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What you need to know about Canada’s regulatory framework for GHG emissions

November 17, 2020

By Nicole Flanagan

The Strategic Assessment of Climate Change will impact project development in Canada. But how?

On October 6th, 2020, the Government of Canada released the final version of its Strategic Assessment of Climate Change (SACC). The SACC describes new policies regarding greenhouse gas (GHG) emissions and climate change that must be followed by project proponents when undergoing federal environmental assessments. The SACC also requires projects with a life expectancy extending beyond 2050 to provide a credible plan for the project to achieve net-zero emissions. Essentially, all future projects seeking federal approval must meet SACC standards.

So, what does this mean for major resource development projects in Canada? How do these projects fit into the new framework? In this blog, I’ll break down the SACC and address the risks and implications for project development, including:

  • What is the SACC and what does it mandate?
  • How are project emissions calculated?
  • What are the most effective GHG mitigation measures?
  • How can you develop a credible net-zero plan?

Essentially, all projects seeking federal approval will need to meet the Strategic Assessment of Climate Change standards heading forward.

What is the SACC and what does it mandate?

The SACC requirements fall under two main topics: GHG/carbon emissions and climate resilience. The requirements related to GHG/carbon emissions include the following:

  1. Projects must report annual greenhouse gas emissions. This is required for the entire life expectancy of the project—including construction, operation, and decommissioning. It must also report the emission intensity of production during operation, as measured by net GHGs per unit production
  2. Projects with upstream emissions exceeding 500,000 tonnes must perform upstream GHG assessments. Upstream emissions refer to emissions generated prior to the project, such as fuel extraction, processing, and transportation. The threshold for requiring the assessment will decline each decade through 2050
  3. Projects must perform best available technology (BAT) and best environmental practice (BEP) assessments. These show whether a project is technically and economically feasible. If so, the project moves forward. If not, the project must identify when it will become feasible to implement. It is important to consider the cost of carbon in the project’s expected return on investment. The assessment should include the mitigation potential of the BAT/BEP and rank BAT/BEP by scale of emission reductions
  4. Project must submit a credible plan to achieve net-zero by 2050. This applies to projects that have a life expectancy that extends beyond 2050.

Total emissions are calculated by combining direct GHG emissions with acquired GHG emissions, and then subtracting captured carbon, avoided GHG emissions, and offset credits.

How are project emissions calculated?

Project emissions are calculated using Equation 1 in the SACC. Total emissions are calculated by combining direct GHG emissions with acquired GHG emissions, and then subtracting captured carbon, avoided GHG emissions, and offset credits. Let’s look how each component of the equation is defined:

  • Direct GHG emissions are emissions occurring at the project site, commonly referred to as Scope 1 emission.
  • Acquired energy GHG emissions are attributed to the project and controlled by the project but are emissions that occur offsite. These can include emissions associated with imported electricity generation, steam, or heat. They are commonly referred to as Scope 2 emission.
  • Captured and stored CO2 are emissions that were generated but contained—and the emissions were not released into the atmosphere. This includes carbon capture and storage system .
  • Avoided domestic emissions are still broadly defined but could include projects such as the replacement of facility from high- to low-emission intensit.   
  • Offset credits are emission reductions created by others and sold to the project to be able to use in executing a net-zero plan.

So, if those are the ways that emissions are calculated, what are the most effective ways to reduce emissions and follow the guidelines of the SACC?

I’d certainly encourage a collaborative approach when creating credible plans.

What are the most effective GHG mitigation measures?

The most impactful mitigation measures are those that reduce the creation of emissions in the first place. But reducing venting and fugitive emissions—emissions that are lost due to inefficiencies such as leaky valves or pipes—can also help decrease the release of methane gases.

Energy efficiency can reduce emissions on site, and excess energy can be repurposed for heat, steam, or electricity generation. Electrification should also be considered as a potential option to reduce emissions. But note that the benefits of electrification will vary significantly based on the emission intensity of the grid-generated electricity in your jurisdiction.

The plan to achieve net zero should be incorporated into risk management system and reviewed on an annual basis.

How can you develop a credible net-zero plan?

The SACC makes it clear: The definition of a credible net-zero plan is anticipated to be revisited on a periodic basis—it’s not set in stone and will likely evolve.

The credible plan should include the outcome of the BAT/BEP analysis, as well as a periodic update of BAT/BEP throughout the operational life when the project becomes feasible. The plan should include the frequency that the plan will be revisited, the evaluation criteria, and the decision-making processes for plan updates. The plan should also include any supportive actions by the government needed to execute the net-zero plan, such as electrification or a robust offset system.

I’d certainly encourage a collaborative approach when creating credible net-zero plans, which should include engaging development and financial personnel, risk managers, asset managers, and compliance. The plan to achieve net zero should be incorporated into a risk management system and reviewed annually to maximize payback and minimize the financial risk of the transition to a low/no carbon future.

Looking to the future

As we deal with climate change, SACC puts Canada on a path to reduced GHG emissions and a net-zero plan. Major resource development projects must take note of these changes.

I’m excited to see where we head and to talk about those emissions and the changes to regulations. 

  • Nicole Flanagan

    Nicole has been involved in Greenhouse Gas (GHG) reporting since the inception of provincial reporting programs in 2007.

    Contact Nicole
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