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
Energy
Ottawa’s plan to decarbonize Canada’s electricity by 2035 not feasible and would require equivalent of 23 Site C hydroelectric dams
From the Fraser Institute
By Elmira Aliakbari and Jock Finlayson
The federal government’s plan to make all electricity generation in Canada carbon-free by 2035 is impractical and highly unlikely, given physical, infrastructure, financial, and regulatory realities. So says a new study published today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.
“Canada’s federal government has set an ambitious, and, frankly, unrealistic target of achieving complete carbon-free electricity in ten years,” said Jock Finlayson, Fraser Institute senior fellow and co-author of Implications of Decarbonizing Canada’s Electricity Grid.
The study finds that in 2023, nearly 81 per cent of Canada’s electricity came from carbon-free energy sources, including hydro, nuclear, wind and solar. But to replace the remaining 19 per cent which uses fossil fuels, in the next 10 years, would require constructing the equivalent of:
• Approximately 23 large hydroelectric dams, similar in size to BC’s Site C, or 24 comparable to Newfoundland and Labrador’s Muskrat Falls, or;
• More than four nuclear power plants similar in size to Ontario’s Darlington power station, or 2.3 large scale nuclear power plants equivalent to Ontario’s Bruce Power, or;
• Around 11,000 large wind turbines, which would not only require substantial investments in back-up power systems (since wind is intermittent) but would also require clearing 7,302 square kilometers of land—larger than the size of Prince Edward Island—excluding the additional land required for transmission infrastructure.
Currently, the process of planning and constructing major electricity generation facilities in Canada is complicated and time-consuming, often marked by delays, regulatory challenges, and significant cost overruns.
For example, BC’s Site C project took approximately 43 years from the initial planning studies in 1971 to receive environmental certification in 2014, with completion expected in 2025 at a cost of $16 billion.
What’s more, the significant energy infrastructure listed above would only meet Canada’s current electricity needs. As Canada’s population grows, the demand for electricity will increase significantly.
“It is not at all realistic that this scale of energy infrastructure can be planned, approved, financed and built in just 10 years, which is what would be required merely to decarbonize Canada’s existing electricity needs,” said Elmira Aliakbari, director natural resource studies at the Fraser Institute and study co-author.
“This doesn’t even account for the additional infrastructure needed to meet future electricity demand. Decarbonizing Canada’s electricity generation by 2035 is another case where the government has set completely unrealistic timelines without any meaningful plan to achieve it.”
- This essay examines the implications of decarbonizing Canada’s electricity grid by replacing existing fossil fuel-based generation with clean energy sources.
- In 2023, clean energy sources—including hydro, nuclear, and wind—produced 497.6 terawatt hours (TWh) of electricity, accounting for nearly 81% of Canada’s total supply, while fossil fuels contributed 117.7 TWh (19.1%). To replace this fossil fuel generation with hydro power alone would require about 23 large projects similar to BC’s Site C or 24 like Newfoundland & Labrador’s Muskrat Falls. Using nuclear power would necessitate building 2.3 facilities equivalent to Ontario’s Bruce Power or 4.3 similar to Darlington Nuclear Generating Station.
- The process of planning and constructing electricity generation facilities in Canada is complex and time-consuming, often marked by delays, regulatory hurdles, and significant cost overruns. For example, the BC Site C project took approximately 43 years from the initial feasibility and planning studies in 1971 to receive environmental certification in 2014, with completion expected in 2025 at a cost of $16 billion.
- Land requirements for new electricity generation facilities are also significant; replacing 117.7 TWh of fossil fuel-based electricity with hydro power, for instance, would need approximately 26,345 square kilometers, nearly half the size of Nova Scotia.
- The slow pace of regulatory approvals, high and rising costs of major energy projects, substantial land requirements, and public opposition to project siting all cast doubt on the feasibility of achieving the necessary clean electricity infrastructure in the coming decade to fully replace fossil fuels in Canada.
Authors:
More from this study
Dan McTeague
“Axe the Tax” is just the beginning
From Canadians for Affordable Energy
All across Canada preemptive obituaries are being written for the Carbon Tax. (I’ve written one myself.) And for good reason. The closer we get to the full implementation of Justin Trudeau’s carbon tax, the harder regular people are being hit in the wallet. The tax has helped make it more expensive to feed and clothe our families, to heat our homes, and to gas up our cars. It has been a direct assault on the Canadian standard of living.
The fact that the Trudeau Liberals are behind the Carbon Tax is central to their collapsing poll numbers. And Conservative leader Pierre Poilievre has capitalized on its unpopularity by pledging to “Axe the Tax” every chance he gets. Chances are that pledge will carry his party into the majority, whenever we get around to having an election.
