Canada’s carbon pricing, approaching its fifth anniversary, has sparked intense debate and political strife, especially around the Conservative’s anti-carbon tax campaign. 

Amidst the public discourse surrounding the cost of living and inflation, Prime Minister Justin Trudeau made adjustments to his climate policy. He excluded heating oil from carbon pricing for three years after mounting pressure from the East Coast and Atlantic caucus.

This change triggered immediate responses from various provinces and sectors. Saskatchewan’s Premier Scott Moe announced plans to halt collecting the carbon price for the federal government.

Likewise, the Northwest Territories sought full exemption from carbon pricing for their communities. On the other hand, First Nations in Ontario raised concerns about exclusion from the carbon price rebate program due to tax filing limitations on reserves.

The Impact of a Carbon Tax

Study shows a carbon tax results in a reduction in emissions, with some cases revealing more success than others.

The current carbon pricing in Canada includes consumer fuel charges with accompanying rebates to offset expenses and encourage emission reduction. But Canada’s carbon tax is a patchwork. Not all provinces adhered to it wherein some were resistant and others already had their policies in place.

More notably, a case study revealed that British Columbia’s carbon tax has reduced emissions by between 5% and 15%. Implemented over 15 years ago, BC’s carbon tax was the first in North America. 

British Columbia’s carbon tax started at $10/tonne of CO2 emissions and increased by $5 a year until it hit $50 in 2021. The carbon pricing covered about 70% of the province’s GHG emissions.

However, small businesses bear the brunt of the costs without receiving rebates, which could lead to international repercussions and affect Canada’s export competitiveness.

RELATED: Canada Faces 2 Carbon Issues: Shaky Carbon Tax and Missed Emissions Goal

The ongoing debate over carbon pricing has made it challenging to predict policy consistency, which impacts businesses’ climate plans.

Regardless of political decisions, businesses are committed to their climate goals, adapting strategies to remain competitive while prioritizing profitability. Saskatchewan responded differently to the case.

Provincial Responses and Policy Clash

The Saskatchewan government announced that its natural gas utility will stop charging the carbon levy from residential customers beginning Monday. This decision follows Trudeau’s exemption of home heating oil users from paying the levy, primarily benefiting residents in Atlantic Canada.

Saskatchewan requested a similar exemption for all other heating methods, but Ottawa declined. In response, the province declared it would cease collecting the charge at the beginning of 2024.

Dustin Duncan, responsible for SaskEnergy, highlighted that the levy is due to be paid by the end of February. Failure to remit this amount could result in federal penalties for SaskEnergy executives, as per federal law. To protect these executives, Saskatchewan passed legislation shifting the responsibility to the province.

Duncan mentioned SaskEnergy’s request for the federal government to unregister it as a natural gas distributor, preferring the province to hold this designation instead. The company awaits clarity on whether it will acknowledge this change before deciding in January about remittance.

Saskatchewan’s Strategy: Adaptation and Investment

While Saskatchewan is discontinuing the carbon levy for electricity heating users, they don’t anticipate legal issues due to their control over the levy concerning SaskPower. SaskPower will channel the funds that would have been collected as levies into an investment fund. This move is expected to cost the company over $3 million this year.

Saskatchewan intends to use the funds generated from carbon tax for emissions-free electricity projects, including the potential implementation of a small modular nuclear reactor.

Additionally, levies from other high-emission industries will be directed to a separate technology fund for projects aimed at reducing, capturing, and sequestering emissions.

Despite losing its challenge against the carbon tax’s constitutionality in 2021, Saskatchewan continues to navigate its implementation. The goal is to seek exemptions and alternatives within federal carbon pricing regulations.

At the end of last year, Canada introduced two major moves to cut GHG emissions. One is to cap oil and gas emissions at 38% by 2030 based on 2019 levels.

The other one is to curb methane emissions from cattle burps. This initiative encourages changes in cattle diets, feed efficiency improvements, and strategies that lower methane release.

Canada’s carbon pricing policy has ignited a fierce debate, triggering varied responses from provinces and sectors. While adjustments have been made to exclude certain fuels from the levy, concerns linger over the impact on small businesses and indigenous communities. The ongoing discourse will continue into 2024, affecting policy predictability, and challenging businesses to adapt while maintaining climate goals.

READ MORE: Canada Insures Carbon Price Contracts with $7B Funding

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The United States revealed major successes in nuclear energy in 2023 while aiming to reach zero net emissions by 2050. 

