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Globe and Mail Editorial Rejects International Carbon Credits for LNG Exports

The Globe and Mail editorial board is weighing in against the fossil industry’s increasingly faint hope that Canada can earn international carbon reduction credits for exporting liquefied natural gas (LNG) to Asia.

While a single Canadian export terminal, the heavily-subsidized, C$40-billion LNG Canada megaproject  now under construction in British Columbia, would produce four million tonnes of greenhouse gas emissions per year, LNG export promoters “argue that exports could, in theory, displace coal power in Asian countries. More electricity from LNG and less from coal is a win for the planet, because emissions do not abide by international borders.” The Globe notes that CIBC CEO Victor Dodig bought into that argument in an opinion piece last month, as did chief fossil lobbyist Tim McMillan, CEO of the Canadian Association of Petroleum Producers last week.

“We obviously not just think that Article 6 is extremely important, but it’s the largest contribution Canada can make,” McMillan said.

“The hope that Canada can get credit for LNG exports is pinned on Article 6 of the Paris Agreement,” the Globe explained, in the days before negotiations on the provision collapsed in Madrid. “Article 6 raises the possibility of swapping emissions credits between countries.”

But if it’s a matter of using that kind of carbon trading mechanism to earn credit for exporting a fossil fuel, “if this sounds a little too good to be true, that’s because it is.”

Newly-installed Environment Minister Jonathan Wilkinson said as much, referring to the “big, big emissions” that LNG produces and holding out no immediate promise that Article 6 could fund LNG exports. “This only make sense,” the Globe editors write. “The first clause of the article talks about ‘higher ambition’ in taking on climate change. Building more fossil fuel infrastructure doesn’t fit this bill.”

The editorial also points to a practical problem that has been much discussed in the days since Wilkinson’s statement. “Why would another country hand over credit for lower emissions to Canada? If Country X decides, ‘Yes, let’s buy Canadian LNG, and let’s not build another coal plant,’ why would Country X offer the reduced emissions to Canada rather than book them within its own borders? LNG Canada, an international consortium run by Royal Dutch Shell, will sell gas at market prices. The buyers have no incentive to give Canada anything.”

Even if the two countries did strike a deal under Article 6 [and at this point, presuming Article 6 is ever adopted as a trading mechanism—Ed.], they would amount to yet another Canadian taxpayer subsidy for LNG. “The credits would likely be costly— a cost that would be shouldered by all Canadians. And how exactly will it be proved that LNG displaces coal rather than, for example, discourages investments in renewables?”

Trading emissions credits among countries “is perfectly reasonable,” the Globe concludes, and “Canada does have a real stake in Article 6—but it’s not LNG.” And while the editors point to the opportunity for Canada to meet some of its Paris commitment by buying international credit, “to pin much hope on the article for Canada’s emissions reductions is an unwise strategy. It will play only a small supporting role in the real fight against climate change.” Like Wilkinson, the editors put most of the emphasis on domestic emission reductions.

“On LNG, the federal government’s newfound skepticism is especially warranted,” they write. “An essential pillar of the UN Framework Convention on Climate Change is territorial emissions. An LNG plant in B.C. produces emissions in that province. Developing more fossil fuels comes at a cost, and it’s not realistic to hope Canada gets credit for doing so.”