The Throne Speech and the Environment

The good news is that yesterday’s Speech from the Throne, laying out the Federal Government’s policy agenda, contained a number of references to environmental policy. However, the value of the commitments seems to GallonDaily to be somewhat less than that which environmentally concerned Canadians might be seeking. Significantly, there is no reference in the Throne Speech to climate change, suggesting that the centre of government may not have got over its aversion to using those two words. However, the government does state that it will build on its record as the first government to achieve an absolute reduction in greenhouse gas emissions [see EUROPE WILL MEET CARBON EMISSION TARGETS: NEW SCIENCE-BASED REPORT below for an alternate perspective on this theme] by working with provinces to reduce emissions from the oil and gas sectors while ensuring Canadian companies remain competitive.

The Throne Speech also contains the following statements of intent related to environment and sustainable development:

  • Canada’s energy reserves are vast—sufficient to fuel our growing economy and supply international customers for generations to come. However, for Canadians to benefit fully from our natural resources we must be able to sell them. A lack of key infrastructure threatens to strand these resources at a time when global demand for Canadian energy is soaring. We must seize this moment. The window for gaining access to new markets will not remain open indefinitely. Now more than ever, our future prosperity depends on responsible development of these resources.
  • Our Government believes, and Canadians expect, that resource development must respect the environment. Our Government’s plan for responsible resource development includes measures to protect against spills and other risks to the environment and local communities. Our Government will:
    • Enshrine the polluter-pay system into law;
    • Set higher safety standards for companies operating offshore as well as those operating pipelines, and increase the required liability insurance;
    • Re-introduce the Safeguarding Canada’s Seas and Skies Act, to protect our oceans and coasts; and
    • Act on advice from the Expert Panel on Tanker Safety, to create a world-class tanker safety system in Canada.
  • Our Government has supported fishermen by ensuring proper management of fish stocks and by opening new markets worldwide. It will continue to be open to solutions, supported by fishermen, that strengthen the economic competitiveness of this traditional pillar of our coastal economy.
  • Forestry remains essential to Canada’s rural economy, supporting almost 200,000 jobs across the country. Our Government secured and extended the softwood lumber agreement with the United States. And our Government will continue to support innovation and pursue new export opportunities for Canadian companies.
  • Over the next decade, our Government will invest 70 billion dollars in federal, provincial, territorial and community infrastructure. Projects such as building subways in the Greater Toronto Area, replacing Montréal’s Champlain Bridge, building a new Windsor-Detroit crossing and constructing Vancouver’s Evergreen Line will create jobs across our country.
  • To foster Canadian productivity and global competitiveness, our Government provided 1.4 billion dollars in tax relief to manufacturing companies investing in modern machinery and equipment. And our new Advanced Manufacturing Fund will support new products and production methods.
  • Transformation of the National Research Council, doubling the Industrial Research Assistance Program, and the new Venture Capital Action Plan are all helping to promote greater commercialization of research and development.
  • Building on this strong foundation, our Government will release an updated Science, Technology and Innovation Strategy.
  • Our Government will continue making targeted investments in science and innovation chains from laboratory to market in order to position Canada as a leader in the knowledge economy.
  • Our Government will work with the provinces and territories to further strengthen food inspection regimes.
  • Our Government will consult with Canadian parents to improve the way nutritional information is presented on food labels.
  • Protect Canada’s rich natural heritage by unveiling a new National Conservation Plan to further increase protected areas, focusing on stronger marine and coastal conservation.
  • Complete, by 2015, its work to protect wilderness lands in Nááts’ihch’oh, Bathurst Island and the Mealy Mountains.
  • Work with communities, non-profit organizations, and businesses to create and protect more green space in our urban and suburban areas.
  • Take further action to improve air quality nationwide.
  • We will take targeted action to increase the safety of the transportation of dangerous goods.
  • Building community resilience can mitigate the worst impacts of natural disasters and other emergencies before they happen. Our Government will work with provinces and territories to develop a National Disaster Mitigation Program, focused on reducing the impact of natural disasters.
  • Our Government will help the world’s neediest by partnering with the private sector to create economic growth in the developing world.

