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Wilkinson Throws Cold Water on Carbon Credits for LNG Exports

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Environment and Climate Change Minister Jonathan Wilkinson is raising major flags about the fossil industry’s hope of using liquefied natural gas (LNG) exports to earn carbon reduction credits under the hotly-contested Article 6 of the Paris Agreement, and aiming to meet Canada’s Paris targets without resorting to international carbon trades.

Ahead of his arrival at COP 25 in Madrid, Wilkinson told [1] the Globe and Mail Canada was keen to see negotiators reach a deal on Article 6 [2], a contentious, nine-paragraph page of text that would set the terms for an international carbon trading system. But in a reversal of the position taken by former natural resources minister Amarjeet Sohi, Wilkinson said Canadian LNG “is a long way off from fitting into it,” the Globe writes.

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“I think we’ve got to be very careful about the LNG argument,” Wilkinson told the paper.

“The industry has touted exports of LNG as a means for reducing global emissions, as the burning of natural gas creates less emissions during power generation compared with those produced from coal often employed by Asian countries,” the Globe explains. The argument “is that if LNG is exported to places such as Asia to replace the current coal-supplied electricity, then Canada should get credit for the resulting emissions cut.”

But “whether the LNG would indeed be used to replace coal, rather than in addition to the coal plants, is one of the issues that would need to be clarified, Mr. Wilkinson said. Other outstanding issues are what he called the ‘big, big emissions’ created domestically from the liquefaction process, and how deals on emissions from LNG would be certified to prevent double-counting.”

“None of that is going to happen in the very short term,” he told the Globe, though he didn’t entirely rule out the possibility. For now, he said Ottawa would be focused on domestic emissions cuts and “achieving our commitments without Article 6.”

A Canadian COP delegate explained to The Energy Mix last week that, even if an Asian customer could generate international carbon credits by using Canadian gas and shutting down coal, there’s no guarantee that country would then sell the credit to Canada. And there is no prospect at all that a formal, process-driven text like Article 6—or the Paris Agreement as a whole—would get granular enough to factor in the impact of the climate-busting methane released by the northeastern British Columbia fracking fields that fed the exports.

Tim McMillan, president and CEO of the Canadian Association of Petroleum Producers (CAPP), called Wilkinson’s position “a bit frustrating”, adding that “we obviously not just think that Article 6 is extremely important, but it’s the largest contribution Canada can make”. Climate Action Network-Canada Executive Director Catherine Abreu countered that, rather than just “shuffling the deck” on which fossil fuels are used, Ottawa must focus on the shift to renewable energy.

While displacing coal with gas has a “large emission reduction potential,” added environmental economist Dave Sawyer, it takes a “very shaky” argument to count those savings toward Canada’s domestic emission target: the question, he told the Globe, is why a country or company would both pay for a product and forego the associated carbon credits.

On Monday, Alberta Premier Jason Kenney called Ottawa’s apparent change of heart a disappointment. “I hope he’s not surrendering Canada’s interest before even getting to the Madrid conference,” he said. In Question Period, Conservative Opposition MPs accused Wilkinson of “thumbing his nose” at the industry.

But Wilkinson was apparently undeterred. “We’re not building a plan to simply trade away reductions,” he said Monday. “I’m not saying LNG in the future can’t be part of an overall structure,” but “the focus of the climate plan is on reducing our own domestic emissions.”

On Tuesday, The Vancouver Sun identified [4] LNG exports as a focal point for that work, and the Haisla Nation as a major participant. It cited Fort Nelson First Nation Chief Sharleen Gale, chair of the First Nations Major Projects Coalition, anticipating that a consent-based business model under the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) will trigger billions of dollars in energy sector activity and require business leaders to form partnerships with Indigenous communities.

The B.C. legislature unanimously adopted [5] UNDRIP late last month.

“When companies come to First Nations on Day 1, it promotes certainty that projects will be built on time, that they align with our values and that there won’t be litigation,” said Gale, chairwoman of the First Nations Major Projects Coalition. “We don’t want to be in the courts, we want to take equity stakes and participate in the economy in our territories.”

“It gives me goosebumps to think of the opportunities that are coming over the next 10 years,” said Haisla Nation Chief Crystal Smith, chair of the First Nations LNG Alliance.

The Canadian Council for Aboriginal Business projects the country’s Indigenous economy growing from C$30 billion to $100 billion per year by 2024. “There are about 50,000 Indigenous businesses in Canada, and they are growing at nine times the rate of non-Aboriginal businesses,” the Sun says, citing the Council.

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