Using Blockchain to Avoid Double Counting While Empowering Everyone to be Part of the Solution

Today’s side event at COP24 for Blockchain Technology for Enhanced Climate Action emphasized the importance of distributed ledger technology (DLT) to accelerate mitigation solutions for climate change and empower non-country parties to work together. The event featured the Climate Chain Coalition Screen Shot 2018-12-11 at 1.12.56 AMfounded just one year ago but already bringing together 140 organizations with a mission to mobilize climate finance and enhance monitoring, reporting and verification of climate goals.

Blockchain technology is a form of Distributed Ledger Technology (DLT). (For a good explanation of this technology see this World Bank Group 2017 report.)Screen Shot 2018-12-11 at 1.22.55 AM It functions as a decentralized database that can securely store data and digital assets, like environmental credits or certificates. Transparency is increased because the data recorded on the blockchain is a permanent ledger that cannot be modified. Trust between parties is increased because the data is not stored in a centralized location but rather through peer-to-peer transactions. Transaction costs are reduced enabling much smaller transactions that are accessible to more individuals.

A new report issued this week by the Climate Ledger Initiative (a collaboration of several think tanks aiming to accelerate climate action) Navigating Blockchain and Climate Action identified three main areas where blockchain has the most potential to accelerate climate action: 1) next generation registries and tracking systems; 2) digitizing measuring, reporting and verification; and 3) creating decentralized access to clean energy and finance.

The UNFCC has identified blockchain technology as a disruptive technology that has the potential to solve the solution to the main challenge of “how do you attribute the climate contribution while avoiding double counting.” Under the Paris Agreement (PA), a country steps up by submitting their commitment to mitigation measures as their Nationally Determined Contributions (NDCs). Theoretically, the development and continued revision of these NDCs will govern the Parties and their climate commitments under the Paris Agreement. But the Paris Agreement also encourages developed countries to finance projects in developing countries. Screen Shot 2018-12-10 at 5.41.57 PMWho gets the credit toward the NDC – the country financing the project or the country implementing the project? How do we ensure that one country (or entity) doesn’t take credit at one stage of a project and another take credit at a different stage? The security and transparency of blockchain may be the solution. (However, keep a healthy dose of skepticism, said CEO of Goldstandard, Marion Verles, because many times technology solutions are being proposed that don’t actually solve the real world problem.)

Climate change is the seminal issue of our generation and requires all hands on deck. As Massamba Thioye of the UNFCCC said today, “We need to mobilize ALL stakeholders, suppliers, financiers, consumers, citizens, policy makers so that they make the right investment.” The challenge being faced is how do we all work on the solution and create market incentives. Ms. Verles identified the importance of DLT technology in the supply chain to help corporations get the critical data they need to make decisions on the impact that a good has on the planet (carbon impact, water impact, etc).

See GLOCHA - the Global Citizen Empowerment System

See GLOCHA – the Global Citizen Empowerment System for Full Poster

This information can move to the end consumer. If you knew, and could compare, the carbon impact of items you were purchasing, would you pay a little more to make a cleaner purchase? The bottom line is that blockchain has the potential to add a value stream to products that represents the intentional choices of individuals, companies, and countries to work toward a cleaner, safer planet.

(Note bitcoin uses blockchain technology in a very energy intensive manner that is not healthy for our planet – see fellow VLS student Ben Canellys blog here.)

 


Canadian Carbon Pricing System Moving Forward

As the world gears up for COP24, the Canadian government reaffirmed its intention, on October 23, 2018, to implement a federal carbon pricing system across Canada in 2019.

DcDre-xU0AAUhvwAs set out in its Nationally Determined Contribution (“NDC”) submitted to the UNFCCC under the Paris Agreement, Canada committed to reduce GHG emissions by 30% below 2005 levels by 2030. To that end, Canada proposed adopting various measures to transition to a low-carbon economy, including a federal carbon pricing system. In 2016, the government published the Pan-Canadian Framework on Clean Growth and Climate Change ,(“Pan-Canadian Framework“) which outlined a benchmark for pricing carbon pollution requiring all ten (10) Canadian provinces and three (3) Canadian territories to have a carbon pricing system in place by 2018, in their respecting jurisdiction (the “Benchmark“). Provinces and territories had the option to either implement i) an explicit price-based system (i.e. a carbon tax like in British Columbia or a carbon levy and performance-based emissions system like in Alberta) or ii) a cap-and-trade system like in Quebec.

