Canada’s proposed Net Zero Carbon Regulation for Digital Business is the first of its kind in the world and a potential model for other countries. The Canadian government has already begun making efforts toward the regulation’s enforcement regarding global warming. This regulation will impact every digital business in Canada.
Canada Net Zero Carbon Regulation Impact on Digital Business
Canada recently unveiled regulations for digital businesses, requiring them to be net zero carbon by 2050. The goal is to help the nation reach its overall carbon emissions targets and show that the government is serious about reducing carbon output.
This regulation is intended to drive companies towards more sustainable energy solutions, which will, in turn, lower Canada’s carbon footprint. This moves Canada into alignment with other countries that have already implemented similar regulations, such as the US, China, Japan, and the UK.
The law requires all Canadian digital businesses that exceed a certain revenue threshold to offset their emissions and then prove they’ve done so. In a nutshell, the regulation creates two methods for meeting its ambitious goals:
- In order to offset its emissions, a digital business can either invest in an approved emission reduction project or purchase carbon credits from someone who has already invested in a green-friendly project.
- In order to prove it has met its obligations, the business must measure and report its annual greenhouse gas emissions consistently–and then keep track of those measurements over time.
These requirements apply to any business that makes more than C$10 million per year from its Canadian operations. This threshold has been fixed for five years and will only increase by C$5 million each year after that. Some businesses might wait to be subject to the regulation but must comply within the next few years.
If you own such a business, you should monitor whether you’re on pace to trigger compliance requirements. For this reason alone, it’s critical to get ahead of the game by understanding how the regulation works and what it means for your company.
Why do we need this regulation?
Canada’s digital industry is proliferating, significantly contributing to the country’s overall economic growth. It is also leading the way in driving emissions reductions. Canada has been a world leader in climate policy and is at the forefront of implementing carbon pricing.
According to a study, Canada is expected to miss its 2030 target by more than 50 million tonnes of CO2. That’s not good—mainly because of the increased emissions from digital businesses such as Uber and Amazon.
Canada aims to “lead by example” in the fight against global warming and has joined other countries in taking steps to reduce their environmental impact.
The regulation has been explicitly proposed because of the urgency of climate change and its environmental impact. However, it will also have immediate economic effects on Canada’s economy in the form of lost jobs and tax revenue. The government hopes these consequences are temporary but acknowledges that they are necessary to protect the environment.
How does this regulation work?
The Canadian government requires industries (including data centers) with an energy consumption capacity of more than 100 MW to use renewable energy.
Several steps in this policy have been regulated, such as:
- Renewable energy: must obtain 10% of its power from renewable sources, including solar, wind, and hydropower, or purchase green energy credits.
- Carbon capture: must capture a minimum of 2% of its power emissions and store them in tenured storage facilities
- Emissions trading: must trade with an approved emissions trading registry to reduce its environmental impact.
The ‘Net Zero Carbon’ regulation will require large companies operating in Canada that are not already achieving net zero emissions to achieve this level of emission reduction by 2050. The regulation is being implemented through a collaborative effort between the Department of Innovation, Science and Economic Development (ISED) and Environment and Climate Change Canada (ECCC), with support from Natural Resources Canada.
What actions can Canadian digital businesses take to become compliant?
The government is calling on all companies in all sectors to reduce their emissions to net zero by 2050. The move is aimed at helping combat climate change and aligning Canada with the Paris Agreement’s goals, which the United States withdrew from earlier this year.
For digital businesses operating exclusively within Canada, there are numerous ways they can comply with the new regulations. Some options include:
- Reducing operational emissions by looking for opportunities with suppliers and vendors;
- Implementing efficiency upgrades on business equipment;
- Adopting more efficient business practices such as buying local products for online sales, printing fewer emails, and reducing unnecessary meetings and calls.
It is also possible that digital business people will start relocating their data centers to Indonesia, which has become the most prominent green data center located in Southeast Asia. Tech giants such as AWS, Google, and Microsoft Azure are already present in Indonesia. It means that digital businesses in Canada can save on their data center costs while meeting the requirements set by the government.
Want to protect the environment? Be part of the solution!
The Canada Net Zero Carbon Regulation for Digital Business is part of Canada’s broader plan of creating a “clean economy” by investing in renewable energy, supporting green innovation, creating jobs, reducing pollution, and ending reliance on fossil fuels.
The regulation hopes to be an excellent example other countries could follow to lessen their environmental impact. It will also make the companies more sustainable and incentivize them to keep reducing their carbon footprint. However, many people are skeptical of this new regulation, as it could require them to spend much money on something they have no control.
While the ultimate goal is to reduce overall emissions in Canada and move toward a low-carbon economy, some experts are concerned that this regulation may need more effect on lowering actual greenhouse gas emissions. Instead, they say that it could cause companies to go out of business or relocate outside Canada. Some are also concerned about whether this initiative can be enforced.
The benefits of doing so are enormous: not only will it be better for the environment (no more CO2 emissions!), but it also allows companies to become part of the solution instead of being part of the problem. And perhaps most importantly of all—it’s also an investment opportunity!