Launching Canada’s National Zero Waste Council

Described by its founders as a cross-sectoral leadership initiative bringing together governments, businesses, and non-government organizations to advance a national waste prevention and reduction agenda in Canada, the National Zero Waste Council is being launched on October 16 at Metro Vancouver’s 2013 Zero Waste Conference.

The Council’s mission is

To act collaboratively with business, government and the community, at the national and international level, as an agent of change for waste prevention and reduction in the design, production and use of goods.

Its goal is

To support a high quality of life, environmental sustainability and economic prosperity while consuming fewer resources and less energy. Taking early action will ensure that Canada is well placed to effectively compete in a resource constrained world.

The founding chair will be the Mayor of Richmond BC with significant participation from municipalities, including Councillor Shelley Carroll from the City of Toronto, and the Canadian Council of Ministers of the Environment. Business representation is so far a bit sparse, comprising representatives from the Construction Resource Initiatives Council, the Globe Foundation, and Walmart. No doubt additional business participation will be welcome.

Gallondaily’s editor will be facilitating a session on The Art and Science of Zero Waste at the conference which launches the National Zero waste council. More details at http://www.metrovancouver.org/zwc/Pages/default.aspx

 

Europe will meet carbon emission targets: new science-based report

In a new 148 page detailed science-based report the European Environment Agency has declared unequivocally that it will meet its 2020 greenhouse gas emission targets, possibly with some time to spare. Most interestingly, the report identifies that all parts of the European plan are needed to meet the goal and that, as experts have suggested for some years, there is no silver bullet that has led to this successful outcome. This achievement is likely to put Europe in the lead of future global policy formulation as the only major trading block to have achieved its climate change objectives. Some of the key highlights of the report that may be relevant to Canadian business include:

  • although the recession had a significant impact in reducing emissions, these fell more in sectors covered by the European Emissions Trading System than in other sectors.
  • carbon sink activities, such as reforestation, are contributing about 1.5% of total emissions to emissions reduction [note that, perhaps confusingly for readers without strong involvement in the field, both carbon sink activities and flexibility measures are reported as an increase in the carbon emissions budget rather than as a decrease in emissions]
  • flexibility measures, such as emissions reduction projects in developing countries, are contributing a further approximately 1.9% of reduction of total emissions to emissions reduction
  • almost all individual European countries that signed on to the Kyoto Protocol are also on target to meet their commitments
  • Europe is on track to achieving 20 % of total energy consumption being renewable energy in 2020
  • only 4 EU countries (Bulgaria, Denmark, France and Germany) will meet the 20% energy efficiency target by 2020, meaning that many energy efficiency opportunities are likely to remain untapped for further work

This report, and an Executive Summary, is available at http://www.eea.europa.eu/publications/trends-and-projections-2013

Divestment of fossil fuel company stocks

Stranded assets are those investments which lose their value as a result of unanticipated or premature write-offs, downward revaluations or which are converted to liabilities. Stranded assets are of concern to investors because they mean that the value of the investment is lost prematurely. However, environmental advocates often seek to trigger stranded assets as a way of reducing environmental risks. One example is the current effort to encourage universities and other large investors to withdraw their investments from fossil fuel companies. If these initiatives were fully successful, which not even the environmental advocates who are promoting divestment believe is likely, then the companies’ stock prices would collapse and the value of the asset would be lost – a typical ‘stranded asset’ situation.

Currently, campaigners are encouraging universities and large investors to eliminate fossil fuels from their investment portfolios. The Stranded Assets Programme at the University of Oxford’s Smith School has undertaken research on the risks that arise from this type of campaign. Its latest publication, Stranded Assets and the Fossil Fuel Divestment Campaign: What Does Divestment Mean for the Valuation of Fossil Fuel Assets?, states that the aims of the fossil fuel divestment campaign are threefold: (i) ‘force the hand’ of the fossil fuel companies and pressure government—e.g. via legislation—to leave the fossil fuels (oil, gas, coal) ‘down there’ ; (ii) pressure fossil fuel companies to undergo ‘transformative change’ that can cause a drastic reduction in carbon emissions—e.g. by switching to less carbon-intensive forms of energy supply; (iii) pressure governments to enact legislation such as a ban on further drilling or a carbon tax. Inspiration for the fossil fuel divestment idea leans heavily on the perceived success of the 1980s South Africa divestment campaign to put pressure on the South African government to end apartheid.

