Lawyers in Canada: Davis LLP - Legal Advisors Since 1892

Environmental infrastructure - it's broader than you think

It seems every time I pick up the paper or get an email there is an environmental infrastructure project waiting to be developed. 'Environmental infrastructure' is the label I use to refer to projects that are either aimed at improving or restoring the natural environment, or are at least looking to do business better than usual with respect to the environmental externalities of the industry.

Take for example oil and gas production. I know a number of people who would be confused, if not outright offended, by my use of the term 'environmental infrastructure' when referring to an oil and gas project. After all, doesn't the consumption of fossil fuels create greenhouse gases, which in turn contribute to global warming? How could the promotion of a oil and gas project be 'environmental infrastructure'?

Well, the Community Research and Development Centre in Nigeria held a conference entitled "Promoting Renewable Energy and Energy Efficiency in Nigeria" on November 21, 2007. One of the topics covered was oil and gas production, and specifically the flaring stats of the oil and gas producers in Nigeria.

For those of you who are unfamiliar with the oil and gas industry, flaring is the process of burning off 'waste gas', in this case in during the extraction of crude oil. Nigeria is currently the world's largest source of emissions from flaring, contributing more than 20% of the world's total emissions.

However, in some ways, flaring is better than letting the waste gases escape. By combusting the waste gas, it is turned from greenhouse gases with high CO2 equivalence into CO2. This helps reduce the total greenhouse gas impact of the project. A better solution however would be to capture and store the gas and to then use the gas as a source of energy. This would not only reduce the emissions (as is done by flaring) but it would allow for a fuel switch from energy sources that are less efficient (thereby generating more carbon credits by reducing the impact of a second industry). If done properly, it could also help address some of the major concerns around flaring in Nigeria.

Yes this is not a project that produces zero emission energy with no visual, social or other impacts, but it is a project that could improve the environmental impact of the oil and gas industry in Nigeria. For this reason, capture and storage of waste gases as an alternative to flaring falls within the scope of 'environmental infrastructure'. As such it is one of the many projects that people should be looking to invest in, not only for the benefits the project brings (improved rates of resource extraction and a secondary product for sale) but also for the fact that it minimizes environmental degradation. Thankfully, more and more environmental costs are beginning to be recognized in the market economy, and as a result, it is now possible to find partners who are willing to fund projects that minimize those impacts.

BC Introduces Greenhouse Gas Reduction Targets Act

On Tuesday, November 20, 2007, the Greenhouse Gas Reduction Targets Act (BC) was introduced for first reading. Once passed by the BC legislature the Act will set two province wide targets for greenhouse gas reductions:

• by 2020 and for each subsequent calendar year, BC greenhouse gas emissions will be at least 33% less than the level of those emissions in 2007; and
• by 2050 and for each subsequent calendar year, BC greenhouse gas emissions will be at least 80% less than the level of those emissions in 2007.

In addition, targets for 2012 and 2016 are to be set by regulation before the end of 2008. The government will also grant the Minister of Environment the ability to set targets for other interim dates.

Although the Act does not state how the province will achieve this goal. What it does do however is set targets for making all levels of government, and all government facilities, carbon neutral. It also grants the minister the ability to regulate sources of greenhouse gases and emission offsets. Although only binding in the context of the governments commitment for going carbon neutral these will be the first signals to the rest of the province with regards to the offset regime and will be watched with interest.

IPCC Synthesis Report sets the stage for the Bali negotiations of Kyoto Part 2

Submitted by Andrew Lord

The negative impacts of global warming are already occurring and will only get more severe if the world continues to run business as usual. However, many of the negative impacts - both natural and economic - can still be mitigated, particularly if the world acts now to reduce its emissions of greenhouse gases.

This is the message of the Intergovernmental Panel on Climate Change (the "IPCC"), which released its final report on climate change on November 16, 2007 (a summary of which is available here). The report, the fourth and final of a series released by the IPCC, synthesizes reams of data and conclusions from the previous reports. It is the first report to be issued since the IPCC received a Nobel Prize for its efforts in combating climate change.

