Alberta and Canada are talking about claiming emissions reduction credits for exporting fossil fuels

Alberta and Ottawa are searching for ways to claim credit for potentially reducing greenhouse gas emissions in countries that swap their coal-fired power plants with Canadian gas, documents obtained by Canada's National Observer reveal.

Energy discussions between Canada’s largest oil-producing province and the federal government are taking place over the next year. A draft text of the working group’s terms of reference shows the two sides, which are usually at odds over climate policy, are teaming up to explore how to use Article 6 of the Paris Agreement to the fossil fuel sector’s advantage.

Article 6 is a section of the landmark climate accord that allows countries to trade carbon offset credits (essentially, selling emission reductions in one jurisdiction to another). It’s a path to achieving net-zero greenhouse gas emissions that’s filled with potential issues, from the risk of double counting emission reductions to undermining the energy transition off fossil fuels by creating offsets that look good on paper, but turn out to be worthless in the real world. Nonetheless, genuine carbon offset credits may be a way to help curb planet-warming greenhouse gas emissions if designed and implemented properly. Last year, Canada launched a carbon credit trading system.

Enter Alberta and the federal government. According to the draft text, the two governments are exploring how Article 6 could be used to help Canada and Alberta claim credit for lowering emissions by exporting liquefied natural gas (LNG) — a fossil fuel that, in some cases, isn’t much cleaner than coal.

The move would upend a key part of the Paris Agreement, which states countries are responsible for emissions within their own borders. It’s that principle that allows Canada to ignore emissions caused by fossil fuel exports when they are burned abroad and rationalizes the continued production of fossil fuels while claiming to be on a path to net zero: When the exported fuel is burned, the emissions are the responsibility of whichever country imports them.

Now, Alberta and Canada will argue they should receive emission reduction credits for LNG exports because when countries replace coal with Canadian LNG, emissions could drop.

Canada would still have to negotiate with other countries to receive the emissions reduction credits, but experts interviewed by Canada’s National Observer poured cold water on the plans. They point out countries like China, where much of Canadian gas is slated for export, will want to claim the emissions reductions for themselves.

Convincing them to give up that credit would likely come at a steep price, said Aaron Cosbey, a senior associate with the International Institute for Sustainable Development, adding it “would be a radical departure from norms.”

Moreover, it would create precedents that could backfire on Canada, like creating space for China to argue it should get emission reduction credits when Canadian companies install Chinese-made solar panels.

A spokesperson for federal Natural Resources Minister Jonathan Wilkinson confirmed the agenda item is on the table. Canada is exploring every avenue to reach its climate commitments, the spokesperson said.

“There is interest among Canadian industry to see if Article 6 can be operationalized in order to displace coal abroad with Canadian LNG,” the spokesperson said. But Canada’s position is that there should be conditions for these discussions: an LNG project’s domestic emissions would still have to fit within Canada’s targets, for example, and it can’t be assumed “that exported LNG is in fact displacing coal” given countries could just add gas on top of existing coal plants.

Similarly, a spokesperson for Alberta’s Environment Minister Rebecca Schulz said carbon credit trading under Article 6 was a “significant opportunity” for companies to play a role in the emission reduction goals of governments.

Experts interviewed by Canada’s National Observer said the plan being pitched by Alberta and the feds has for years been a goal of the fossil fuel industry because it allows companies to continue profiting from their products even as policies to phase out fossil fuels are ramped up globally.

“The Canadian gas industry has been fantasizing about using Article 6 to greenwash its LNG exports for many years now, and is now being carried forward by its political lackeys in the Albertan government,” Climate Action Network Canada executive director Caroline Brouillette said.

“It's confusing that the Canadian government would accept this as a topic for discussion given that the idea still does make zero sense — both from an emissions reduction perspective and in terms of how the Paris Agreement actually works.”

Cosbey said the gas industry’s primary goal is to delay decarbonization “in the hopes they’ll get a more sympathetic government.”

Bluntly speaking, he added, if Canada tried to discuss this with other countries in the United Nations system, it would be “laughed out of the room.”

The fact Alberta and Canada are even discussing this is “an exercise of mutually agreed suspension of disbelief,” Cosbey said.

Both governments know it’s likely a dead end, but discussing it offers both sides political cover, he explained. For the federal government battling premiers hostile to its goals, “they’re desperate for anything” that makes them look like a team player. For the provincial government, “they also know it can’t happen, but they want it in there because it gives them cover and time,” he said.

“Instead of having to move quickly on trying to decarbonize Alberta's oil and gas sector … [the Alberta government] can say, ‘Don't worry about it, this stuff is clean, and we're going to get credits for it,’” he said. “The only loser in the whole deal is the climate and Canada's commitment to climate change action because it gets pushed down the road.”

“That's the danger,” he said.