COMMENT: More information on free allowances is vital for Ontario’s cap-and-trade participants « Carbon Pulse

COMMENT: More information on free allowances is vital for Ontario’s cap-and-trade participants

Published 16:14 on March 21, 2018  /  Last updated at 23:17 on March 21, 2018  /  Americas, Canada, Conversations, US, Views  /  No Comments

In the run-up to the 2nd Annual Ontario Cap and Trade Forum on April 18-19 at the Beanfield Centre in Toronto, Canadian Clean Energy Conferences is producing a series of articles featuring the key topics concerning regulated entities under Ontario’s program.

Q&A interview with Tracy Keyhanfar, Senior Director, Environmental Management, ConAgra Foods

By John McCloy, Canadian Clean Energy Conferences

In the run-up to the 2nd Annual Ontario Cap and Trade Forum on April 18-19 at the Beanfield Centre in Toronto, Canadian Clean Energy Conferences is producing a series of articles featuring the key topics concerning regulated entities under Ontario’s program.

Responsible for compliance over the entire ConAgra Foods network, with a footprint of 35 facilities, Tracy Kayhanfar is intimately aware of the opportunities, and shortcomings, of the Ontario cap and trade system. Uncertainty, both political and regarding post-2020 regulation, continues to prevent active long-term planning, she notes, as participants are unsure if the program will remain in its current form or shift to a carbon tax after the upcoming election.

As Senior Director of Environmental Management, Kayhanfar has expert insight on the effect that cap and trade participation has had on compliance entities. Carbon reduction projects, she notes, which where initially unattractive because of their low ROI(return on investment), can now be seen in a much more favourable light because of funding from cap and trade.

However, the complexity of the compliance system has caused companies, Congra included, to employ outside assistance to alleviate their logistical burden, increasing the overall cost of compliance.

In this Q&A interview, Kayhanfar gives her informed perspective on on the effects of the cap and trade program on its participants. She will also be presenting at the upcoming Canadian Clean Energy Conferences Ontario Cap and Trade Forum, taking place on April 18-19 at the Beanfield Centre, Toronto. Visit: www.capandtrade.canadianclean.com

Canadian Clean Energy Conferences: What are the top concerns for Ontario participants at this stage of the program?

Tracy Kayhanfar: I would say the fact that the program is still very much in its infancy. There are a lot of wrinkles that still need to be ironed out. Obviously the upcoming election has created some apprehension, with participants not knowing if the program will morph from a cap and trade system into more of a carbon tax. So there is still a lot of uncertainty around the program.

CCEC: What opportunities are evolving under the program to support carbon reduction goals?

TK: A program like this definitely forces industry to evaluate current infrastructure, to try to identify opportunities to decrease their greenhouse gas emissions footprint. In many cases, a program like this makes projects that may have not been attractive, from a return on investment perspective, seem more attractive due to the cost of the carbon. Cap and trade allows you to pull that cost into a project. That way of thinking really becomes an integral integral part of the evaluation of projects and improvement opportunities.

CCEC: How are compliance processes and best practices evolving?

TK: We have one facility in Canada and one facility in Dresden that fall under the program and I really think it’s forced us to monitor emissions much closer than we did prior to the program’s start. The biggest concern is that you end up in a position where you are short on allowances, particularly at the end of a compliance period. With that being said, most companies really don’t want to spend money on carbon allowances which has forced us to only purchase what we need.

We specialise in food manufacturing, so buying carbon allowances is definitely a cost to our business. The majority of our emissions are created during the combustion of natural gas in our boilers during tomato fresh-packed season. This program has really forced us to monitor our boiler performance for optimal efficiency and make sure that we’re running as efficiently as possible to try not to impact the cost of the products that we’re trying to make for consumers.

CCEC: What tools and resources have been most useful in developing carbon strategies?

TK: Our company has been involved with cap and trade in California since 2013 and actually participated in the very first auction that was held in late 2012. We originally had two facilities in California that fell under that program. Since the program’s inception we’ve actually closed one of those facilities. We also participated in the auction held in August 20th, 2017. To date we’ve internally managed our accounts and strategy, primarily led by me.

Our company structure was significantly different back then, with additional resources available on the environmental compliance side of the business, which allowed me to really put some dedicated time into understanding the program and participating in a lot of different webinars and meetings that were occurring out in California.

Where we are now is that our corporate structure has changed significantly and I now have responsibility for the compliance over our entire network, which is currently a footprint of 35 facilities. We have realised that we need to engage some external experts who specialise in these programs and in the market. That’s something we’re currently working on right now. We realise that we’re playing pretty far outside of our comfort zone with being able to manage this as effectively as we could as an organisation.

To that end, we’ve engaged Alpha Inceptions to partner with us. One of the reasons we’ve entered into this partnership is because the cap and trade program, with its complexity and the constant changing and morphing, requires you to have dedicated resources to be able to comfortably try to develop a strategy to move forward.

CCEC: What key information on the post-2020 rules would allow participants to develop plans?

TK: Personally, I think it vital we have more information on the amount of free allowances that we could expect and better visibility on the cost of allowances going forward. There’s been a lot of speculation about change of the assistance that different industries should expect, and right now it’s very much in a state of flux. That creates difficulties in developing a concrete plan and a financial strategy to deal with an issue that there’s just so much uncertainty around. So I would be interested in more clarity over what kind of assistance we can expect and what the program’s going to look like in the long term.

CCEC: What are the next steps for Ontario participants in evolving their cap and trade plans?

TK: The facility that we are currently operating in Canada has voluntarily opted into the program, since they are between the ten thousand metric tons and 25,000 metric tons and have no mandatory requirement to enter into the program.

I would say the next steps for our company will be to better understand the two facilities we have in two different countries. To help develop that longer term strategy because we are beginning to edge too far outside our comfort zone and we really need that expert insight.

One area of distinct interest for us is how allowances from certain jurisdictions work in other jurisdictions. For example, we participated in the auction in August of 2017 and our purchase was split between the State of California and the Quebec Government. So the allowances that got put into our account were split between the two entities. It’s going to be interesting to see how we are expected to manage both of those facilities based on how these split allowances are added into the system and how we are able to utilise them.

CCEC: What are you looking forward to at the Ontario Cap and Trade Forum on April 18-19?

TK: What I’m really looking forward to is getting some insight into the details of the Ontario program and to hearing from people working through the same situations as us. I’m sure other participants will be able to shed some light onto some of the questions that we have on where industrial participants envision this program going. Im looking forward to absorbing that knowledge because, as it stands, I certainly don’t feel that we have the information that we need to make smart business decisions in terms of our compliance strategy.

The Ontario Cap and Trade Forum takes place at Toronto’s Beanfield Centre on April 18-19.

Take advantage of this high-calibre networking opportunity with mandatory participants in Ontario’s cap and trade and key government decision-makers, and gain useful updates on compliance and trading strategies from international carbon market experts.

Visit the event website for more details on the Ontario Cap and Trade Forum, which will bring together regulated entities from Ontario, Quebec and California with key government decision-makers and carbon market experts.

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