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Despite recent reports of government decisions to shutter coal-fired power plants in Canada, the United States (US) and the European Union, coal remains the source of almost 40 percent of the world’s electricity. In the past two decades, the capacity for coal-powered electricity has doubled to about 2,050 gigawatts, with another 247 gigawatts in planning or under development in China alone.
With the United Nations (UN)-led climate talks in Glasgow (COP26) here, there’s a way for governments to work with industry. One paragraph in the Paris Agreement lays the groundwork for an international emissions-trading system that could bring an end to the production of coal-fired electricity.
The success of international carbon trading has been mixed due to issues such as oversupply and a lack of accounting rules. The Paris Agreement seems to have a solution for this problem, as countries agreed to reduce their national emissions by setting climate targets, known as Nationally Determined Contributions (NDCs).
For example, countries A and B could create an agreement that makes it easier for country A to switch from coal-powered electricity to the cleaner sources that are produced by country B. Not only does country A reduce its emissions, allowing it to meet its NDCs, but the agreement also leaves country A with ITMOs to sell, which country B could then purchase.
Canada aims to reduce its emissions to 40 percent, relative to 2005 levels, by 2030. Based on the 2020 National Inventory Report, however, Canada will miss its mark.
For instance, natural gas consumption continues to grow in emerging economies. China, for example, has committed to increasing its natural gas consumption by 15 percent in 2030 and switching to gas in industry and buildings. China currently relies on imports to cover about half of its domestic consumption. Given its recent energy crisis, China is set to become even more reliant on external sources of energy, including natural gas, to meet its basic energy needs.
Natural gas production in Canada will increase around 20 percent over the next 20 years, while domestic consumption is predicted to decline. This leaves opportunity for considerable growth in liquefied natural gas (LNG) exports.
The rules are still a work in progress. The rule book for emission reductions is expected to be completed at the UN-led climate talks in Glasgow in November.
In the meantime, pilot projects and other initiatives – in a variety of industries, from waste management to transportation – have emerged worldwide to show how an ITMO transfer would function in practice. For example, the Canada-Chile programme provides technical innovation to reduce emissions in the waste management sector and a system for tracking, monitoring, and reporting emission reductions.
Many questions regarding the benefits of the transfer of carbon reductions remain, including whether governments should support transfers between companies.
The accounting and quality of emissions, how they are transferred and the lasting mitigation effects may help address environmental integrity. The rule book writers must also define how emissions are reported and create transparent registries to make sure emission reductions are not counted twice.
Industry and government must partner to create models that incentivise the creation of carbon trading mechanisms to transfer ITMOs, while also creating economic and environmental benefits.
For Canada, where 2030 climate targets are rapidly approaching, it is essential for the government to leverage ITMOs to work together with industries and collaborate on solutions that support a future transition with cleaner energies. Setting short-term and long-term goals that include the transfer of ITMOs particularly in the oil and gas industry and to collaborate on solutions that support a future transition with cleaner energies will be vital for Canada to achieve its climate goals.
(Yukinori Kinoshita, an undergraduate student in international economics at the University of British Columbia, co-authored this article. Citlali Cruz Cruz is a Graduate Research Assistant, Public Policy and Global Affairs School at the University of British Columbia. John Steen is a EY Distinguished Scholar in Global Mining Futures at the University of British Columbia.)
(This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for them. This article was originally published on The Conversation. Read the original article here.)
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