Computare
30 Fairmont Park Lane S
Lethbridge, Alberta, T1K 7H7
Telephone: (403) 328 -1804
Fax: (403) 206 - 7352
Wednesday, July 30, 2003
Offsets Consultations
Climate Change Economics Branch
Environment Canada
10 Wellington Street, 24th floor
Gatineau, Quebec
K1A 0H3
Dear Sir/Madam:
Re: Comments on the Government of Canada Offset Consultation Discussion Paper
I’m enclosing comments on the Offset Consultation Discussion Paper. I was registered for the Calgary Workshop, but was unable to attend as a result of a family illness. I appreciate the opportunity to comment.
I served on both the Technology Issue Table and the Expanded Integrative Group of the National Climate Change Process. My experience there opened up a lot of unanswered questions. The Offset Discussion paper raises more questions and brings more to my mind.
It is my impression that the authors of the Discussion Paper are being pressed far too hard to come up with a practical working system to establish an offset credit incentive system for emissions removals. The science and technology to establish a routine day to day system is just not there it seems.
I am suggesting that thinking on an offset system be re-directed in some way to contemplate using emission removal offsets to somehow support funding for science and technology development in this area.
On the other hand, it seems offset credits might be workable to encourage deployment of emission reduction technology. Perhaps that could be the initial focus of a system intended to help Canada cope with the Kyoto commitment.
Yours truly,
Duane Pendergast, Principal Engineer
Enclosure: Comments on the Government of Canada’s Offset Consultation Discussion Paper, 03/07/30
Comments on the Government of Canada’s Offset Consultation Discussion Paper
Wednesday, July 30, 2003
Overview and an Alternative Approach
Consultation on greenhouse gas management with Canadian stakeholders continues. An “Offset System Discussion Paper” (referred to as “Discussion Paper” hereafter) was posted on the Government of Canada public climate change website in mid-June 2003. Its purpose is to provide a basis for consultations on the possible design of an offset system as proposed in the Climate Change Plan for Canada. Written submissions and comment were solicited from stakeholders. Computare welcomes this opportunity.
The posting of the discussion paper includes background papers on the Kyoto Protocol, International Sinks Accounting Rules, and Landfill Gas. Some aspects of the paper are disturbing. The authors have raised a vast array of issues to be considered. The discussion seems to have proceeded far beyond the solid science and technology foundation needed for rational greenhouse gas management. Many vested interests and issues which are only tenuously linked to greenhouse gas management are evident, and constraining the thinking underlying the Discussion Paper. Perhaps other obscure tactics remain hidden.
Most of the Discussion Paper focuses on detailed and difficult aspects of forest, agricultural and landfill emission removal type offsets. The goal seems to be excessively far reaching - to actually put a working system with all checks and balances in place. Many more questions are asked than there are answers for. Indeed, the establishment of a workable offset system related to forests, agriculture and the carbon cycle is a most difficult issue.
Atmospheric emission removals are extremely important. Earth’s carbon cycle removes and releases far more carbon dioxide on an annual basis than humans introduce through fossil fuel use. Humans already play a very large role in the carbon cycle through agriculture and forest practice. The potential for control of greenhouse gases by better managing human influence may be significant. Unfortunately we just don’t seem to know enough about the workings of the carbon cycle to identify and implement clever practical solutions via emissions removals and sinks.
The initial focus of a practical working system could be on emission reduction offsets. There are many known technologies to help meet the Kyoto commitment. Early encouragement of emission reduction or avoidance opportunities in non-emitting electricity (i.e. – nuclear, clean coal and renewable sources) could pay big dividends following the Kyoto period. Late delivery could be at least partly covered by the Kyoto penalty clause for missed goals. There are many other opportunities in the industrial, residential and automotive sectors to effect relatively easily measurable and verifiable emissions reductions.
Computare suggests that Canada consider including emissions removal in an offset system only in the restricted context of focusing on a fund raising system for research and development in the science and technology of intelligent carbon cycle management. It would be wise to consider this possibility whether Kyoto is implemented or not.
Funding provided by offset purchases would be directed to support innovative projects with the goal of finding workable systems to account for and permanently remove emissions via management of aspects of the carbon cycle. Governments, universities, R&D firms, industry, agriculture and forestry would all be included in the system designed to encourage funding sources and to maximize information exchange and foster practical ideas. International credit might be earned by the system but that would not be the overriding goal. The main goal would be to establish the science and technology basis needed to allow Canada to make better use of, and get international credit for, emissions removals achieved by her agriculture and forest industry in the longer term. Mistakes will be made during this exploratory phase. Unworthy projects will be funded. However the freedom afforded project proponents could lead to useful concepts warranting widespread international implementation in coming decades. The rigid controls and constraints necessary for a working system, as anticipated by the Discussion Paper, seem sure to stifle innovative projects.