The researchers have found that:

  • Direct impacts on equity or debt are likely to be limited. The maximum possible capital that might be divested from the fossil fuel companies represents a relatively small pool of funds. Even if the maximum possible capital was divested from fossil fuel companies, their shares prices are unlikely to suffer precipitous declines over any length of time.
  • Any divested holdings are likely to find their way quickly to neutral investors. Larger fossil fuel funded sovereign wealth funds such as Norway or Abu Dhabi may even welcome the opportunity to increase their holding of fossil fuel companies—businesses they understand very well—particularly if the stocks entail a short-term discount.
  • Direct effects on coal valuations are likely to be more substantial. Coal companies represent a small fraction of market capitalisation of fossil fuel companies and coal stocks are also less liquid. Divestment announcements are thus more likely to impact coal stock prices since alternative investors cannot be as easily found as in the oil and gas sector.
  • Negative screens or passive funds that exclude fossil fuel companies will quickly emerge. Some banks, particularly multilateral institutions such as the World Bank, may stop lending to fossil fuel companies, particularly coal.
  • Since a divestment campaign has little hope of directly impacting the future cash flows of fossil fuel companies, neutral debt or equity investors have little cause to shun to fossil fuel companies.
  • Divestment announcements are more likely to impact coal stock prices.
  • Divestment campaigns will probably be at their most effective in triggering a process of stigmatization of fossil fuel companies. We find that even if the direct impacts of divestment outflows are limited in the short term, the campaigns will cause neutral equity and/or debt investors to lower their expectations of fossil fuel companies’ net cash flows in the long term. The process by which uncertainty surrounding the future of fossil fuel industry will increase is through stigmatization. In particular, the fossil fuel divestment campaign will increase legislative uncertainty and potentially also lead to multiples’ compression causing more permanent damage to the companies’ enterprise values.
  • Stigmatization, while likely to cost fossil fuel companies billions, is unlikely to threaten their survival. Coal companies will probably be the hardest hit segment of the market.

The report makes recommendations to investors, fossil fuel companies, and campaigners on how to manage these risks.

The full report is available at http://www.smithschool.ox.ac.uk/research/stranded-assets/SAP-divestment-report-final.pdf

 

Aviation industry may become a world leader on GHG strategies

At its meeting in Montreal last week the International Civil Aviation Organization took a big step towards a global strategy to reduce greenhouse gas emissions. We must not get too excited, however, because the vote was primarily only for a program to develop a plan for implementation in 2020. Nevertheless, if ICAO follows through, and there will be more votes on the plan between now and 2020, then aviation could be the first industry sector to adopt a global initiative designed to reduce GHG emissions. Imagine how much of a model this could be if other industry sectors: mining and metals, oil and gas, shipping, and more, followed through with similar initiatives.

Known by ICAO as a market based measure (MBM) it is anticipated that the ICAO approach will not be cap and trade, like the temporarily suspended  European Union program for airlines, but may be in the form of a levy on GHG emissions, possibly with an accompanying offset program funded by the ICAO. While they supported the vote for this program at ICAO, Europe is understood to be considering its options for its own cap and trade program and may decide to reinstate it when the suspension ends next year.

The ICAO initiative is likely to add to already increasing air fares and air cargo costs. Air cargo represents less than 10% of world trade by volume but more than 30% of world trade by value. Either way, air freight is a part of many of the products on the market today.

The ICAO is a specialized agency of the United Nations established to sets standard and regulations for aviation safety, security, efficiency and regularity, as well as for aviation environmental protection.