The report is expected to be a key reference during the upcoming negotiations in Bali, Indonesia, during which world leaders will craft a treaty to replace the Kyoto Protocol after 2012. Those negotiations are expected to be polarized. On the one hand, countries like the US, Saudi Arabia, and China, who attempted to soften the conclusions in the report, will likely resist any attempts to cap emissions. On the other hand, developing countries, whom the report forecasts will be hit early and hard by the effects of global warming, and progressive countries like members of the EU will likely push for more immediate and concrete action to mitigate emissions.

The following are some of the highlights of the report:

That global warming is occurring is "unequivocal." There is evidence that natural systems in every continent are already being affected by increased average temperatures.

Global warming is very likely the result of human emissions of greenhouse gases. These emissions are certain to continue growing given the current policy status quo.

Given the status quo, global warming will continue to get worse and to produce much more severe negative effects than in the past century. These negative effects will be unevenly distributed across industrial sectors and across socio-economic regions, with developing countries likely to suffer disproportionately.

Both adaptation and mitigation efforts will be required to deal with the problem. Mitigation efforts, particularly those undertaken soon, can help to reduce, delay or avoid some of the negative impacts of global warming.

The report concludes that the cost of timely mitigation is likely to be much less than the economic impact of unchecked global warming.

Battle of the voluntary emissions standards heats up

Submitted by Andrew Lord

Yet another standard for voluntary carbon credits was launched this week. However, the proliferation of new standards risks clouding the air rather than clearing it.

The launch of the aptly named Voluntary Carbon Standard ("VCS") was announced on November 19, 2007. The VCS is the product of a two-year consultation between The Climate Group, the International Emissions Trading Association ("IETA"), the World Business Council for Sustainable Development ("WBCSD"), and other NGOs and market specialists. The standard is in part a response to the growing concern that the voluntary market may be infested with credits of dubious quality and value. The VCS rules are intended to be as robust as those under the Kyoto Protocols' Clean Development Mechanism ("CDM"). Consequently, credits generated by projects that comply with the VCS should be seen as more reliable - and therefore more valuable - than credits generated by projects that follow other standards (or no standard at all). Proponents of the VCS are therefore confident that the standard will be widely adopted as buyers become more discerning.

However, at least two NGOs have already issued critiques of the VCS. Climate Focus' critique suggests that the VCS is as cumbersome as the CDM and therefore does not add any new value to the certification market. Climate Focus also calls into question the legality of provisions of the VCS dealing with ownership of credits and the interface of the VCS credits with Kyoto AAUs. WWF's critique focuses on what it describes as "loopholes" in additionality rules and validation/verification processes. With respect to additionality, WWF is concerned that the VCS will allow developers to receive credits (which are intended to overcome the financial barriers to "better than business as usual" operations) for projects that merely replicate normal market behaviour or respond to regulatory requirements. WWF's concerns about validation and verification may be mitigated as complementary certification programs for greenhouse gas professionals are developed (see, for example, the programs of the Greenhouse Gas Management Institute).

The VCS just one of several recent standards created in an attempt to increase the rigour and transparency of the voluntary market. For example, Ecoenergy International launched a Code of Best Practice for Verified Emission Reductions at the end of October. A proliferation of competing standards may confuse, rather than help, those who wish to certify the credits they generate.

That confusion will no doubt be exacerbated by the introduction of complementary specifications for emissions reductions projects, the most widely recognized being the ISO 14064 series of standards (described by one service provider here). "Specifications" are not the same as "standards." Specifications tell project developers what they need to do to make their emissions reductions verifiable. Standards tell project developers how to measure reductions so that those reductions are directly comparable to those from similar projects. To offer an accounting analogy, a specification would state that one must prepare annual statements while a standard would specify the rules governing the content of those statements.

In addition to standards and specifications, some organizations are offering other products that are intended to give emissions reductions projects better exposure in the marketplace. For example, the Canadian Standards Association offers a couple of registry products where qualified projects may be publicly posted.

What seems to be emerging is a "brand war" between organizations offering standards, specifications and other emissions reduction certification products. In the short term, this war may leave project developers and investors shell shocked. In the longer term, the victor (or victors) will be determined by credit buyers whose choices will determine what constitutes a high-quality credit worth paying for.