The country achieved significant milestones like approving its first small modular reactor design, showing that the nation is gaining confidence and momentum in the field of nuclear energy. Here are the 5 big achievements that the U.S. aims to build on for more progress this 2024. 

Enabling Advanced Reactor Licensing

The U.S. Nuclear Regulatory Commission (NRC) finalized its rule to certify NuScale Power’s 50-megawatt power module. This achievement was possible due to licensing efforts supported by industry awards in collaboration with the Department of Energy (DOE).

NuScale’s advanced light-water system marks the first certified small modular reactor (SMR) by the NRC. And it’s only the 7th reactor design approved for use in the country. This milestone will serve as a blueprint for other SMRs currently being developed, enabling them to advance their technologies.

The NRC also recently granted approval for the construction of Kairos Power’s Hermes reactor in Tennessee, potentially starting in 2026. 

Kairos Power Reactor

Hermes is among the new reactor technologies supported by the DOE’s Advanced Reactor Demonstration Program (ARDP). This reactor is the first of Generation IV to receive a construction permit from the NRC. It will contribute to the development of Kairos Power’s commercial reactor employing fluoride salt-cooled high-temperature technology.

READ MORE: Novel Nuclear Reactor Gets U.S. Approval After Half a Century

Promoting Clean Hydrogen Production

The DOE supported the installation of a low-temperature electrolysis system, which aids in cooling the power plant. The station, Nine Mile Point Nuclear Station, is operated by Constellation which initiated the clean hydrogen production in New York. 

This project is one of three supported by the DOE, demonstrating how nuclear power plants can assist in reducing costs and scaling up clean hydrogen production. Other projects aiming to start generating hydrogen this year would be at the Davis-Besse (Ohio) and Prairie Island (Minnesota) plants.

Notably, the DOE also announced $7 billion in funding to establish 7 regional clean hydrogen hubs across the U.S. These hubs can potentially reduce 25 million metric tons of CO2 emissions each year from various uses. Three of these hubs, namely the Mid-Atlantic, Midwest, and Heartland regions, will incorporate nuclear energy as a component of their projects to produce clean hydrogen.

RELATED: US DOE’s $7B Clean Hydrogen Hub Grant: The 7 Chosen Ones

Creating Fuels for Future Reactors

High-assay low-enriched uranium, or HALEU is a crucial material required for many advanced reactor designs. A 20-kg HALEU was first produced by the Centrus Energy Corporation, the first of its kind in over 70 years. It also marked a key achievement in the DOE’s HALEU Demonstration project in Piketon, Ohio.

Image from Department of Energy

The HALEU material will be used for fueling the initial cores of DOE’s two demonstration reactors granted under the ARDP. Additionally, it will support fuel qualification and other testing of new reactor designs. Centrus plans to increase its HALEU material production to a rate of 900 kilograms per year starting in 2024.

DOE issued its initial request for proposals to award contracts for deconverting HALEU uranium hexafluoride into chemical forms suitable for creating fuels for advanced reactor developers. This year, the agency will issue another proposal seeking contracts for acquiring, storing, and transporting enriched uranium hexafluoride, with financial backing from the Inflation Reduction Act.

Upgrading and Expanding Testing Capabilities  

The Idaho National Laboratory (INL) has implemented various improvements to its TREAT (Transient Reactor Test Facility) reactor to facilitate advancements in nuclear energy. One such upgrade involved developing a specialized capsule for conducting transient testing on fast reactor fuels. This effort was part of a collaborative project between the United States and Japan. 

In 2024, the countries will conduct tests on certain fuels at TREAT, which haven’t been conducted for over 2 decades. 

Additionally, INL initiated construction on the NRIC DOME, recognized as the world’s first microreactor test bed. This test bed is to support the creation and authorization of new reactor technologies. INL is repurposing its EBR-II containment structure, reducing the financial risks associated with developing small reactor systems. 

The National Reactor Innovation Center (NRIC) will manage the facility, with testing expected to begin as early as 2026.

Recognition in International Cooperation 

More remarkably, nuclear energy achieved notable recognition on the global platform. It secured its place in the final COP28 agreement in Dubai to expedite its utilization. 

During COP28, the United States, along with numerous allied nations, made significant commitments. These included pledges to triple worldwide nuclear capacity by 2050 and to mobilize over $4.2 billion in government-led investments. The objective is to establish a global commercial nuclear fuel market that operates independently from Russian influence.

RELATED: The Big News from COP28: Nuclear Energy’s Triumph

The U.S. also organized its inaugural U.S-African Nuclear Energy Summit in Ghana. The aim is to establish a framework for sustainable growth of nuclear energy in the said region. Additionally, the DOE unveiled plans to build a clean energy training center in Ghana. 

