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Briefing to the PM on achieving Copenhagen, ramping up ambition post-2020 and not hurting hard worki

Prime Minister,

The UN’s timeline requires Canada to submit a post-2020 GHG target before the end of June. With the first step in our strategy now complete, signalling last week we would not align with the US on its 2025 GHG target, we now need to finalize our pledge.

In this briefing, I outline one scenario where Canada makes a realistic post-2020 GHG pledge while ramping up ambition to close the gap to our 2020 targets. In a seperate note I outline a pure political move that sets the INDC at -30% below 2005 in 2030.

To close our 2020 Copenhagen gap, Canada needs another 113 Mt of emission reductions, but this number is uncertain given oil prices. Still, the gap is considerable regardless of energy production forecasts. On top of this gap, we also have to consider what else we can achieve to 2025.

Our position to not align with the US on their -26% to -28% reduction below 2005 in 2025 was practical, avoiding a commitment of another 65 Mt of reductions on top of the 113 Mt 2020 gap. If we would have aligned with the US, reductions equal to ¼ of current Canadian emissions would have been required between now and 2025, with carbon costs twice as high as the US.

The question now becomes what post-2020 GHG target do we pledge?

First, there are no major economies that we can look to align on quantity targets. Simply, our oil and gas sector is unique globally, making alignment elsewhere problematic.

Based on our analysis of Canada’s national circumstance, a pledge of -20% below 2005 in 2025 is feasible. A pledge of this level would more or less align with the US on carbon costs, enabling us to message we are “maintaining competiveness” to our base.

Still, a -20%/2005 in 2020 pledge will be panned at home and abroad. To provide political cover for a perceived weak target, we should pledge a contingent target, meaning we will revise the target upwards in 2020 should our major trading partners deliver on their current pledges. This is an approach Norway adopted for their 2020 Copenhagen target.

To add credibility to the pledge, and gain us some cover at home and abroad, we need to outline a well-resourced plan in short order. The elements of the plan need to be designed to gain votes at home, and gain some credibility globally to help facilitate our foreign policy goals. As the G20 Brisbane Summit demonstrated, our $300 million commitment to the Green Climate Fund signals just how embedded climate has become in geopolitics.

To implement the -20% pledge, a significant shift will be required in our position, but a shift that can allow us to continue to message our opposition to carbon pricing.

We could also signal we will achieve our Copenhagen pledge. Surprising perhaps, but doable with a mix of regulatory action and a commitment of $400 million annually between now and 2020.

The plan has three elements.

First, credibly signal we will implement regulations for heavy industrial emitters including oil and gas. We can role these out in short order given regulatory efforts to date. For now a Notice of Intent signalling we are preparing regulations should be sufficient. Even if we go to Canada Gazette I with proposed regulations next year, we can’t expect significant reductions before 2020. Yet, regulations finalized before 2020 should be able to reduce emissions in the order 16 Mt by 2025 at an average cost to industry equal to our coal-fired power electricity regulations. We also need to signal our continued regulatory push on vehicle and energy efficiency standards.

Second, directly finance domestic low cost reductions. There are multiple reductions to be had at home that we can purchase directly between now and 2020. The bonus of focusing at home is we can spread the purchases throughout the federation. To do this, we would establish a programme for emission reduction purchases from existing systems, including reductions enabled with B.C’s Carbon Neutral Capital programme, Alberta’s Specified Gas Emitter Regulations, and Quebec’s Green Fund. We would also develop rules for the other provinces to supply reductions, prioritizing homes and clean energy. For $200 million annually, we could likely get in the order of 20 Mt total before 2020, while setting up a longer term facility to deliver economy-wide reductions towards our post-2020 pledge.

Third, directly finance global low cost reductions. While we could set up our own financing mechanism to source international reductions, Japan’s experience shows it is slow going. Instead we could access existing GHG supplies, at least prior to 2020. The Clean Development Mechanism alone has over 1,400 Mt of verified emission reductions available at average prices below $4 tonne. For a cost of $200 million annually out to 2020 we could close our Copenhagen gap. Such purchases would be popular abroad, especially if we targeted reductions from least develop countries, touting the development benefits that are bundled with the GHG reductions.

To role this strategy out, we need to first announce our new target while also indicating we will stay committed to our Copenhagen pledge. At the same time, we need to outline the three point plan that initiates regulatory action while committing climate finance at home and abroad.

As you know from previous briefings, the preferred cost-effective policy complements our sector-by-sector approach by helping to unify fragmented carbon pricing schemes nationally. But this scenario is perhaps better left to our next mandate.

April, 29, 2015

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