A legally binding international treaty on climate change aims to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 °C and pursuing efforts to limit the temperature increase even further to 1.5 °C.
To achieve this long-term temperature goal, countries aim to reach global peaking of greenhouse gas emissions as soon as possible to achieve a climate-neutral world by mid-century.
The Paris Agreement is a landmark in the multilateral climate change process because, for the first time, a binding agreement brings all nations into a common cause to undertake ambitious efforts to combat climate change and adapt to its effects.
United Nations General Assembly set up Sustainable Development Goals (SDGs) in 2015 and are intended to be achieved by 2030. It’s a list of 17 interlinked global goals designed to be a “blueprint to achieve a better and more sustainable future for all”. The 13th goal from the collection is “Take urgent action to combat climate change and its impacts”.
As of April 2018, 10 developing countries had successfully completed and submitted their first iteration of their national adaptation plans for responding to climate change. Developed country parties continue to make progress towards the goal of jointly mobilizing $100 billion annually by 2020 for mitigation actions.
In June 2021, the EU adopted a European Climate Law, establishing the aim of reaching net zero greenhouse gas emissions (GHG) in the EU by 2050. The law sets an intermediate target of reducing GHG by at least 55% by 2030 compared to 1990 levels. All member states of the European Union (plus Iceland, Liechtenstein, and Norway) are part of the EU Emissions Trading System (EU ETS), a market created to trade a capped number of greenhouse gas emission allowances. Some key points of this law are:
the strengthening of the emissions reduction targets for each Member State
a Carbon Border Adjustment Mechanism, putting a carbon price on imports of iron and steel, cement, aluminum, fertilizers and electricity;
a revision of the Energy Taxation Directive, introducing an EU-wide minimum tax rate for polluting aviation and shipping fuels
Carbon pricing is about recognizing the cost of pollution and accounting for those costs in daily decisions. Putting a price on carbon pollution is widely recognized as the most efficient means to reduce greenhouse gas emissions while also driving innovation. Since 2019, every jurisdiction in Canada has had a price on carbon pollution. Canada’s approach is flexible: any province or territory can design its own pricing system tailored to local needs or can choose the federal pricing system.
The federal pricing system has two parts: a regulatory charge on fossil fuels like gasoline and natural gas, known as the fuel charge, and a performance-based system for industries, known as the Output-Based Pricing System.
The federal fuel charge applies in Ontario, Manitoba, Yukon, Alberta, Saskatchewan and Nunavut. The federal Output-Based Pricing System applies in Manitoba, Prince Edward Island, Yukon, Nunavut, and partially in Saskatchewan.
A credit for CO2 sequestration was added to the tax code in the Energy Improvement and Extension Act of 2008 (Division B of P.L. 110-343). The legislation included several provisions designed to encourage cleaner, more efficient, and environmentally responsible use of coal specifically, and GHG emissions reductions broadly.
The Bipartisan Budget Act of 2018 (P.L. 115-123) expanded and extended the 45Q tax credit. Key provisions include:
Increases the credit value incrementally over ten years from $10 to $35 per metric ton of CO2 stored geologically through enhanced oil recovery and from $20 to $50 per ton for saline and other forms of geologic storage.
Provides $35 per ton for CO2 captured and put to beneficial uses beyond EOR that reduce lifecycle emissions.
Authorizes the program for carbon capture projects that commence construction within 7 years from enactment, and projects meeting that timeframe can claim the credit for 12 years after being placed in service.
Reduces the minimum eligibility threshold for qualified facilities from 500,000 metric tons of CO2 captured annually to 100,000 tons for industrial facilities and 25,000 tons for CO2 captured and put to beneficial uses other than EOR.
Retains the 500,000-ton eligibility threshold for electric generating units.
Awards the credit to the owner of the carbon capture equipment and allows the transfer of the credit to other entities responsible for managing the CO2 to provide greater flexibility for companies with different business models to utilize the tax credit effectively, including cooperatives and municipal utilities.
Allows projects that involve carbon monoxide capture and direct air capture to qualify for the credit as well.