The ICAO announcement of the adoption of the GHG program is available at http://www.icao.int/Newsroom/Pages/mbm-agreement-solid-global-plan-endoresements.aspx  [note that the typo is part of the url, or you may go through the ICAO main page at http://www.icao.int/

Climate change denial is often a characteristic of conspiracy theorists

Research undertaken by university-based psychology researchers through a survey of a sample of the American population has studied the linkage between conspiracy theory and the rejection of science. The paper, published in the peer-reviewed journal PLOS ONE, presents a number of interesting findings, including the following excerpted from the report:

  • American Conservatives, but not Liberals, trust in science has been declining since the 1970’s. Climate science has become particularly polarized, with Conservatives being more likely than Liberals to reject the notion that greenhouse gas emissions are warming the globe. Polarization is particularly pronounced with respect to climate change: People who embrace a laissez-faire vision of the free market are less likely to accept that anthropogenic greenhouse gas emissions are warming the planet than people with an egalitarian-communitarian outlook.
  • Conversely, opposition to genetically-modified (GM) foods and vaccinations is often ascribed to the political Left although reliable data are lacking.
  • Conspiracist ideation is associated with the rejection of all scientific propositions tested. The involvement of conspiracist ideation in the rejection of science has implications for science communicators.
  • Free-market worldviews are an important predictor of the rejection of scientific findings that have potential regulatory implications, such as climate science, but not necessarily of other scientific issues.
  • The role of worldview may be attenuated by underscoring the breadth of consensus among scientists: When people are informed of the pervasive consensus about the fundamentals of climate change, they become more likely to endorse the basic premise of global warming, and they attribute a larger share of the observed warming trend to human CO2 emissions.
  • Opposition to vaccinations involves a balance between two opposing forces, namely a negative association with free-market endorsement and a compensatory positive association with conservatism. The different polarity of those associations is consonant with the notion that libertarians object to the government intrusion arising from mandatory vaccination programs, whereas people low on conservatism—who, by implication, are liberal or progressive—may oppose immunization because they distrust pharmaceutical companies. The latter link, however, was far from overwhelming.
  • Opposition to GM foods was not associated with the worldview constructs. This result is striking in light of reports in the media that have linked opposition to GM foods with the political Left based on statements by political figures. The results provide no evidence that this link holds in the American population at large. This finding is consonant with the fact that among liberals trust in science has remained high and stable since the 1970s.
  • People who endorse one conspiracy are known to be likely to also endorse multiple others; thus, the belief that AIDS was created by the government has often been found to be accompanied by the conviction that the FBI killed Martin Luther King or that MI6 killed Princess Diana. Endorsement of conspiracy theories is also associated with people’s own willingness to engage in a conspiracy themselves when deemed necessary. It is not surprising, therefore, that conspiracist ideation has been found to be associated with stable personality variables. We [the researchers] nonetheless prefer to view conspiracist ideation as a cognitive style rather than a potential personality trait because if conspiracist ideation is considered at a cognitive level, its analysis can reveal why it is antithetical to scientific reasoning in several ways.

The complete article, The Role of Conspiracist Ideation and Worldviews in Predicting Rejection of Science, by Stephan Lewandowsky, Gilles E. Gignac, and Klaus Oberauer, is fascinating reading for those involved in communications and dialogue about environmental issues. The article contains much more information from the research and is available at  http://www.plosone.org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0075637#pone.0075637-Ding1

US identifies additional measures to achieve 17% reduction in GHGs by 2020

In a draft report prepared for submission to the United Nations Framework Convention on Climate Change the US government has identified a series of “additional measures” that it expects will enable it to achieve something close to its target of a 17% reduction in greenhouse gas emissions by 2020. The report is currently up for public consultation with comments due by October 24, 2013.

The additional measures, yet to be presented with program details, include:

  • tax credits that currently have sunset dates, such as the production and investment tax credits, to be extended indefinitely;
  • federal energy appliance and equipment energy efficiency standards and building codes to be updated periodically;
  • power sector clean energy deployment to achieve 58% clean energy generation by 2020 – assuming clean energy generation includes electricity from renewables and nuclear with half credit for electricity from efficient natural gas generation.

