EDC Associates Ltd. is working on a multi-client study that explores how the supply/demand balance for offsets in Alberta will evolve over the next decade. EDCA will discuss the provincial/federal carbon policies while factoring in abatement cost curves for major industries (oil & gas, electricity, petrochemical, cement, etc.).
The cost of carbon is now growing to $170/t by 2030. One would assume that the supply/demand balance of offsets would be skewed to demand, but that is not the case because two facets needs to be considered.
- Alberta is the most attractive jurisdiction in Canada to develop renewable resources. Therefore, the amount of available offsets from new generation projects is expected to accelerate at a never-before-seen pace.
- With carbon costs accelerating by such a degree, major industries that normally use offsets and credits to meet their obligations will begin to turn attention to abatement activities. If implemented, could permanently reduce demand for purchasing environmental attributes (and potentially even contribute to the swelling of the supply).
Depending on the capital costs and the appetite for a permanent (internal abatement opportunities) versus temporary (purchases offset/credits) approach, the demand for environmental instruments could continue to outpace supply, slow and eventually match supply or potentially collapse beneath the available supply.
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