Tammy Nemeth on international efforts to stunt Canadian energy development
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Summary
In this episode of the podcast, we are joined by environmental economist and author of the book "Sustainability on Steroids: The New Accounting Standards for Sustainability in the 21st Century" to talk all things sustainability and climate change. In this episode, we discuss the new Global Baseline Standard for Accounting for Carbon Emissions (GAS) adopted by the International Financial Reporting Standards Board (IFRS) and what it means for companies across the value chain.
Transcript
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You know, there's just so much going on. I mean, we've got a world in an energy crisis. We've got
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a country that's sitting on some of the best energy resources on the planet, yet we still
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seem to be determined to shut ourselves in. Absolutely. And there's this new global baseline
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standard for sustainability and climate-related financial disclosures, which is basically ESG
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on steroids. And it's been drafted by this organization called the International Financial
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Reporting Standards Foundation. Now, Canada is one of the 140 jurisdictions that follows
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the IFRS standards, and they're meant to provide some level of standardization of accounting
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standards in the world. Now, after COP26, a new International Sustainability Standards Board
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was created out of the IFRS, and its goal is to create a global baseline for accounting
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for carbon emissions, anything related to sustainability, climate, and they have three
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building blocks, sustainability, climate, and then industry-specific standards. Canada has
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agreed to support this initiative. We lobbied for, and we got one of the ISSB offices in Montreal.
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It was inaugurated at the end of June. Then, at the same time, we created the Canadian Sustainability
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Standards Board, and its job, they said, is to work in lockstep with the ISSB to implement
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this new baseline in Canada. So, right now, they've issued a proposed draft standard. It's
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open for comment until Friday, so time is quite short to put in your opinion about what this
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thing means. And although hydrocarbons are the main target right now, agriculture is affected,
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pretty much every industry that operates in Canada. There are 68 industries that fall under
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this standard for accounting for a person's climate footprint.
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Well, yeah, and they use the word sustainability. That's kind of been a loaded word for quite
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a long time because you can just read so many things into it to push a further agenda. And
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it's pretty, you know, subjective, or I mean, objective, what somebody would define as sustainable.
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I mean, they can point to anything and say it's unsustainable and we need to reduce it,
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but they don't go any farther with that. And right now, as you said, it's hydrocarbons. And yeah,
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there's quite a move on our farms. Like, it just seems like madness when we're all suffering from cost
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the living increases. Exactly. And the cost to implement this for small businesses or even
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large businesses, when the Security Exchanges Commission was doing something similar in the
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United States, their comment process ended in June. They estimated to comply with these new standards
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would cost a company up on average $644,000 a year. Now, how is a small mom and pop operation
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or a small oil producer or a farmer or a rancher supposed to pay $644,000 to comply with all these
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new standards? Like, one of the things that they include is the monitoring of scope three emissions.
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Now, a lot of this sounds arcane, right? You've got scope one, scope two, scope three. What does all
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this stuff mean? Well, scope three is everything. So whatever a company produces, they're supposed to
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follow it down the value chain. Who's using it? How much are they using it? How are they disposing of
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it? How did the product get to somebody? What happens with it down the road? They're supposed to
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account all of that as part of their emissions profile. So the more you produce stuff, the higher
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emissions profile you're going to have, which would seem rather weird that you're trying to
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basically cut down businesses that produce things. So then we'll all become a service economy, I guess.
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Yeah, I mean, it just seems so inane and unreasonable. I mean, the term we hear a lot, too, is that ESG. So
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environment, social and governance. But I mean, again, and that's loaded as well. I mean, now you got to start
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talking about social impacts. And well, that's all over the map. But I mean, part of the problem I see
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is companies won't push back on this. Like they're beaten into silence. They're afraid to speak up and
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they keep complying and complying. And to be honest, I think they're kind of somewhat the authors of their
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own destruction until they stand up for themselves here. Absolutely. And you know, there's no way a company
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can comply out of this. You just can't. It'll permeate everything. And like with the oil and gas
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companies, if you're an exploration and production company, they want you to account for the embedded
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emissions in your reserves, which will count against a company, because the standard is meant to be used
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by banks, by insurers and investors. So if they're trying to limit the amount of emissions in their overall
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portfolio, what are the odds they're going to support a company that has large reserves? Because
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those reserves will be counted against the company. So in a time of energy insecurity, as you mentioned,
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why are we adopting a policy or a standard that will basically compromise our oil and gas reserves?
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Well, they'll be counted against a company. Yeah. And some of those bars, I mean, one of the things
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that people forget, and it drives me bananas when I hear from some people saying, oh, Energy East was
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shut down because it wasn't financially viable. Well, no, it was shut down because the government
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made it financially unviable. It was always viable before that. And the big one was they were going
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to make the producers responsible for downstream emissions. Well, you don't know what the end user is
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going to do with that product. Maybe they're going to consume it in a non-emission sort of manner.