An alternative scenario to the above will include additional energy savings primarily in areas not targeted by regulations and incentives in Scenario 1, including:

  • reductions in vehicle miles travelled;
  • improvements to existing residential and commercial building shells;
  • accelerated deployment of new industrial combined heat and power (CHP) capacity;
  • reductions in industrial energy demand in several subsectors;
  • 62% clean generation by 2020.

Further initiatives under either scenario will include:

  • abatement of methane emissions relative to business as usual (BAU) in the range of 25 to 90 MtCO2e;
  • HFC emission reductions by the year 2020 relative to BAU in the range of 100 to 135 MtCO2eq.

The report is available at http://www.state.gov/e/oes/climate/ccreport2014/ by clicking on U.S. Biennial Report  near the bottom of the page. The full report presented through chapter by chapter links on the same web page, describes measures that the US is already taking to reduce GHG emissions and their expected results. All of the above additional measures are likely, in GallonDaily’s opinion, to provide significant new business opportunities for environmental service companies for at least the next six years.

Water risks may hinder corporate growth

Researchers with the Markets and Enterprise Program of the World Resources Institute, a respected Washington, DC, based ngo, have reported that water risks may already be affecting corporate bottom lines and that some major investors are clamouring for comparable data about water risks that may affect their investments. For example, Calvert Investments found that Hanes Brands, a manufacturer of clothing, lost $5.2 billion as a result of cotton supply shortages triggered by the 2011 US drought. Moody’s Investor Service has released warnings about risk to credit ratings in the mining industry, as companies spend more on infrastructure in response to growing water risks. Deutsche Bank Securities estimates that the recent US drought, which affected nearly two-thirds of the country’s lower 48 states, will reduce GDP growth by approximately one percentage point.

WRI states that, at the World Economic Forum in Davos this year, experts named water risk as one of the top four risks facing business in the twenty-first century. Similarly, 53% of companies surveyed by the Carbon Disclosure Project reported that water risks are already taking a toll, owing to property damage, higher prices, poor water quality, business interruptions, and supply-chain disruptions.  According to WRI, more and more investors are clamoring for sustainability reports and disclosure initiatives to identify corporate water risks, but the process of actually evaluating water supply risks, particularly on a comparable basis, is challenging. For WRI, as well as for many international agencies, water risks include floods, drought, and pollution.

WRI is one of the members of a Global Compact team working to reconcile the differences between various terms and reporting methodologies. The results will be published in 2014 as new Corporate Water Disclosure Guidelines under the UN Global Compact. For those interested in getting a head start on compliance, a public exposure draft is available at http://ceowatermandate.org/

WRI commentaries on corporate water risks are available at http://insights.wri.org/topic/water-risk

Toronto family-owned dry cleaner hit with $60,000 environmental penalty

A family-owned dry cleaner claims to offer “the highest level of custom dry cleaning and shirt laundry. We have earned our reputation for excellence, through our dedication to providing the finest service.” However, the claim apparently did not extend to environmental performance. Environment Canada reports that in July 2012 the Company was found to be improperly storing and containing tetrachloroethylene (also known as perchloroethylene or PERC) waste water and residue.

In a negotiated resolution agreement the Company was fined $60,000, to be paid to the Environmental Damages Fund, and must publish an article regarding the results of their case in a textile industry magazine.

The high fine was the result of new penalties under the Canadian Environmental Protection Act which were adopted in June 2012. Environment Canada states that this is one of the first cases in which the new higher minimum fines were imposed. 

The risk of getting caught under federal environmental regulations may be declining. Environment Canada reports 28 successful prosecutions in 2009, 40 in 2010, 39 in 2011, 26 in 2012, and 7 so far this year . However,  there does appear to be a trend of increased penalties for those cases that are successfully prosecuted.

Details of the dry cleaner case, of other successful Environment Canada prosecutions, may be found at http://www.ec.gc.ca/alef-ewe/default.asp?lang=En&n=8F711F37-1