SCOUT ENVIRONMENTAL…

SCOUT ENVIRONMENTAL
30 Commercial Road
Toronto, ON M4G 1Z4

January 15, 2018

Vidya Anderson
Project Manager
Ministry of the Environment and Climate Change
Environmental Programs Division
Program Planning and Implementation Branch
135 St. Clair Avenue West, Floor 11
Toronto, Ontario M4V 1P5
Vidya.Anderson@ontario.ca

Dear Vidya Anderson,

Re: Developing a Voluntary Carbon Offsets Program for Ontario, EBR Registry Number 013-1634

Thank you for sharing this important policy proposal and soliciting my comments and advice. As Canada’s first emissions trading executive - pioneer and instigator of the world’s first significant carbon offsets trading ( launched from Ontario ) - I am excited at the opportunities for carbon mitigation and ecosystem restoration presented by this excellent policy discussion paper.

Scout Environmental www.scoutenvironmental.com is a not-for-profit organization that specializes in the development, delivery, and management of creative programs that engage people to act on environmental issues. For over fifteen years, Scout has pioneered local and national programs engaging business, government and hundreds of thousands of individuals to make better choices for our environment, health, and economy. Many of Scout’s programs have led to significant measurable reductions in GHG emissions.

I am well versed in the fundamental development and current ins and outs of the WCI design and Ontario nuances. I believe that Ontario’s WCI Inc-linked regulatory-grade carbon offsets program can work impeccably well in parallel with an innovative voluntary offsets system as per this current policy proposal; and both initiatives, well designed and implemented, could significantly help Ontario meet its near-term and longer-term greenhouse gas reduction targets as well as the goal of the Ontario Government to zero its own carbon footprint beginning in 2018 (and I note that it is now 2018).

As you know, industrial sectors account for a minority of the greenhouse gas emissions inventory. Individual (public) actions are an important contributor to the GHG emission problem through gasoline & diesel vehicle use, residential energy use as well as other equipment choices such as gas-powered lawn mowers, diesel-powered generators, etc. Market-based systems that facilitate private sector investment in reducing emissions in uncapped sectors can leverage significant emission reductions at a lower cost to industry sectors while reducing the needs for government capital financing and subsidization in non-industrial sectors. I see the potential of cap and trade and both regulatory and voluntary offsets to reach into building and transportation sectors – influencing the daily decisions of individual citizens to reduce energy use and fossil emissions – as THE KEY OPPORTUNITY for Ontario to achieve its greenhouse gas goals economically, while stimulating ingenuity and innovation, and creating new, higher-value jobs. I am excited to see this policy discussion paper recognize and highlight the additional opportunities in agriculture and ecosystem restoration that complement urban initiatives.

Scout Environmental (formerly the Clean Air Foundation and Summerhill Impact) pioneered the use of emission reduction credit trading to influence individual Canadians to make better environmental and economic decisions about the purchase, use & disposition of their small, medium and large consumer products. This not-for-profit organization was born through offsets finance – creating and harnessing the market value of emission reductions to deliver significant voluntary action and results by individual citizens with such programs as:
•Car Heaven – born in Ontario in 2000, expanded Canada-wide – over a decade led to the retirement of >260,000 gross-emitting motor vehicles.
•As you may understand, in any population of fossil-fuelled engines, more than 80% of the emissions come from less than 20% of the engines -- mostly the oldest least efficient engines, originally built to less stringent standards, perhaps not adequately maintained during their aging life. Accelerating the retirement of these aging emitters can leverage and yield significant cumulative emissions avoidance.
•Mow Down Pollution – launched in Ontario in 2001, expanded Canada-wide – over a decade retired >62,000 gross-emitting two-stroke lawn-mower engines, replacing them with zero or lower-emitting products.
•Keep Cool – launched in the Greater Toronto-Hamilton area in Ontario from 2002 to 2007 –retired almost 30,000 inefficient personal window air conditioners, which reduced GHG and other emissions from Ontario’s then-fossil-fired electricity generation system.

Car Heaven was started through a NOx and GHG emission reduction trade with Ontario Hydro (and subsequently Ontario Power Generation). The quantified and verified emission reductions were used by Ontario Hydro/Power, net of 10% reduced off the top, to help meet its public voluntary NOx and GHG commitments during a nuclear outage that required the coal-fired power stations to be base-loaded (operate continuously at peak capacity). Offsets were also factored in, in helping to meet Ontario Power Generation’s NOx obligations under Ontario Regulation 397/01 – Canada’s first cap, offsets, and trade regulation. NOx and GHG emission reduction credit market value was a key enabler of Mow Down Pollution. This and other populist measures like Keep Cool showed how even a start-up offsets trading market could engage individual citizens in making better choices. The measurable results speak for themselves.

Recognizing that this is a policy framework discussion paper and that a detailed program design paper should be written to follow, I have reviewed the current paper and I provide my comments and input below. I specifically address below each of the 8 questions under the “Share Your Views With Us” section of the discussion paper.
Thank you again for the opportunity to share my thoughts and experience with you on this important matter.