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But I mean, it's something you can't commit yourself to. So the investors pulled out.
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Exactly. And honestly, for what's supposed to be an accounting standard,
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why would you require companies to account for something they're not in control of?
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Usually in accounting, you can only account for things for which you're responsible.
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And therefore, if you misstate something or you omit something, you can be held liable because
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that's under your control and you didn't report properly. But with this, it really leaves companies
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open to litigation for mistakingly say something or they omitted something that an activist investor
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thought they should have included. So it'll open up a can of worms for litigation for the
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for companies. And it's really death by a thousand cuts.
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Well, and likewise, just like in the case of Vancouver, with their lunatics and city council
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are suing oil companies for global impacts while overlooking all the benefits, you know,
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of those long lifespans and not freezing to death in winter. But I mean, it's the same sort of
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principle. They want to hold companies responsible for downstream emissions when they had no control
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Exactly. And if I can just segue a bit into agriculture, because with the new fertilizer
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ban or reduction that they that they that they're putting forward, what this standard does is it says
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that if you're a livestock producer and you sell your livestock to, say, JBS or, you know, a big meat
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producer, that meat producer will require you to say whether or not you operate in an area of high or
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extreme high risk water stress. Well, if you look on and they and they use the World Resources
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Institute aqueduct program, very controversial, the data is not so good, they don't use provincial
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data or anything. And if you're found to be in one of these areas, you could be denied funding from
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the banks, or the producers will say, Look, we've committed to reducing our sustainability stresses in
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areas of high to extreme high risk water. So I'm sorry, we can't take your livestock, we can't take
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your grain. So it's yet another attack on agriculture at a time of food insecurity, where these these poor
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ranchers and farmers are going to be held to account for emissions and operating in high to extreme high
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risk water areas. And if I can just point out, that's pretty much all of Western Saskatchewan or Western
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Canada, southern Saskatchewan, southern Alberta, southern Manitoba, all fall within that region.
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And it also happens to be the region for fracking, where the Bakken plays are where all the major
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shale plays are in the United States, almost all of them fall within an extreme or high extremely high
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water stress area. So it looks like we could be binding ourselves to this agreement or these policies
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in a few days. What sort of enforcement, though, is there if we sign on? I mean, we get a lot of these
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things, they're aspirational, they talk about it, but they don't actually mean to follow through, or maybe
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they do mean to, but they've always failed. I mean, we've never hit even close to an emissions target
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yet. What sort of trouble could we get in if another government comes in the future says, Well,
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we're not going to comply with this? By doing the IFRS standard, the banks will do it. So it's a way
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for governments to get around the bad press and the anger that will come. It'll be left to the banks,
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the insurers and the investors who sign on to this. If Canada, with its Sustainability Standards Board and
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its Montreal office for this, if they agree to implement it, there might be a possibility down
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the road that a future government can say, You know what, I don't think we want to do this, we're
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not gonna, we're going to say it's not enforceable in Canada. But if all the banks are saying we want
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this, it'll be difficult, it'll be difficult to do. And that's why they're doing it this way,
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so that no one can escape. And Brian Moynihan of Bank of America was very clear in May when he said,
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this is a way that no one can escape from it, to bring it in through the accounting standards,
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because it'll just become another part of accounting, and no one will escape.
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It sounds insidious. As you said, there's a few days to write letters. I mean,
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as one of my commenters, Brad said, you know, the million dollar question, what can we do about it?
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Well, I've been encouraging as many people as possible to write a comment letter, you know,
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expressing your support of the Canadian oil and gas history, emphasizing energy security,
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no scope three emissions, no scenario analysis, stop the the water stress thing, because that
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it will just devastate Western Canadian agriculture and our petroleum industry that operates in the
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Bakken place, or even in the Western sedimentary basin, because that pretty much falls within that,
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that high stress area. So you can send a letter to comment letters at IFRS.org,
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and they post them probably within 24 hours. So if you send a letter, it gets up there right away.
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And it's, it's a way to at least express discontent before it gets implemented here in Canada.
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Great. And where else, before I let you go then, can people find more information about this than,
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you know, to find those addresses and that, if they haven't written it down?
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I wrote a report about this called Counting Carbon Molecules. It's on my website, which is
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thenemethreport.com. And it has links to my podcast, my op-eds that I've written recently, and this new
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report about it. And I have the information there on where they can go to submit comments at ifrs.org.
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So please go to my website, check it out. It's thenemethreport.com.
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Great. And then help me pronounce, correct the pronunciation of your name as I was asking at
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the start of the show. So Nemeth report. Okay. I appreciate that. Well, thank you for coming on
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today. There's still a, you know, a few days to go. Hopefully some folks get there. Maybe sometimes
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common sense prevails. It seems we usually have to fight pretty hard for that to happen though.
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So thank you very much for coming on today. And I hope we can talk again down the road.