Josephine V. Yam

Canada Reports Great Progress in Meeting 2020 Emission Target

On August 9, 2012, the Honourable Peter Kent, Canada’s Environment Minister, announced that Canada is half way towards meeting its 2020 greenhouse gas (GHG) emission target. Said Minister Kent: “Using a sector-by-sector approach, our Government has taken action on two of Canada’s largest sources of emissions: electricity and transportation.”

Minister Kent referred to the Canada’s Emissions Trends Report 2012 (the “Report”) that shows a projection of GHG emissions to 2020. When Canada signed the Copenhagen Accord in December 2009, it committed to reduce its GHG emissions to 17% below 2005 levels by 2020, setting a target of 607 Megatonnes (Mt). In 2011, Canada’s GHG emissions were projected to be 785 Mt in 2020. Since then, GHG emissions are now projected to be 65 Mt lower at 720 Mt in 2020.

The Report cites four main factors that have contributed to the decline in projected emissions, when compared to 2011:

The first factor is that GHG emissions are increasingly becoming decoupled from economic growth.

The Report notes that between 2009 and 2010, Canada’s GHG emissions remained steady despite economic growth of 3.2%. The Canadian economy has experienced a substantial decline in energy intensity as industrial processes have become more efficient and lower-emissions and service-based industries have grown. Moreover, GHG emissions from energy generation have declined, primarily due to changes to the electricity generation mix (i.e. from coal to natural gas and renewables) and closure of coal-fired generating units. Thus, economic growth and the level of GHG emissions are becoming increasingly independent of each other. For example, between 2005 and 2010, the Canadian economy grew by 6.3% while its GHG emissions decreased by 6.5%.

The second factor is projected growth for the emissions-intensive sector is now lower, while such growth is now higher for the less emissions-intensive sectors. This reduces projected GHG emissions in 2020, even though total Gross Domestic Product (GDP) is projected to be slightly higher.

According to the Report, emissions intensity continues to improve through 2020 with help from federal, provincial and territorial actions. The projected decline in GHG emissions is associated with a reduction in intensity, implying greater de-coupling between GDP and GHGs. The improvements in emission intensity are partly due to the increased contribution of the services sector, which typically emits less GHG emissions per dollar of GDP and the fact that consumers and businesses are making more progress in reducing emissions while the government helps accelerate the adoption of energy efficient technologies and cleaner fuels.

The third factor is the inclusion in the projections of the contribution of the land use, land-use change and forestry (LULUCF) sector to achieving Canada’s GHG emission target.

The Report notes that, for the first time, there is recognition of the contribution of the LULUCF sector, which has been globally recognized as an important consideration in global accounting frameworks for emissions reductions. Current estimates of this sector’s impact suggest a net contribution of 25 Mt of GHG emissions towards the Canada’s 2020 target.

The fourth factor is that the 2012 projections have a new, lower starting point because the most recent data show that GHG emissions were significantly lower in 2010 than had been previously estimated.

According to the Report, in 2011, GHG emissions were estimated to be at 710 Mt. However, Statistics Canada subsequently reported that Canada’s actual GHG emissions in 2010 were at 692 Mt.

The full text of Canada’s Emissions Trends Report 2012 can be accessed at this link.

Federal Court of Canada Holds that Canada can Legally Withdraw from Kyoto Protocol

On January 13, 2012, Daniel Turp filed an application with the Federal Court for judicial review of the Government of Canada’s decision to withdraw from the Kyoto Protocol. Its decision to withdraw was communicated to the Secretary General of the United Nations on December 15, 2011. Turp asserted that withdrawal from the Kyoto Protocol was illegal as it was in violation of the Kyoto Protocol Implementation Act (KPIA), among others.

On July 17, 2012, in Turp v. Canada, the Federal Court dismissed the application for judicial review. It found, among other things, that the KPIA, which established certain climate-change-related reporting obligations on the Canadian government, did not limit its royal prerogative to withdraw from the Kyoto Protocol. Thus, the government’s decision to withdraw from the Kyoto Protocol did not violate the KPIA.

The full decision of Turp v. Canada can be accessed at this link:
http://cas-ncr-nter03.cas-satj.gc.ca/rss/T-110-12%20kyoto%20decision%20ENG.pdf

Thoughts on the Corporate Knights Best 50 Canadian Corporate Citizens List

I read with great interest the Corporate Knights Best 50 Corporate Citizens in Canada. The metrics used in arriving at the Best 50 list were very comprehensive, as they ran the gamut of environmental, social and governance (ESG) indicators.

For Environmental indicators, the following metrics were used:
• energy productivity
• carbon productivity
• water productivity
• waste productivity

For Social indicators, following metrics were used:
• ratio of CEO remuneration to lowest-paid employees
• number of injuries and no lost-time accidents per 1M hours worked
• average % of taxes paid over past 4 years
• funded status of defined- benefit plan benefit obligations

For Governance indicators, following metrics were used:
• existence of sustainable development-themed board committee
• existence of a link between sustainability criteria and senior executive’s compensation
• percent of women, Aboriginal, and visible minorities on Boards of Director

Needless to say, I was very surprised to learn that a lot of companies were coming from the Oil, Gas and Consumable Fuels industry and from the Metals and Mining industry. This is because these industries have the reputation of having as corporate members the heavy polluters and large emitters of GHGs.

I was also very surprised that the list had an economy-wide scope of a plethora of industries – from insurance to independent power producers, to commercial banks, to media, to capital markets, to professional services, to retail and to diversified telecommunications, in addition to the oil, gas and consumable fuels, and the metals and mining industries. This evidences that the ESG indicators have become acceptable benchmarks in the larger mainstream sectors of Corporate Canada.

In view of these revelations --- including the discovery of companies in the “notorious” Oil, Gas and Consumable Fuels and the Metals and Mining industries in this list ---- my traditional perception of such companies in these industries has been radically altered. But then again, it should probably not come as such a surprise to me. This is because if these resource-based companies ignore ESG indicators in their overall operation and management of their companies, they only do so at their peril.

Written: 2011 December
Reference:
The Corporate Knights Best 50 Corporate Citizens in Canada at http://www.corporateknights.com/report/2011-best-50-corporate-citizens-canada/2011-best-50-corporate-citizens-canada