It is pertinent to note the authors of the discussion paper also have very significant reservations. Paragraph 17 indicates “consultations may even lead to re-consideration of whether to develop an offset system at all”.
The following paragraphs are structured, as requested, on the Discussion Paper and identify some of the issues which lead Computare to conclude it is premature to include emission removals in an offset system intended to establish policies to control atmospheric greenhouse gas.
Background Commentary on the Offset Discussion Paper
1 Introduction
The terminology “Offsets” and, ‘Offset Credits” are used often throughout the report. There seems to be little distinction between so-called offsets related to sinks and systems which actually remove emissions from the atmosphere and those attributed to emissions reduction via efficiency, modified or alternate technology. Some thought experimentation suggests there is a big difference. Workable emissions removals would actually offset emissions in accordance with the basic definition of the word. On the other hand the provision of offset credits for emission reduction essentially provides for a license allowing more emissions from the capped sectors which are not necessarily offset in the uncapped sectors. Micro examples of two firms, one inside and one outside the capped sectors, working together to hold emissions to a capped level are often cited. In the macro world of a freely growing economy the illusion of capped control provided by the simple examples will disappear.
The Large Industrial Emitters program, mentioned throughout the paper, has been barely discussed publicly. There is insufficient information available on it to allow informed discussion of topics within the offset discussion paper which are linked to it.
The discussion on landfill gases scattered through the paper seems excessive. In a crude, possibly unthought-of sense, humans are emulating nature by returning bio-material to the earth in landfills. The inherent sink capability of land fills needs to be carefully thought through. Landfills as a means of waste disposal may be a abandoned once the management of greenhouse gases is understood – or they may become a significant means of sequestering carbon. At this time devoting excessive attention to landfill gases emanating from them seems a possible dead end endeavor.
Paragraph 16 states that; “All sources and sinks are expected to make a contribution to meeting Canada’s Kyoto target”. This reflects an excessive focus on the negative aspects of fossil fuel as an energy source often evident in discussions on climate change. Determination to control fossil fuel consumption leads to an unwarranted implication that energy sources which do not emit greenhouse gases have little role to play. In fact non-emitting energy sources such as hydro and nuclear already play a major role in reducing Canada’s emissions. They can provide much more of our energy needs and avoid the emissions so often associated with energy use.
2 Core Design Elements
Paragraph 32 is very convoluted and hard to follow. First it says domestic offsets do not contribute directly to achieving the Kyoto Target. Does the first sentence refer to the idea, expressed elsewhere herein, that emission reduction offsets do not necessarily cap emissions as Kyoto requires? Then, the second sentence states the system can be designed to make a contribution to Kyoto. That sentence seems to be a paradox relative to the first as we are in the design phase. The second last sentence states that emission reduction offset projects might receive only a portion of the reduction achieved beyond BAU emission reductions. Why? Is this possibly reflection on the inherently different nature of emissions removal versus emission reduction offsets?
The suggested restrictions with respect to the crediting period (Paragraph 38) should be rethought as they are not encouraging to the long term development of technology. The Kyoto penalty clauses do allow some shifting to the second commitment period and this should be incorporated into any offset policy for the first commitment period.
Three paragraphs (46, 47, and 48) reflect on the connection of the proposed Canadian offset system to the international CDM and JI system. Computare smells a caveat here. One of Canada’s best prospects for reducing emissions is to develop her nuclear energy technology. The prejudice and restriction on claiming credit for nuclear projects under the Kyoto Protocol’s CDM and JI mechanisms should not be allowed to interfere with any offset credits which might accrue to nuclear energy projects in Canada.
3 Administration of the Offset System
This chapter outlines many of the problems to be expected. One question theme running through the chapter (Paragraphs 55, 60, 64) relates to the desirable degree of privatization. Uncertain science and many other unknowns are associated with the establishment of the system. We are still in the midst of a crisis of confidence with respect to the creation, marketing, and auditing of shares of corporate entities – a process which has been established for many decades. The potential for fraud and deceit in greenhouse gas management far exceeds that in those better known and understood systems of management and control. It thus seems certain that governments must initially take on the responsibility for establishing and running the system. More than one level of government must be involved in a watch dog relationship to ensure honesty and transparency until workable procedures are established.
4 Design Issues
The complexity of the design process makes the simple straight forward cap, permit and trade system so easily abandoned after the National Stakeholder meetings in June of 2002 look very attractive in retrospect. Certainly the tentative rules posed will keep project proponents and the Program Authority busy second guessing each other.
