With more public and government pressure to decarbonize the economy, carbon heavy industries are having to adapt to remain competitive in these new market conditions. When the Alberta government increased the carbon levy for large emitters and introduced a limit on the amount of emissions under the new Climate Leadership Plan, a greater importance was placed on oil production innovation.
As former Executive Advisor, Sustainability and Innovation with Suncor Energy, Gordon Lambert stated “Innovation will lead to benefits in technology development and expertise. Carbon competitiveness is an important dimension of future success.”
In other words, many believe that the amount of carbon content in a barrel of oil may very well be the differentiating factor for consumers in future markets. If Canadian Oil Sands producers can develop new technologies that reduce the amount of carbon necessary to produce a barrel of oil while also keeping costs down, it may be a game changer for future Canadian oil markets. The forestry industry witnessed a similar situation when consumers began demanding stewardship certifications as a way of ensuring the paper used to make magazines was sourced in an environmentally and socially responsible way.
Shifting to Outcome Focused Regulation
In order to provide incentives for oil companies to adapt to this changing market sooner rather than later, the government has the option to send price signals by way of Market-Based Instruments (MBIs). MBIs are policy instruments that provide polluters with monetary incentives to reduce their emissions. There are a number of different types of MBIs, grouped into two broad categories:
- Transferable Permits (e.g. Carbon Credit)
- Taxes & Subsidies (e.g. Carbon Levy)
Different than traditional Command and Control policies (CACs), MBIs encourage innovation by setting pollution thresholds and then letting the industry figure out how to meet them. If a company finds that investing in or developing a new technology is a less expensive means of staying under an emissions standard, they will find a way to do just that. Furthermore, when MBIs establish a new market, (i.e. where buyers and sellers are able to trade environmental credits), each transaction has the potential to decrease environmental degradation while also adding additional value to the economy. For more information on the difference between CACs vs MBIs please see our June 2016 blog, “When Traditional Regulation Fails: Using Market-Based Instruments to Improve Environmental Management”.
Incorporating Additional Ecosystem Services
By investing in new technologies and carbon offsets, oil & gas companies are contributing to more than just green house gas reductions. Linear restoration programs, for example, sequester carbon in the trees planted, which may be eligible for carbon credits. What’s sometimes forgotten is that these programs also improve wildlife habitat, purify the surrounding rivers and streams and add to the timber supply. Many of these extra benefits go unreported by companies, as they don’t realize the full potential of their restoration programs.
Consumers want access to socially responsible products. By under-reporting the additional benefits added to the land base through restoration efforts, companies are potentially missing out on a huge value-add marketable product.
Silvacom offers a number of services to ensure the total value of the landscape is being reported. For more information, please visit our Ecosystem Services page.