Pursuant to the Pan-Canadian Framework, the federal government was to introduce an explicit price-based carbon pricing system in order to cover jurisdictions that will not have met the Benchmark requirements within that two year period.

In that regard, earlier this year, the Greenhouse Gas Pollution Pricing Act (the “Act”) (the Federal Backstop), received Royal Assent on June 21, 2018. The Act outlines two compulsory mechanisms which will be applicable to jurisdictions that did not meet the Benchmark:

  1. a charge on fossil fuels that are consumed within a province (generally to be paid by fuel producers and distributors) which will start applying in April 2019; and
  2. an output-based pricing system, to be applicable to emission-intensive industrial facilities (i.e. facilities emitting 50,000 tonnes of carbon dioxide equivalent/year or more, etc.), to be applicable as of January 2019.

The majority of Canadian jurisdictions have either developed their own carbon pricing systems or elected to adopt the federal system:

The holdouts—Manitoba, Ontario, Saskatchewan and New Brunswick—having either failed to adopt measures that meet the federal Benchmark stringency requirements or declined to propose their own carbon-pollution pricing systems. They will be obligatorily subject to the federal carbon pricing system.

The main requirement of the federal system is to attribute a $20/tonne cost on emissions as of April 2019, which will rise by $10 each year, reaching $50/tonne in 2022. The federal government has committed to return direct proceeds collected under the federal carbon pricing backstop system to provinces.  This may happen via one of three methods: 1) providing individuals and families “Climate Action Incentive payments;” 2) providing support to schools, hospitals, small and medium-sized businesses, colleges and universities, municipalities, not-for-profit organizations, and Indigenous communities; and 3) supporting reductions in GHG emissions in such provinces.

Chart_Pricing carbon in CanadaIt remains to be seen whether or not the Canadian carbon pricing plan will help Canada meet its NDC commitments and contribute to the overall long-term goal of the Paris Agreement of holding the increase in the global average temperature to well below 2 degree Celsius above pre-industrial levels and of pursuing efforts to limit that increase to below 1.5 degrees.

 


Equity Takes Center Stage in Global Stock Take Discussions

In determining the modalities, procedures, and guidelines for the Global Stock Take under Article 14 of the Paris Agreement, equity is the name of the game. Parties joining the first informal consultation on the Ad Hoc Working Group on the Paris Agreement on November 7, 2017 have repeatedly mentioned the need for considering the impact of applying the principle of equity to the Global Stock Take. With the Transparency Framework’s emphasis on flexibility and the differentiation between the reporting requirements of the developed and developing parties, one would think that defining equity should be easy. This has not been the case.

Experts on the principle of equity were asked to weigh in on the matter at a side event held later the same day. These experts agree that equity in the Global Stock Take involves accounting for each Party’s “fair share” of the burden of curbing Green House Gas omissions so as to meet the 1.5 degrees Celsius target temperature. However, they do not agree on what “fair share” means.

Dr. Allison Doig of the Christian/ACTCOVER Alliance expressed the view that, in light of the urgency in which all Parties must begin addressing climate change, “fair share” means that Parties must “do more.” Parties will do things differently, but they must “do more.” According to a report published by the Civil Society Review, developing countries carry their “fair share” of the burden when they dramatically deepen their domestic mitigation and when they support developing countries’ actions to do the same. This is so because developing country Parties have expressed their willingness to do more, but they lack the capacity to achieve their goals. According to Dr. Doig, developing country Parties can only succeed with the help of developed countries and to carry their fair share, developed countries must extend help.

