canada can help stabilize supply to the U.S. and Europe as geopolitical risk premiums surge. But the long-term impact may be even more profound: countries in Asia are likely to deepen ties with stable, non-Middle East suppliers like Canada. This is an opportunity to position Canadian energy as a cornerstone of energy security in a more divided world, and we must act strategically to expand our infrastructure and secure that future.”
Piquette says CEV is hearing directly from buyers in Europe and Asia, at least half a dozen countries, who are urgently looking to secure long-term contracts with reliable, conflict-free suppliers.
“Canadian oil is back in focus, and not just for ethical reasons. With the Trans Mountain expansion now operational, we can access Asian markets directly through the BC coast, while the U.S. The Gulf Coast remains a viable path to Europe. Yes, transportation adds cost—but buyers today are willing to pay a premium for stability. This is Canada’s moment, but it requires Ottawa to deliver on its promises: we need regulatory certainty, investment in infrastructure, and export capacity that matches global demand.”
Maureen McCall is an energy professional who writes on issues affecting the energy industry.
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