Best regards,

Brian Jantzi, C.Chem.
Director, Board of Directors – Scout Environmental,

cc. Dan Lantz, CEO, Scout Environmental

Brian Jantzi -- Comments & Advice on:
Developing a Voluntary Carbon Offsets Program for Ontario, EBR Registry Number 013-1634

1.Are there additional priorities related to the development of the proposed voluntary carbon offsets program that have not been considered in this document?

Yes. Transportation, mobile sources, building heating and cooling reduction/avoidance projects are excluded from the voluntary system for no good reason.

Capping fuel distributors and having them trade in allowances will send a price signal to the fuels-consuming marketplace, but there is a need and opportunity to allow USERS OF FUELS to create or participate in projects that benefit them directly. For example, it is well known that more than 80% of emissions come from less than 20% of older engines (built to past, less-stringent standards, or poorly maintained). Accelerated retirement programs for gasoline & diesel cars, medium & heavy duty diesel trucks, diesel construction, resources & agricultural equipment have the potential to PULL older engines out of service. Combined with the price signal from distributors trickling down their allowance costs, incentive cash through offset financing can ACCELERATE old-engine fleet turnover.

Look what Car Heaven accomplished starting with merely pilot-scale offsets financing! Fleet turnover is also the key opportunity for replacement with electric, fuel-cell, or other technology. Net emission reductions from the accelerated retirement of older engines have CASH VALUE in an offsets market. If you can get people to part with their clunkers, you have a chance they will replace them with newer lower-carbon technology.
EMPOWERING users of fossil fuels to come up with new offsets-financed projects will uncap imagination and spark innovation in areas we cannot yet imagine.

The only objection to this would be “double counting” the tonnes of carbon – once with fuel distributors, and again with fuel users, for the same fuel used. Government is the HOLDER and ADMINISTRATOR of the GHG accounting system. Surely, if the government is issuing allowances and issuing offsets credits, the GHG accounting can be trued up annually. For every tonne of accelerated retirement offsets credits issued, deduct those tonnes from the next year’s allowance offering. Simple. The atmosphere doesn’t care about our accounting systems.

2.In addition to the five program objectives listed in this discussion paper (see “Getting there”), are there other objectives that you think the Ministry should consider?

The five program objectives are sufficient, but I would suggest adding < > to :
2. Promote additional environmental co-benefits <wherever they may be found>;
3. Facilitate participation by Indigenous, northern and agricultural communities and municipalities <and individuals>
in the carbon market;

3.Are there specific barriers to participation in the carbon market that the Ministry should consider when developing the proposed the Ontario voluntary carbon offsets program?

Please see GHG accounting system comments under 1. The Ministry needing to approve new protocols can be a barrier if the Ministry only allows a preapproved list to exist. The Ministry needs to allow and encourage new protocols to be imagined and piloted – to open the door to innovation. The Ministry cannot imagine what will appear when offsets finance begins, tied to tonnes reduced/avoided/removed. Open the door.

Similarly, the Ministry’s track record with offsets under Regulation 397/01 and adaptations to Regulation 194/05 suggests that government cannot be expected to acquire and retain the sustained expertise and policy continuity required to INTERNALLY carry out the timely functions of operating an offsets system. This should be delegated to an arms-length agency, or subcontracted out.

Experience in subcontracting the Registry for Reg.397/01 suggests that creating an arms-length Government Agency is the better way to go. However, functions such as technical review of project proposals, protocols, and approval recommendation can be effectively carried out by a subcontracted entity such as Climate Action Reserve. Past experience in Ontario with PERT and Clean Air Canada technical review shows how effective this can be. The government should not attempt to internalize these functions or the entire market will log-jam and go full stop, as what happened with offsets trading in Reg397 & 194.

4.What is the best way for the Ministry to facilitate community participation in the proposed Ontario voluntary carbon offsets program?

Allow and encourage imagination by not having a restrictive list of what can be considered. Look for ways where INDIVIDUALS can participate ( How about carbon credit cards or online games as ways to encourage citizen participation in the carbon credits market?)

Also, do not allow government financing & grants through other government programs to disqualify projects from earning carbon offsets finance. Use cap and trade funds to help community projects, and allow those projects to own all of the carbon offsets created, and freely trade them. That will help the market QUICK START. It’s the tonnes that matter.

On the land use and ecosystem natural-capital recovery side, encourage bottom-up projects, modelled like www.TIST.org. This can help be a guide to how communities can create a friendly storm of economic and environmental co-benefits from simply planting trees and restoring wetlands and grasslands, combined with sustainable agriculture. A simple project involving small groups of subsistence farmers in East Africa has grown to four countries, empowers and employs 75,000 people, 25,000 of them women in creating broad local ecosystem-agriculture-restoration & higher skill economies for sustainable ecosystem health. This small group, small village model was recently voted Best Offsets Project in the World by Environmental Finance Magazine and might be an ideal approach for aboriginal communities to consider.