Furthermore, DOE launched a virtual training initiative designed to assist nations in exploring nuclear energy as a means to bolster their economic development, energy security, and environmental goals.

Read the other big wins announced by the Office of Nuclear Energy here.

The year 2023 has been a landmark year for the United States in advancing its nuclear energy initiatives. With those achievements, the U.S. has poised itself to continue this momentum into 2024, capitalizing on technological advancements and strategic partnerships to lead the way in clean and efficient nuclear energy solutions.

The post How Nuclear Energy in the U.S. Got Its Groove Back, Poised to Soar in 2024 appeared first on Carbon Credits.

The Securities and Exchange Commission (SEC) has introduced a transformative climate disclosure rule aimed at revolutionizing the reporting landscape for public companies. 

This proposed rule seeks to mandate detailed disclosure of emissions, climate risks, and strategies for achieving net zero emissions, marking a significant leap towards corporate transparency and sustainability. 

Key Aspects of the Proposed Rule

At the core of the SEC’s proposed rule lies a call for comprehensive reporting, compelling companies to provide detailed insights into their climate-related facets. This includes the delineation of risks associated with climate impact, emissions data, and robust plans for achieving net zero emissions.

One of the primary objectives of the SEC’s proposal is to arm investors with consistent, comparable, and meaningful climate-related information. This will enable investors to make more informed decisions, considering a company’s environmental impact and climate risk profile in their investment strategies.

Moreover, standardizing reporting obligations across companies issuing securities is another key aspect of the proposal. This seeks to establish uniformity in disclosures, potentially reducing discrepancies and enhancing the overall quality of information provided by companies.

Most notably, SEC’s proposed rule will significantly impact the practices of accounting, auditing, and assurance for public companies and their service providers. It involves adapting existing frameworks to accommodate the new reporting requirements. 

It may also call for developing new methods and standards for evaluating and reporting climate-related information. 

Overall, the proposed climate disclosure rule cover two major aspects:

Climate-Related Financial Impacts: The regulation tackles how climate-related impacts should be included in financial statements (e.g. balance sheet, income statement, cash flow).
Narrative Disclosures: The rule also involves narrative disclosures in form SK. It will likely include discussions on risks, business strategy impacts, and metrics like greenhouse gas inventory.

Implications and Challenges for Companies

The SEC’s disclosure rule also poses a number of implications and challenges. 

The first one is increased reporting obligations for companies. They will face additional reporting demands that may require thorough data gathering, accurate presentation, and strengthened internal controls to comply with the new regulations. 

RELATED: SEC New Climate Disclosure Rule Turns into a Battleground

Companies also have to go along the transition from voluntary to regulated disclosure. This represents a significant change, requiring gradual efforts until they become accustomed to the new reporting requirements. 

However, for companies that are already complying with similar disclosure rules, it would be easier for them to embrace the proposed changes. Given the overlap with other existing regulations, determining the costs of the SEC’s rule alone would be hard. 

But according to the SEC, the required reporting will cost a small publicly listed firm about $420,000 a year on average. For a larger company, it will be $530,000 a year.

Source: U.S. SEC

Role of Carbon Credits and RECs

The SEC’s proposed rule acknowledges the relevance of carbon offsets and renewable energy credits (RECs), underlining their importance in climate-related reporting. Companies increasingly leverage these instruments for decarbonization, establishing  market-based mechanisms to advance sustainability goals.

However, discussions have emerged regarding the adequacy of the SEC’s requirements, raising concerns about the need for more comprehensive disclosures. It’s crucial for investors and stakeholders to understand how the use of these credits impacts a company’s risk profile, business strategy, and long-term financial implications. 

In particular, the proposed rule outlines the following key areas for disclosure:

Climate-Related Risk: Companies’ use of voluntary carbon markets in their transition risk strategy.
Business Strategy Alignment: How the use of carbon credits or offsets aligns with a company’s business model, strategy, and future outlook.
Targets and Goal Disclosure: Requirements for companies to disclose if their sustainability targets involve the utilization of RECs and offsets.

While the proposed rule has been in existence for about 18 months, awaiting finalization, stakeholders have actively engaged in the process, submitting over 20,000 comments during a consultation period. 

However, the final timeline for its completion remains uncertain, leaving companies in a state of anticipation regarding the impending changes.

How to Prepare for SEC’s Proposed Climate Disclosure Rule: A Roadmap for Companies

Despite the uncertain timeline, companies are advised to prepare by focusing on “no regret” actions, according to Matt Handford, Principal, Climate Change and Sustainability at Ernst & Young. He further shared insights on how companies can better prepare for the new disclosure requirements. 