Prof. Ottmar Edenhofer of the Potsdam Institute for Climate Impact Research did not completely agree. To him, equity can only be achieved when Parties can measure and compare similar efforts done with similar technology. Current Nationally Determined Contributions do not reflect this, as Parties determine the point from which they will calculate their emission targets. Different times will have different technologies. Therefore, efforts based on NDCs are incomparable and cannot be the basis for determining equity. For Prof. Edenhofer, the answer to the issue of determining equity is an internationally harmonized carbon pricing.

Carbon prices, unlike NDCs, are comparable and transparent. If Parties can agree to carbon prices, equity can be easily determined through the Equal Effort Principle. Under this Principle, those that have to spend more to mitigate their carbon emissions will be compensated by the Green Climate Fund for their efforts. Those that can spend less to do the same will have to donate to the GCF. Their donations will go towards those who cannot easily afford to install emissions reduction technology. This way, all Parties are required to put the same amount of effort in curbing their emissions and no one country disproportionately bears the burden.

At the moment, these views are merely theoretical. Parties are still in the early stages of developing the modalities for the Global Stock Take. However, Parties need to begin looking into mechanisms for determining equity and fair share like the ones summarized above if they are to incorporate equity into the Global Stock Take.

 


Climate Change News from Across the Pond

Newsflash #1

france frackFrance has announced that it might stop importing shale natural gas from the United States because it’s extracted using hydraulic fracturing.  Fracking was banned in France in 2011. Two French utilities currently contract with Houston-based Cheniere Energy, which sells them liquified natural gas (LNG) comprised of 40% shale gas. Notably, this policy debate in France is taking place as the US seeks to step up its LNG exports to Europe.

Newsflash #2

UK national gridThe United Kingdom used no coal in the electricity that flowed from Britain’s National Grid between midnight and 4am on May 10. This is a first since the 19th century. A number of reasons contributed to this moment. A carbon tax has made coal unprofitable in the UK and led to increased use of renewables and gas. The UK has also signaled its intent to phase out coal by 2025. In addition to all the sound policy making, serendipity also played a role in the UK’s May 10 first:  a series of power plant breakdowns occurred!  For more details on this – and the bumps in transitioning to a clean grid, read here.


Pricing carbon: Is this the year?

At the close of COP21, French President Francois Hollande promised to build on the Paris Agreement by advocating for a global carbon tax.

ICAPPutting a price on carbon has been done at regional, national, and subnational levels thus far. Some jurisdictions have used the cap and trade approach while others have levied a carbon tax.

Today the International Carbon Action Partnership (ICAP) issued a report predicting that 16% of global GHGs will be covered by carbon markets by 2017, up from 9% in 2016. The report underscores that emissions trading schemes (ETS) are currently found on 4 continents, 35 countries, 13 provinces and states, and 7 cities.  Analyzing the coming growth, it points to pledges in the 185 INDCs filed pre-COP21 that indicated intent by almost half of these countries to use market mechanisms to mitigate GHG emissions.  ICAP specifically highlights China’s announcement in 2015 to expand its province-level pilot markets to a national market in 2017: once operational, the Chinese ETS will bypass the EU’s market as the largest in the world. The ICAP report also looks carefully at new efforts in North America, Latin America and the Caribbean, and greater Asia Pacific region.

On the carbon tax front, Canadian province British Columbia has applied a carbon tax to fossil fuel consumption in the province since 2008.  Currently, voters in Washington State are considering a ballot measure that would make it the first U.S. state to do the same. Over 350,000 Washington residents signed on to the initiative, which (similar to BC) would be a “revenue neutral” tax that would result in other state taxes being lowered.  South Africa is in the process of revising a carbon tax bill proposed last November, which is likely to be implemented in January 2017.

UPDATE:  On March 3, all ten Canadian province premiers will meet with Prime Minster Justin Trudeau to discuss a national carbon tax. Alberta Premier Rachel Notley supports a carbon tax while her peers from Manitoba and Saskatchewan oppose it.  Interestingly, the Ontario and Quebec premiers also oppose a national carbon tax, presumably due to their existing regional carbon pricing schemes.  A collection of energy sector business leaders, banks, unions, think tanks, and environmental groups have weighed in to support it.