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Carbon accounting has become an important tool for businesses worldwide, particularly regarding climate change, which is a serious issue.
We at Faber LLP believe that, though modern environmental practices are warranted, safe ones are paramount. This blog article covers the history, practices, and significance of carbon accounting in Canada, with some insights into how the country’s carbon pricing system works and how modern software applications are making all this possible.

The Evolution of Carbon Accounting

The last few decades have brought about considerable improvements in carbon accounting and measuring and controlling Canada’s GHG emissions. The milestones, including the Kyoto Protocol (1997) and the Paris Agreement (2015), prepared the ground for a robust emission-tracking system with efficient carbon accounting methods.

The Role of the Carbon Pricing System

It forms a critical component of Canada’s approach to managing the challenges of climate change. The concept of carbon pricing goes back to the early 1990s when countries such as Sweden and Denmark introduced economic instruments to constrain emissions.
The carbon pricing program, a government initiative that became operational in 2019, offers the necessary financial inducement for businesses and citizens to cut CO2 emissions. It has become possible because Norway and two-thirds of the world’s nations already have a carbon tax and cap-and-trade scheme. Both activities have been partially successful in reducing global greenhouse gas emissions.

Carbon Tax

The government can impose a price on greenhouse gas emissions from the use of fossil fuels like coal, oil, and gas by enacting a carbon tax. The tax, which is computed per ton of carbon dioxide equivalent emissions produced, must be paid by the burning entity.
Carbon Pricing was introduced in 2019, starting at $20 per tonne of CO2 and was to be increased annually until reaching $170 per tonne by 2030. This gradual increase incentivizes the business community to adopt cleaner and safer technology, and businesses get the adjustment time.

Cap and Trade System

Provinces such as Quebec have a cap-and-trade program. The core of the hard cap approach is that a set limit is placed on the total volume of GHG emissions; then, business entities can trade emission allowances. This approach is such that firms would try to reduce emissions to within the limit. They will also try selling off any excess allowances to other companies to generate an incentive to reduce emissions.

Progress Review

Canada and its businesses have a proper carbon pricing regime, but a little help is required to achieve the goals regarding climate change.
While some argue data is scarce, the newest data posted on Environment and Climate Change Canada’s website on GHG emissions reveals that in 2021, Canada emitted 730 million tonnes, slightly lower than the previous years. However, this still leaves the country a long way away from even a frothy notion of either a 2030 or 2050 target.
Notably, the oil and gas industry, among other contributing sectors, has these emissions, emphasizing the role of more rigorous measures and a strategy in carbon tracking.

Carbon Emission Process

The primary sources of carbon dioxide emissions, which arise from fossil fuel combustion for energy generation, transportation, and industrial activities, give insight into the carbon emission process. In Canada, these activities contribute the most to greenhouse gas emissions.

The Hazards of Carbon Emission

Global warming—caused by harmful uncontrolled carbon emissions—is detrimental to the environment and the economy. Climate change causes weather such as hurricanes, flooding, and wildfires. All these occurrences are dangerous to the ecosystem, people, agriculture, and infrastructure. Melting polar ice caps and increasing sea levels pose threats to coastal communities and a variety of lives.

The Importance of Carbon Accounting

Canada’s federal pricing system has directed all organizations to report their carbon emissions periodically and pay for their carbon input. Carbon accounting allows companies to monitor their emissions effectively. It ensures that the federal and provincial laws related to carbon accounting are being complied with. Non-compliance with the rules and regulations would result in the loss of the business house concerned reputation, in addition to specific penalties.

Financial and Environmental Benefits

Setting aside the compliance issues, there are some genuine business benefits to be had from carbon accounting for any business:

The Voluntary Carbon Market

Besides mandatory carbon pricing, Canada promotes a growing voluntary carbon market. Carbon credits are sold to companies and used to offset company carbon emissions through investment in GHG-reducing or removal projects. The voluntary market is vital to global climate action since companies drive towards zero-emission aspirations.

Role of Digital Platforms in Carbon Accounting

Digital tools are reforming carbon accounting entirely, creating a new standard for accessibility and efficiency among multiple businesses. In Canada, the three main uses of this domain are Xero, Sumday and Greenly.

Edmonton's Carbon Accounting Budget:

Edmonton has taken firm steps toward zero-carbon missions in 2050. It was designed to limit the quantum of greenhouse gases. The city’s current budget, accompanied by an updated 10-year plan labelled ‘Community Energy Transition Strategy,’ is designed to help the town by increasing renewable energy sources, diminishing carbon emissions, and growing carbon capture.
This budget contains an overall reach of Healthy Cities, urban places, Regional Prosperity, and Climate Resilience.

Edmonton's Carbon Accounting 2050: How to Get to the Future

Edmonton is targeting carbon neutrality within the next 30 years. The carbon accounting budget supplies a strategy for achieving the city’s sustainable climate by the aforementioned period. The city clearly states the objectives of reducing emissions, the critical sectors involved in doing so, and, as explained above, how precisely this would happen. This carbon budget for 2023-2026 and implementing a carbon accounting scheme are critical for the City of Edmonton.
Interestingly, since 2005, Edmonton’s collective GHG emissions have been around 18 – 20 million tonnes per year, declining slightly. Unless something radically different is done, the city will end up at more than 18 million tonnes annually come 2050. If this rate keeps up, Edmonton will reach its total carbon budget of 155 million tonnes by 2028.
The emissions per person dropped ever so slightly last year, and these emissions have been slowly reduced year over year. The emissions per Edmontonian stayed the same in 2018 at 19.11 tonnes. City emissions must be reduced to 3.2 tonnes per person if the city is to stay within its carbon budget by 2030 and reach zero by 2050.
Also, the administration understands the process and labour involved in successfully implementing a carbon accounting system.
Experience shows that as the city matures the processes, its capability for designing better approaches for estimation, reporting and monitoring against the target and integrating the framework with organizational decisions will increase.

Conclusion

Carbon accounting is much more than a mandate; it’s a prerequisite if a business must survive in a world that is changing at breakneck speed. Companies focused on adopting carbon accounting practices—against the backdrop of Canada’s increasing focus on GHG emissions reduction—would manage the associated risks. Consequently, the latter would benefit from the rapidly growing demand for sustainability.

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