Key areas to focus on per Handford’s advice include the following:

Emissions Understanding and Accounting: 

Companies need to treat emissions data with the same rigor as financial data, ensuring completeness, accuracy, and reasonableness of their emissions inventory.

Data Hygiene and Quality Assurance: 

Emphasis should be on the quality of data and the reliability of sources, underpinning robust documentation and validation processes.

Reassessment of Climate-Related Claims: 

Companies are reassessing their public claims related to carbon neutrality and net zero targets, ensuring robust strategies and execution plans to meet these objectives.

Engaging Internal Stakeholders: 

Collaboration across various internal departments, including finance and legal, is pivotal to comprehensively address climate-related disclosures and strategies.

The SEC’s proposed climate disclosure rule represents a transformative era in corporate reporting, mandating transparency and accountability regarding climate-related information. As businesses gear up for these regulatory changes, thorough preparation and collaborative approach will be crucial in meeting the evolving disclosure obligations and steering towards a more sustainable future.

The post A Deep Dive into SEC’s Proposed Climate Disclosure Rule for Sustainability appeared first on Carbon Credits.

The year 2023 marks a pivotal moment in the volatile journey of the carbon credit market. Once hailed as a cornerstone of corporate climate action, voluntary carbon markets are now grappling with a crisis of confidence and a significant downturn in price and demand.

A Rapid Rise and Troubling Slowdown

Voluntary carbon markets (VCMs), a key tool in the global fight against climate change, experienced exponential growth from 2019 to 2021. 

As seen above, VCM credits jumped by 86% in 2021 compared to 2019 level. This surge was fueled by escalating corporate net-zero commitments and optimistic forecasts about the market’s potential size.

For instance, Citibank committed to reach net zero emissions by 2050, while using carbon credits to tackle unavoidable emissions. One of the world’s largest biopharmaceutical companies, Pfizer, also pledged to achieve net zero emissions by 2040. The US’ biggest utility, Pacific Gas and Electric (PG&E), also aimed at hitting net zero by 2040 while reducing Scope 1 and 2 emissions by 50% from 2015 levels by 2030. 

However, 2022 witnessed a stark slowdown in the VCM’s growth, a trend that continued into 2023. Various factors, including the increasing complexity of market mechanisms and the role of carbon credits in broader sustainability strategies, have contributed to this decline​​.

The Offset Decline: An Erosion of Confidence

Several high-profile corporations, such as Shell, Nestlé, EasyJet, and Fortescue Metals Group, have recently retreated from carbon offset schemes. This withdrawal stems partly from growing skepticism about the effectiveness of these projects, with concerns about their actual climate benefits and accusations of greenwashing. 

Shell: The MIT Technology Review reported that corporations, including Shell, announced they were backing away from offsets or the claims of carbon neutrality that relied upon them. This shift reflects a broader trend of companies moving away from credits that simply claim to prevent emissions, particularly in light of increasing awareness about the challenges in proving the actual environmental impact of these projects​​.
Nestlé: Reuters detailed Nestlé’s decision to move away from investing in carbon offsets for its brands, such as KitKat, to focus more on programs and practices that help reduce greenhouse gas emissions within their own supply chain and operations. This change is part of their strategy to reach their net-zero ambitions, indicating a shift from offsetting to direct emission reductions​​.
EasyJet: According to the MIT Technology Review, EasyJet was mentioned as another corporation that had decided to wind down its offsetting program. Instead, EasyJet is now focusing on cutting emissions from its operations, signaling a shift in strategy towards more direct measures of reducing environmental impact​​.

A significant decrease in demand for offsets was observed, with estimates suggesting a 25% decline from 2021 levels by the end of 2023​​.

Carbon Price Collapse

The downturn in demand has had a dramatic effect on prices. The Xpansiv market CBL, the world’s largest spot carbon exchange, saw prices of carbon offsets fall by over 80% in an 18-20 month period.

Note: You can view the daily price changes and charts of carbon prices right here.

This price decline reflects the broader challenges facing the voluntary carbon market, including questions about the actual environmental impact of the credits and the integrity of projects claiming to offset emissions​​.

While the VCM prices have been hit, the decline in NGEO (Nature-Based Global Emissions Offsets) prices stands out due to the premium they were trading at over the other offsets last year. With increasing scrutiny on forestry projects, NGEO prices sharply dropped from around $15 in June 2022 to $1 in June this year.

