EV charging carbon credit programs offered by the federal and B.C. governments in their clean fuel regulations may look similar, but there are crucial success-defining differences that Canadians should be aware of, writes Maxime Charron
Over the years, there have been different positions and criticisms of government carbon credit programs. Some say that they are simply another form of taxation for corporations that will increase prices for customers. Others say that they don’t reduce or limit the number of carbon emissions allowed, but only create an “offset” market for trading.
Regardless of the position, there are now two different EV-charging carbon credit programs in Canada: the federal program and the provincial British Columbia program. Both permit electric vehicle charging stations to generate carbon credits that may be sold in a public market.
The idea is to increase the return on investment (ROI) for an organization deciding to invest in EV charging. In turn, this incentivizes the installation of new charging stations or other green energy alternatives across the province and the country. This is a shared objective for both programs.
But, unfortunately, that is where the similarities largely end. Under the current structure of the federal program, money from carbon credits is being funneled in the wrong direction, into the hands of network operators rather than EV charging station investors.
It is imperative for the federal government to take a close look at the British Columbia program and change the way its EV-charging carbon credit program is administered to encourage more private investment in the industry and, in turn, encourage a greener future for Canada.
B.C.’s carbon credits approach
In British Columbia’s program, the business that invests in the charging infrastructure collects carbon credits. So, companies like Tesla, Baseload Power, EV Initiative, and Parkland are now flooding landowners’ emails with proposals to install chargers to secure the credits before the landowners realize the market potential.
With the decentralization of energy, power has shifted to whoever has land rights access. This is a huge opportunity for property and landowners.
Charging network investors, once they secure land rights, can sell the carbon credits from their network on the market and use the proceeds at their discretion, including putting the proceeds towards the project ROI; reinvesting in other, unrelated projects; or simply keeping the money in savings.
It is a very fair and straightforward process where the investor in the project claims the carbon credits and then earns the revenue — at approximately $500 per credit — from reselling them.
And should the EV charging station owner not be interested in managing a carbon credit account themselves, an aggregator can be appointed to manage the account on their behalf.
Federal carbon credits approach
At the federal level, however, a crucially different approach will be implemented after January 2023.
In its Clean Fuel Regulations, administered through Environment and Climate Change Canada (ECCC), the federal government awards carbon credits from public charging stations to the network providers, not to the charging station investors.
Network providers offer services such as a mobile application to process payments or a software platform that collects data on the charging stations for a monthly fee to the station owner. In some cases, they will also sell their proprietary hardware (chargers). Under the federal program, the network providers will, in essence, collect the carbon credits on someone else’s initial investment while also making a profit from the station owner (investor) on annual and transaction fees.
Once the federal carbon credits have generated revenue, the money can only be reinvested in EV charging infrastructure, electricity distribution infrastructure that supports EV charging, or financial incentives for consumers. One concerning potential market outcome is network providers, who also sell hardware, could then strongly discount their own products to clients because they are financing the equipment with carbon credits sold in the backend financed by the station investors.
This could lead to a vicious cycle as the customer’s ability to shop around for the best technology is usurped by EV charging network providers that hold the power to negotiate due to their ability to aggressively sell their own products.
It would be the same as an investor depositing money at a bank, but the bank is allowed to keep the interest generated from the investor’s initial deposit on top of charging annual account and portfolio management fees. That doesn’t seem fair, does it? Well, that’s what the federal program plans for — until enough voices are raised to change course.
Prioritizing investor incentives
For the federal carbon credit program to succeed, the investor must be incentivized to install additional green infrastructure.
Electric vehicle charging station owners or investors should always be able to claim their carbon credits and they should demand their network provider give them the proceeds from the credits their charging stations generate — as is the case in B.C. and California.
By administering the program as it is currently structured, the federal government will not achieve its intended objective of increasing private investments in EV charging infrastructure. Instead, it runs the risk of creating a new monopoly in the EV charging industry.
In addition, it will undoubtedly lead to user frustration due to the lack of innovation within a narrow industry run by only a few companies.
We are already seeing it in Canada. The first generation of direct current fast chargers (50kW DCFC) is still being installed in public charging applications. Taxpayers’ money is being used to fund inadequate charging infrastructure.
There is now an opportunity for property owner groups to make their voices heard at the government level as carbon credits are becoming a big ROI factor in the deployment of EV charging infrastructure.
In the meantime, I applaud the British Columbia government for building such a fair carbon credit program that will benefit the investors and increase private investment in the industry.