That said, we must be careful because the Carbon Tax is just one part of Trudeau’s Net-Zero program. It would be a catastrophic blunder for the Conservatives, upon entering government, to repeal only the Carbon Tax and leave the rest of the Liberals’ green agenda in place. Doing so would jeopardize Poilievre’s ability to make life in Canada more affordable.
There are a whole raft of policies on this file which a Poilievre government should quickly repeal. Here are a few which ought to be at the top of the list:
Clean Fuel Regulations (CFR)
Trudeau’s Clean Fuel Regulations (CFR), which I’ve nicknamed the Second Carbon Tax, are designed to reduce the carbon intensity of fuels like gasoline and diesel by blending increased amounts of ethanol into those fuels, making them less efficient while potentially contributing to engine corrosion and other problems. Plus, it’s estimated that the CFR will raise gasoline prices between six and seventeen cents a litre by 2030. Which is to say, we’ll be paying more for fuel and getting less out of it.
And, like the original Carbon Tax, the cost of the CFR is felt beyond the pumps, with estimates suggesting it will increase household energy costs by between 2.2 and 6.5 percent a year, while also significantly constricting the growth of our economy. These regulations ought to be scrapped entirely.
Emissions Caps
As I’ve written elsewhere, the Trudeau government’s proposed Emissions Cap, which targets our nation’s oil and gas sector, “would make Canada the only country in the world which willingly and purposefully stifles its single largest revenue stream.” Oil and gas is our “golden goose,” according to a study by Jack Mintz and Philip Cross, but the Trudeau government is proposing a cap on that sector’s carbon emissions, which a recent Deloitte report found “would lead to a 10% decrease in Alberta’s oil production and a 16% decrease in conventional natural gas production.” That translates to an estimated decline of real GDP in Alberta of $191 billion, and of $91 billion in the rest of Canada.
This is madness, and that’s before we even touch on the fact that it will have no discernable impact on global carbon emissions. It merely ensures that the world’s energy needs will be met by less environmentally responsible nations like Russia, Venezuela, Saudi Arabia, and Iran.
Electric Vehicle Mandates and Subsidies
Among the most reckless policies enacted by this government is Trudeau’s Electric Vehicle (EV) mandate, which bans the sale of new gas-and-diesel driven cars and trucks by 2035. I’ll say that again – in just under a decade, every new car and truck sold in Canada will have to be electric! This despite the fact that electric vehicles are notoriously bad at holding their charge in cold weather, one of our country’s trademarks.
And that’s assuming you can find a place to charge them. Natural Resources Canada estimates that we will need roughly 450,000 public charging stations by 2035 to make this EV transition at all realistic. At the moment we have about 28,000.
Plus, the wholesale adoption of EVs across Canada would put a tremendous strain on our electrical grid, especially at a time when the environmentalists have been pushing for a nationwide transition to less reliable methods of generating electricity, like wind and solar.
And then there’s the billions in subsidies which support the mandate. Federal and provincial taxpayer dollars are being thrown at automotive companies to underwrite their producing a product which taxpayers will then be forced to buy. It’s an outrageous example of double dipping.
Poilievre seems to understand this. He has called the EV mandate “a tax on the poor,” because of the elevated cost of an EV, compared to traditional vehicles, and he’s slammed the subsidies as bad deals for Canada.
Even so, when Trudeau has accused Poilievre of wanting to cancel the subsidies, Poilievre has tended to pivot to discussing the “generational” opportunity Canada has to start producing the minerals necessary for EV batteries, if only the Liberals would speed up the approval process for new mines.
That’s all well and good, except that the entire EV industry is built on subsidies and mandates. And even with those, countries around the world are finding that demand for EVs is much softer than anticipated. Some “generational” opportunity for Canada, to become a key link in the supply chain for a product that no one wants! Much better to change course, scrap the mandates and subsidies, and see if the industry can stand on its own two feet. Once consumers have shown that they’re willing to buy EVs, then we can talk.
And Many More…
Of course, repealing these policies is just scratching the surface. I could easily have written about the problems with Bill C-69, the so-called “no new pipelines bill;” Bill C-48, the Oil Tanker Moratorium Act which significantly reduces Canada’s ability to export our natural resources; or Bill C-59, which bans businesses from touting the environmental positives of their work if it doesn’t meet a government-approved standard.
The fact of the matter is, Canadians need a government that will not just pull down the low-hanging fruit of the Carbon Tax, but to “axe” the numerous Net-Zero policies, enacted by Trudeau’s and his environmentalist allies over the past nine years, which are making all of our lives more expensive.
Pierre Poilievre has his work cut out for him. Let’s all hope that he turns out to be the man we need him to be. We can’t afford anything less.
Dan McTeague is President of Canadians for Affordable Energy.
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