It even declined to below $1 at the time of writing. 

One major reason for the downward trend of NGEOs was the tough macroeconomic environment, causing stagnation in demand in 2022. Moreover, the poor outcome for the VCM at COP27, which carries over at the recent COP28, further casted doubts on how carbon offsets fit in corporate net zero plans.

Mark Kenber, VCMI’s Executive Director, commented that though there are many encouraging developments on carbon markets at COP28, agreements “fell short of the mark”. He further stated that:

“For the market to fully develop in the next two years, policymakers can draw on the foundational work of the VCMI and IC-VCM, developing high-integrity VCM and Article 6 markets that deliver the finance that makes ambitious global action possible.”

Over in compliance markets, the EU carbon prices have broken records in February this year, surging past 100 euros. But the EU allowance prices also dipped back to its low levels this month at 78 euros, close to its November 2022 average price. 

The region, which has the largest carbon market EU ETS, plans to phase out its free carbon allowances while gradually phasing in its newly introduced carbon tax, known as the Carbon Border Adjustment Mechanism. CBAM will ensure that companies operating inside and outside the bloc remain on the same page in terms of carbon pricing and environmental impact. 

RELATED: CBAM Carbon Pricing (EU’s 1st Cross-Border Carbon Policy)

Following the EU footsteps, the UK is also set to launch its own CBAM version. It aims to ensure that imported goods from carbon-intensive industries like iron, steel, and cement face fair carbon prices. 

A couple of African nations are also gearing up to participate in the carbon arena. New carbon credit exchanges are created in Zimbabwe and Tanzania while Zambia and Kenya have plans to do the same. 

Several countries in Asia are also joining the carbon market bandwagon. Indonesia had launched a carbon credit trading market through IDX as part of its 2060 net zero goal. Japan’s first exchange-based carbon market opened in October this year.

Amid all these, the future of carbon markets now stands at a critical juncture. They face the challenge of regaining credibility and functionality amidst growing scrutiny and regulatory changes. How these markets evolve in response to these challenges will significantly impact their role in global climate strategies.

The Inflection Point: What’s Next for Carbon Prices and Trading?

Not all carbon news is grim here in 2023.

On Dec 13th, 2023, Xpansiv’s CBL spot exchange hit a daily trading volume record of 2.13 million tons of carbon credits, signalling robust corporate engagement in carbon offset markets. This surge aligns with the final day of COP28, reflecting an uptick in year-end corporate purchases for sustainability goals. 

New transparency requirements in the U.S., Europe, Australia, and California are driving this demand, pushing companies to disclose more about their carbon offset activities.

Allister Furey, CEO and co-founder of Sylvera, noted the fact that regulators are now seeing the critical role of carbon credits in financing the net zero transition. He further said that:

“Disclosures at every step of the carbon journey and for all involved stakeholders will become increasingly important. From the SEC’s coming climate disclosure rules to California’s AB1305, there are significant incoming regulations which should dramatically improve data availability in net zero–and we will begin to see the price of carbon ripple throughout value chains, slowly but surely.”  

Since 2020, CBL has traded over 300 million tons, dominating over 95% of the global spot exchange-traded carbon offsets. The record day underscores a heightened market activity during the UN’s COP event.

READ MORE: The Big News from COP28: Nuclear Energy’s Triumph

Meanwhile, the Compliance Credits market has not only attracted immense investment dollars – especially in carbon capture projects – but countries like Canada and the UK are setting higher and higher compliance prices.

NASDAQ Enters the Carbon Credit Market Arena

The NASDAQ Exchange, recognizing the growing importance and potential of the carbon credits market, has recently launched an innovative technology to revolutionize the industry. This new system, aimed at digitizing the issuance, settlement, and custody of carbon credits, is set to enhance the scalability of this nascent market. 

Nasdaq’s approach uses smart contracts for secure transactions and promises to bring much-needed standardization and liquidity to attract diverse investors​​​​.

Moreover, Nasdaq’s collaboration with Climate Impact X (CIX) marks a significant stride towards developing the global carbon market. This partnership will power CIX’s spot exchange for quality carbon credits, intending to improve price transparency and liquidity in the voluntary carbon credit market. 

Addressing the inefficiencies and inconsistencies in the market, this move by Nasdaq and CIX is poised to create a more resilient and scalable trading environment, demonstrating Nasdaq’s commitment to pioneering market transformations in the carbon credit sector​​.

It’s clear that change is in the air. Companies are not just looking to buy credits; they’re looking to buy credibility and real impact. And as the market matures, it’s becoming more about quality than quantity.

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