5.What environmental co-benefits (e.g., flood management) should be prioritized in the proposed Ontario voluntary carbon offsets program?

The discussion paper does a good job in outlining the type of land use & ecosystem benefits that carbon sequestration can deliver.

However, in my view, reducing combustion of fossil fuels also needs to be a very high priority in a voluntary offsets system! However, it seems to be missing from this proposal,

Policy that focuses on carbon alone often fails to recognize that the moment you burn a fossil fuel, you are not only emitting fossil carbon dioxide but you are emitting an airborne soup of toxic and noxious air pollutants (e.g. NOx, SO2, CO, PM2.5, ultrafine-particulate, toxic organic compounds, and occasionally metals). Emissions often occur close to where people breath, causing direct and indirect health and environmental impacts. Thousands of southern Ontario citizens die prematurely from inhaling this toxic soup, hundreds of thousands more have their quality of life impaired through hospitalization and impaired activity, and reduced productivity is an additional economic outcome. When thinking fuels, think carbon AND air pollutant reduction/avoidance – together, inseparable.

Please see my comments under 1 for discussion of how to avoid double counting and encourage fuel combustion reduction through voluntary offsets.

6.What project types should be a priority for the Ontario voluntary carbon offsets program?
The land use and ecosystems/natural capital discussion in the discussion paper covers this very well. Reforestation, wetland & grassland restoration, sustainable agriculture should all be key priorities as discussed. Indigenous projects are also highlighted well. A www.TIST.org model for citizen engagement through carbon offsets could facilitate these types of projects, engage citizens, and work well in Ontario, particularly for indigenous communities.

However, transportation and building related fossil fuel combustion reduction/avoidance initiatives also need to be a high priority. The opportunities are IMMENSE, but these seem to be missing from this discussion paper. Accelerated retirement programs for cars & trucks, big trucks, construction equipment, agriculture equipment, and consumer products all present immense opportunities for emission reduction, and also opportunities and encouragement of replacement with low carbon, low pollution emission vehicles, equipment, and products.

Please see my comments under 1. for how this could work in parallel with fuel distributor caps under cap and trade.
There will be many many many types of projects emerge in fossil fuel combustion reduction/avoidance if only it is included in the voluntary system.

7.What actions can the Ministry take to support viable end markets for Ontario voluntary carbon offset credits?

Carbon offsets only work where the offsets have value. You need buyers. Buyers need to know what they are purchasing is a quality and acceptance that the offsets can be used. You are creating emission reduction/avoidance/removal tonnes through specific action. These reductions trade and are used to OFFSET some requirement or need to meet some or part of a goal. Those goals can be imposed by an outside entity (like the government mandating emission caps), or through internal, public and/or peer-to-peer voluntary commitments. Encouraging private sector entities to make net-zero commitments has immense leverage, especially since brand-image can differentiate brands in a marketplace. Peer-to-peer citizen engagement or community to community commitments can be great leverage.

If the demand for voluntary offsets is initially soft, the government should consider using cap and trade auction revenue as selected grants to help jump-start projects that then operate on their offsets revenue stream. The hurdle cost of starting a project can be a key obstacle.

Encourage pilot projects to road-test concepts, and pave the way for scale-up of successful activities. In government contracts for offsets, firm options on future tonnes in scale-up scenarios could help a proponent secure preferred financing in the private sector.

Government is running out of time to spark NEW projects that will deliver tonnes in time to help with 2018, 2019, 2020 etc net zero commitment years. It is going to have to purchase credits from past early-action projects. Contractual terms should tie these offsets funds to firm options for defined new actions, for example, future exiting-project scale up. Pay it forward contracts like this will overcome additionality objections because they move the market to commit to and deliver future reductions. Use your contracts to drive forward motion, not just reward past good deeds – but please do both.

If initial demand for voluntary offsets is soft upon launch, I suggest the government expand its net-zero commitment to include emissions from all agencies, companies, and partnerships of the government. For example, Ontario Power Generation and Hydro One would be such agencies/companies. The government need merely direct the boards of these entities to net zero commitments. Demand for offsets will increase, and the example of government to private entities to emulate net zero policy will be elevated.

Most importantly: be prepared to accept and encourage new things happening, things that you could not imagine before. Offsets finance will be the lure that fishes out new innovation.

8.Are there existing standards or methodologies that you feel the Ministry should consider when developing requirements for the creation of carbon offsets projects?

It might be worth exploring the archived protocols of Ontario’s PERT and Clean Air Canada Inc projects from 1996 through 2005. These are located in the GHG archives of the Canadian Standards Association. When Clean Air Canada shut down in 2005, an agreement was struck to have CSA maintain the Canadian carbon offsets trading archives of the Pilot Emission Reduction Trading Project and its successor, Clean Air Canada Inc.

Again, encourage new things, new types, new categories of offset projects to emerge. Delegate technical review to an arms-length independent government agency or an external subcontractor (like The Climate Action Reserve). Jump start the launch of a system and then do what you can to keep it moving.

Thank you again for the opportunity to comment. -BJ

[Original Comment ID: 212024]