The offset system as envisaged now does not seem to be conducive to capping emissions as growing industry can, in concept, buy offsets which are not true offsets. (For example a growing coal fuelled electrical utility within the capped sector could, in concept, buy offset credits from efficiency improvement projects outside the capped sector. Growth outside the capped sector could result in increased total emissions. On the other hand the example utility could buy offsets from forest or agricultural sink activity. Should those sinks be maintained they would be a true offset and total emissions would remain capped). Nevertheless activities which lead to reduced emissions per unit of useful overall output deserve consideration.
Paragraphs 91 to 100 focus on boundaries and leakage. There is no explicit mention of “life-cycle” analysis. As I recall, life-cycle analysis attempts to take into account the effect of a project on external inputs and thus takes into account some kinds of leakage. For example, projects based on increasing insulation and thus energy efficiency might drive substantial emissions in the insulation industry. Should some consideration of life-cycle analyses be factored into the design process? Would that be a valid consideration in seeking answers to the question of Paragraph 100?
Paragraph 101 on non-permanence of sinks seems to be based on “thinking inside the box.” For example, forest harvesting is touted as an example of non-permanence. Is this an example of thinking gravely constrained by Kyoto and environmental considerations? It is totally inexplicable that Canada’s greenhouse gas inventory is based on assuming that forests, when harvested, release their stored carbon to the atmosphere. Why do we ignore this sink? Lumber exports to the US alone represent a give away of about 40 million tonnes of carbon dioxide sink annually. Canada needs to step well back from policy on sinks which is constrained by perverse thinking whose sole goal seems to be to create permanent forests.
Paragraph 104 poses a question as to how long carbon credits must be sequestered to be considered an emission reduction. Mother natures guidance certainly suggests a very long time. Perhaps this question needs to be refocused to ask how humans can understand her systems and help her maintain her direction. Can we redirect the processes we have established with fossil fuel, agriculture and forestry resources to help her? That seems to be the key to sustainable development.
Paragraphs 105 to 123 seem to wander off into a discussion of risk management and insurance with respect to scientific and technical issues which are barely known. Is that premature? It seems the discussion is very highly theoretical and impractical. Any foray into assigning credits for removals projects will be fraught with mistakes initially. Perhaps this could just be accepted as part of the cost of a learning or research and development process. Indeed, the issue of non-permanence could be identified as a need to develop stronger science, and offset credits viewed simply as a source of funding for the development of removal techniques with permanence.
5 Application of the Proposed Framework to Selected Sectors
Paragraphs 124 to 156 address the issue of offsets for forests. Paragraph 126 asks if there are reasons not to include forest projects in an offset system. There are.
The most basic concerns relate to the possibility Canada has accepted a wooden nickel from other negotiators. Canada’s forests seem to be a huge sink asset. Still Canada exports tens of millions of tonnes of absorbed CO2 in forest products every year without any accounting for it. Harvesting of forests and managing the carbon they contain is the key to establishing continuing carbon dioxide removals via our forests. A transparent explanation and rationale for the restrictions on forest sinks coming from the Kyoto negotiations needs to be established and brought forward. Lacking that, Canada should not engage in actions which perpetuate lack of recognition of our forest sinks.
Perhaps implementation of offset credits in forestry could be considered as part of a Canadian fund raising system to support the development of a science based system of managing greenhouse gas cycling associated with our forests.
Paragraphs 157 to 182 are devoted to offsets related to agricultural sinks. Paragraphs 158 and 160 make much of the idea that soil carbon storage is limited. Again this appears to be based on thinking constrained by the idea that such storage is limited to that which prevailed before humans converted much of Canada’s land to agriculture over the past couple of centuries. Do we really know how carbon stocks in soil were established over previous millennia? Why would we assume that Mother Nature can’t take soil carbon stocks even higher than the level established before humans exerted their influence? Are humans her key for carbon management through the development of modified agricultural and forestry practice?
Paragraphs 183 to 203 relate to possible offsets for landfill gas management. Attention focuses on managing the releases from these. This seems very short sighted. Managed landfills are very new technology. A step back from looking at the details leads one to realize landfills may be an inadvertent emulation of Mother Natures long time work to sequester carbon with the establishment of fossil fuels. Our new focus on managing sinks may be better served if we appreciate that there may be better ways to utilize organic carbon wastes as materials supplies or as permanent sinks. Alternate techniques may simply bypass the current concern with landfill gas. If this turns out to be the case, the many earnest questions posed become irrelevant.
Paragraphs 204 to 211 briefly discuss other sectors. Paragraph 206 suggests the supply of electricity from non-emitting sources and projects would not be eligible to create offsets. The rationale given is that they would be covered by the LIE backstop/covenant system. Although the public is not privy to progress on that system, there is little reason to assume it will provide incentives to electricity production from non-emitting sources. Since non-emitting electricity production is one of the biggest potential sources of emission reduction an offset system should contemplate inclusion of offset credits created by non-emitting electricity production including solar, wind, water, nuclear and clean coal technology on an equitable basis.