Key Takeaways from the CIBC Carbon Summit

Ryan Fan: Welcome to The Sustainability Agenda, a podcast series focusing on the evolving complexities of the sustainability landscape. I’m your host, Ryan Fan. Please join me as we explore today’s most pressing issues with special guests that will give you some new perspectives and help you make sense of what really matters.

Tom Heintzman: One of the big takeaways was that we just need to get going. There’s a lot of technologies, but there are not a lot of projects in the ground that are actually removing and sequestering carbon, and Dr. Julio Friedmann of Carbon Direct made the point on a couple of occasions that scale begets economies of scale.

Ryan Fan: Welcome to our multi-part series profiling the carbon markets. The purpose of this series is to examine some of the most significant issues facing our clients in both the voluntary and compliance markets. On today’s episode, we’ll discuss the key takeaways from CIBC’s inaugural Carbon Summit held in Toronto on October 26th, 2023. Over 230 delegates attended this premier event, representing experts in carbon market structure, project development and policy. The event was aimed at companies who are either on, or looking to start a journey to net zero, and to help them navigate the emerging carbon markets and the role these play in the transition to a low carbon future. I’m excited to welcome my CIBC colleague and podcast co-host, Tom Heintzman, Managing Director and Vice Chair for Energy Transition and Sustainability. Tom and I not only moderated various sessions at the summit, but we have hosted a series of videos and podcasts in the carbon markets in the lead up to the summit. Good afternoon, Tom, and thank you for joining the show.

Tom Heintzman: Good afternoon, Ryan, and my pleasure to be here.

Ryan Fan: Just quickly highlighting the summit for our guests. There was a diversity of delegates from Canada and the US and even in Europe. The program included two distinguished keynote addresses delivered by Dr. Gabrielle Walker and Dr. Julio Friedmann. There were ten panel sessions moderated by leaders across CIBC, with discussion topics such as on the supply side, what’s needed to bring and develop high integrity, voluntary carbon market financing and scaling issues for both reduction and removal. And on the demand side, we explored the growing role of carbon markets on the path to net zero. In addition, there were some regulatory focus on carbon pollution pricing systems and comparing U.S and Canada. So, Tom, we’ve heard from many product developers at the summit. We heard about various technological approaches, business models and funding models. What were some of your biggest takeaways?

Tom Heintzman: Ryan I would say a number of things hit me. One was the multiplicity of technologies focused on carbon removal. We’ve really seen an expansion of the number of different routes to carbon removal and, you know, real multiplication and the number of different people that are approaching this from different directions, not the same old technologies, and that gives me heart. There are only sort of conventional ways that we are approaching it, but the multiplicity of different approaches gives me a lot of hope that there is opportunity for some real breakthroughs. We also saw a variety of business models, ranging from licensing technology to hardware as a service. An example of the first might be carbon engineering. An example of the second might be savant, then pure play developers, and there are a number of those. So not only differences in technologies, but differences in business models. One of the big takeaways was that we just need to get going. There’s a lot of technologies, but there are not a lot of projects in the ground that are actually removing and sequestering carbon. And Dr. Julio Friedmann of Carbon Direct made the point on a couple of occasions. That scale begets economies of scale. So he used the factor of you grow your scale by two x and you’ll decrease the cost per unit by 15%, and he’s seen that hold true in a number of different technologies. We can debate whether the cost reduction will be 15%, 20%, 12%, but it’s somewhere in that order of magnitude. So the real priority is to get moving some of the other points that leaped out for me. One is the importance of community consultation, we often frame as a technical challenge, and it is to some degree. But in the end, it’s development, just like renewable energy development or oil and gas, getting the buy in of community is absolutely critical. And the navigator project, which was just at least put on hold in the United States if not cancelled, is a testament to the importance of engaging with communities. I would say that maybe one other takeaway that I had is the importance of offtakers and funders. So key strategic offtakers, and you’re seeing a number of them in the market these days Microsoft obviously, and frontier. But but others that are starting to make important purchase decisions and then also funders. We heard from Brookfield who’s funding the CRC project in California, amongst others. So some of these big sources of traditionally conventional capital, but actually starting to deploy in significant ways in the space and thereby adding not only legitimacy but also a financial heft to these projects. You and I haven’t debriefed, and I’m curious to see what you took away from the conference.

Ryan Fan: From the angle and perspective of corporates that are on a net zero journey. Think one of the most important messages I heard was that they just simply need to get off the sidelines and start acting. You know, you referenced this with regards to innovation, cost curves and deployment. The cost curve continues to come down with the doubling of deployment and that irrespective of technology, that is a pretty consistent thesis. I think corporates need to understand that. They need to understand that they need to take action, and it doesn’t necessarily mean that they need to buy $500 per tonne DAC credits for all of their offsetting needs, but they certainly should start to get their teams educated on what’s going on, on the initiatives with regards to quality and the fact that they just need to take a portfolio approach. I think something that we heard from, which I thought was quite interesting, is that they’re very conscious about taking a portfolio approach. They’re ambitious. You know, their average cost per tonne is 80. That’s high on an average basis. But that doesn’t mean that everything is. It could mean that some things are 400, some things are 25 or 30. But if you take a portfolio approach as a corporate sector, then you’re learning about the variety of technologies that are out there. You’re learning about and supporting these emerging technologies to help them get down the cost curve as you increase and double deployment. And so I think the key for corporates is get in motion, learn more. And the more you learn, the more you start to deploy. The more you start to deploy, the more the cost curves come down. If you sit on the sideline, the cost curves will never come down and none of us will meet any of our climate goals. So, Tom, I’m going to flip it back to you again. You mentioned quite a few things. What were some of the other observations that you had that that maybe weren’t so obvious when we came into the Carbon Summit?

