Today the Canada Growth Fund publicly released its strategy for offering carbon contracts to de-risk investment in low-carbon projects.
The strategy outlines the types of contracts the Growth Fund will offer, including a new commitment to offer standardized contracts to smaller projects, which could boost low-carbon investment across Canada.
Since launching in late 2023, the Growth Fund has signed three carbon contracts with Canadian firms, the latest one also announced today, with Ontario’s Markham District Energy.
The new standardized carbon contracts announced today are essential to unlock the power of industrial carbon pricing to drive low-carbon investment and decarbonization. Clean Prosperity’s research shows that Canada risks missing out on 33 megatonnes of emissions reductions per year by 2030 if we don’t make carbon contracts available to emitters across the economy.
“Today’s announcement by the Canada Growth Fund is an important move forward for low-carbon investment in Canada. Standardized carbon contracts can de-risk more low-carbon projects, driving investment and decarbonization. I hope the Growth Fund will also offer standardized contracts to larger emitters, at standard strike prices.”
Michael Bernstein, executive director, Clean Prosperity
“Standardized carbon contracts can de-risk more low-carbon projects, driving investment and decarbonization. I hope the Growth Fund will also offer standardized contracts to larger emitters, at standard strike prices.”
The Growth Fund’s plan to offer standardized contracts sends an important message to the market that should broadly increase business confidence in the durability of industrial carbon pricing, potentially unlocking additional investment and decarbonization as a result.
The increased visibility offered by the Growth Fund into its investment criteria and methodology is also helpful, and should give firms added confidence that the federal government is serious about ensuring the durability of industrial carbon pricing.
While the Growth Fund has taken significant positive steps with their new carbon contracts strategy, Clean Prosperity encourages them to go further. The Growth Fund should offer easily-accessible standard contracts to all emitters, both large and small, without linking those contracts to equity or debt investments as they’ve proposed to do in their strategy document. The contracts should also offer a standard carbon-price guarantee — the so-called “strike price” — at a level close to the headline carbon price.
“For Canada to achieve net-zero, our industrial sector has to address 348 million tonnes of emissions by 2050,” said Clean Prosperity Executive Director Michael Bernstein. “Broadly-available standard carbon contracts are the most effective and lowest-cost way to unlock large-scale decarbonization.”
Clean Prosperity has long been one of Canada’s leading advocates for standardized carbon contracts that are accessible to emitters across the economy. Types of carbon contracts include carbon contracts for difference tied to the average price of carbon credits or to the headline carbon price, as well as carbon credit offtake agreements.
Carbon contracts reduce the risk and uncertainty that firms face when making big long-term investments in low-carbon projects that depend on the continuation of Canada’s industrial carbon pricing policy in order to be economic.
Today the Canada Growth Fund also announced its third carbon contract and its first deal in Ontario, with Markham District Energy. The deal offers a 10-year backstop against the headline carbon price for Markham District Energy’s wastewater energy transfer system.
“It’s exciting that Markham District Energy reached a final investment decision on its decarbonization project with the help of carbon contracts,” said Clean Prosperity Ontario Director Kaisha Bruetsch. “Today’s deal shows how carbon contracts can help unlock low-carbon growth in Ontario.”
For more information: media@cleanprosperity.ca