Tom Heintzman: The one that was maybe clear, but really got emphasized is the importance of the infrastructure in order to permit individual projects. And by infrastructure, predominantly mean carbon hubs like the US is is now financing in the United States and pipelines, in order to move large volumes of carbon and allow for the sequestration and allow a whole bunch of projects to take advantage of and to share common infrastructure. So there I’m thinking of the ACTL Alberta Carbon trunk line and Alberta and the summit project in the United States. Good examples of, you know, massive projects with ample additional capacity to allow a whole bunch of different projects to take advantage of and tap into the infrastructure. So it’s on one hand, perhaps obvious, but on the other hand, the number of developers relying upon this infrastructure was really emphasised to me. The second one, which was, I think, really helpful reframing of the topic from a marketing perspective and a communication perspective. Leo Friedmann was quite strong in his view, that we should get rid of the term offset and rather refer to what they actually are, whether it’s removals. So you would buy a tonne of removals or reductions or avoidance. And I think it really turned the paradigm a little upside down for me. But in the end, I think that that is a more powerful way of communicating exactly what’s going on. A removal is clearly something that we want to do, and it the term communicates directly, whereas an offset makes it seem like it’s not the ultimate goal and that it’s buying indulgences. So I was really struck by the power of his suggestion to use the terms removal, reduction and avoidance. And Ryan, how about you? You had the benefit of moderating for much of the day and hosting for the entire day. I’m wondering whether, as you were wrapping up, you had any conclusions, any thoughts that were real lightning bolts for you after, well, months of planning this and then the actual day itself.

Ryan Fan: There were a few strong takeaways as we built out the program for the Carbon Summit. What really struck me. First off was that even though there are competing technologies, competing projects for the same pool of investment dollars, they’re all rooting for each other. And there is a sense of camaraderie amongst people in this industry, carbon management that they all know we need. And I’m quoting, I think it was Julio who said this was, we need all of the above. It’s not a choice of this or that. We need it all if we’re to hit our climate targets globally. And so I got the sense that everyone that’s in the space of carbon management here and that presented in spoke, they all knew that. And so they’re all rooting for each other. And it’s not your typical industry competition. And so. That combined with the fact that there is this, as you said, multiplicity of technologies and business approaches and investment approaches, that suggests to me that we’ll get there. And so one of the key takeaways I had was how optimistic I came away from it all, as opposed to pessimistic. And it’s very easy to be pessimistic about this because we see nothing but negativity in the press. Right. And yet, you know, presentation after presentation, we heard stories and anecdotes of capital being put to use about investors and corporates anticipating guidance from bodies like the Integrity Council and the voluntary carbon markets and their core carbon principles, and the application of that later this year, that will give us some guidance on what the definition of quality is. And so I walked away from it all thinking that there is a lot in motion that is not being reported. We pulled back the curtains on it at the summit and made me feel a lot better about the direction that we’re all headed in.

Tom Heintzman: Those are all great points. Perhaps one follow on the importance of government policy. You mentioned a number of times, and you’ve mentioned it here. Just consistency and farsightedness and government policy. The US government policy has unlocked a fair bit of innovation and hopefully will continue to do so as new administrations come in. The Canadian policies have not yet unlocked that potential, but certainly everybody in the room is hopeful that they will, and particularly given recent announcements in Canada about carbon pricing, we’re all looking for a path forward that’s accepted by all political parties, and that industry can count on for the long term in order to get on with the job of building facilities.

Ryan Fan: Yeah, with regards to policy thought, one of the most important things is looking at how the was such a bipartisan effort and it created price certainty, obviously through investment tax credits. And the one thing that Canada currently still lacks is, is that price certainty. We thought we had it and now it’s still in flux. And so that’s going to be the challenge for those developing projects in Canada. Can you attract those investment dollars without that certainty of being able to stack credits on top of each other? The one thing thought was encouraging last week that wasn’t part of the summit, but was announced, was the Canada Growth Fund is starting to deploy capital now, right. And so unlike the US where you’ve had the IRA, which is tax credits and a market based system to allow the markets to figure out who the winners are, Canada has taken the approach of helping to choose the winners by providing investment dollars similar to I guess, for example, grants would be. And so there isn’t a market based system, they’re choosing the winners for us. We trust that they’ll do a good job, but it’s encouraging to see that the Canada Growth Fund is starting to deploy some capital, and we hope that in the near future there will be some clarity on contracts for differences as well.

Tom Heintzman: From my vantage point as a participant, I just wanted to thank you for all the hard work that I know that went into this summit, and I’m sure you’re already thinking about what it will look like next year, and I have no doubt that it will be a success, because this certainly is a topic that’s going to grow in importance over the next year.

Ryan Fan: Yeah, it certainly will. Thanks, Tom, for your time today and for supporting our inaugural Carbon Summit. Thank you also to our listeners for tuning in. Please join us next time as we tackle some of Sustainability’s biggest questions, providing different perspectives to help you move forward. I’m your host, Ryan Fan, and this is The Sustainability Agenda.

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