The B.C. government is looking at a suite of the province’s natural resources — including liquefied natural gas — that could be marketed globally as “clean” products in an effort “to create new markets for B.C.’s goods and services.”
Draft government documents obtained by The Narwhal through a freedom of information request suggest the province may also be looking to secure credits through international emissions trading for any reductions that result from the export of lower carbon products, such as lumber, copper, and aluminum, from B.C. to help meet Canada’s climate targets.
What’s unclear, according to Simon Donner, a climate scientist and geography professor at the University of British Columbia, is how it would work in practice.
“That’s probably where this falls apart,” he said.
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In more traditional carbon accounting, countries are responsible for the greenhouse gasses emitted within their own borders, Donner explained.
What the province and the Business Council of British Columbia seem to be proposing is a situation where Canada is able to use the trading mechanisms that may become available under the Paris Agreement to get credits for natural resources produced with lower emissions that are then exported to other countries.
“There’s a reason this system hasn’t been set up, this is hard to do and people don’t agree on it because it upends the way some of the accounting is done,” Donner said.
“Here’s why the accounting matters: If you set up a system that allows for double counting of emissions, it could disincentivize people to do emissions reductions,” he said. “If Canada somehow is able to get emissions credits for selling LNG to other parts of the world, that disincentivizes us from doing other emissions reductions at home.”
There is also much debate about whether LNG is truly a lower carbon energy source than coal, when fugitive methane emissions are taken into account. A report from the Canadian Centre for Policy Alternatives and the Corporate Mapping Project, released in July, details how B.C.’s plans for LNG are inconsistent with provincial climate targets. The report found that if all proposed LNG projects go ahead, the province will exceed its 2050 climate target by 227 per cent.
Paris Agreement rules for emissions trading still under negotiation
The exact rules for international trading of emissions reductions credits under Article 6 of the Paris Agreement have yet to be finalized, but the idea is that it would allow countries to buy credits from other nations that have already exceeded their reduction targets through voluntary agreements called internationally transferred mitigation outcomes, or ITMOs.
A draft “ITMOs 101” presentation shared among senior B.C. government officials in November 2019 says “around 50 per cent of countries intend to use international carbon markets to meet their targets, including Canada.”
It goes on to say that “B.C.’s lower carbon exports (e.g., wood products, copper, aluminum, cement, LNG) may result in real global GHG reductions when used to displace higher carbon products.”
“Canada may need ITMOs to meet its targets; B.C. can work with Canada to feature clean exports that reduce emissions globally while supporting clean growth opportunities here at home,” it says.
In a statement, a spokesperson for the Ministry of Environment and Climate Change Strategy said the province “recognizes that emissions trading across borders like those being explored at the United Nations through Article 6 may help jurisdictions meet global targets.”
“We continue to work with the federal government to support international negotiations.”
B.C. needs further reductions to meet emissions targets
It’s not just Canada that may be looking to international trading to meet its targets. So far, B.C. has only released a plan to get the province to 79 per cent of its emissions targets for 2030. Measures are still needed to cut an additional 5.5 million tonnes of greenhouse gas emissions — emissions from more than one million cars per year.
A July 2019 briefing note prepared for then-Energy, Mines and Petroleum Resources Minister Michelle Mungall and obtained by The Narwhal shows the NDP government considers emissions trading under Article 6 to be “a priority to ensure further industrial development fits within the B.C. climate plan.”
Earlier this summer, a spokesperson for B.C.’s Ministry of Environment and Climate Change Strategy said the government “is committed to meeting our emissions reductions targets with or without an agreement on Article 6” but “recognizes that emissions trading across borders like those being explored at the United Nations through Article 6 may help jurisdictions meet global targets.”
B.C.’s pitch of a low-carbon advantage
In the meantime, the province and the Business Council of British Columbia have been working to develop a low-carbon industrial strategy that would “establish B.C. as a world leader in delivering low-carbon goods and services.”
The draft ITMOs 101 presentation cites preliminary findings from research comparing the greenhouse gas emissions intensity of key commodities produced in B.C. — coal, copper, LNG, natural gas, lumber and aluminum — to the emissions intensity of those same products produced in certain competing jurisdictions.
That work was completed as part of a joint effort between the government and the Business Council of British Columbia to develop a low-carbon industrial strategy that would “establish B.C. as a world leader in delivering low-carbon goods and services.”
According to that preliminary modelling, B.C. emits between 3.8 and 4.6 million tonnes fewer greenhouse gases per year from aluminum production compared with the average emissions from aluminum production in the Middle East and Russia or China.
B.C. also emits about 3.7 million tonnes fewer greenhouse gases per year from natural gas production than Texas and 3.3 million tonnes less than Australia in coal production, according to the draft presentation.
“The research found that B.C. commodities can on average have a greenhouse gas advantage over the same products from specific competitive jurisdictions,” a spokesperson for the ministry said in a statement to The Narwhal, noting emissions from production facilities, upstream emissions from electricity and downstream emissions from transportation of the products to the final destination market were all considered.
“There is however more work to do on this,” the statement said.
While the business council and province are still working on a final report of the research, the business council has released some of that preliminary work already, including a greenhouse gas benchmarking and competitiveness assessment.
According to an August 2019 report prepared by consulting and accounting firm MNP, B.C.’s low emissions electricity and its provincial climate policies are greenhouse gas advantages over competing jurisdictions. However, transportation distances are a disadvantage for B.C.’s coal, natural gas, lumber and aluminum industries when it comes to emissions.
The business council is seeking relief from at least one of the climate policies that may be contributing to the very greenhouse gas emission advantage they’re hoping to promote: the carbon tax.
The tax, according to the council, adds costs for B.C. industries and puts them at a competitive disadvantage.
In its report, MNP notes the analysis was based on modelling and cautioned “actual results across individual entities may differ.”
Proposal criticized as lobbying effort, not ‘real system’
Canada has proposed similar arrangements before in an effort to secure credits for exporting lower-carbon natural resources, to no avail.
Referencing the clean exports project of 2002, the province’s draft ITMOs 101 presentation notes “Canada attempted to introduce the concept that credits from natural gas exported to the U.S. would meet 30 per cent of Canada’s targets. The international community reacted poorly, especially Europe, and the concept was scrapped.”
B.C. Green Party leader Sonia Furstenau is critical of the idea. In a statement she said “this endeavour by the NDP and (Business Council of British Columbia) is more about greenwashing our fossil fuel industry than it is about avoiding a climate catastrophe.”
“The explicit objective of ITMOs is that they should support ambition to promote greater efforts to cut emissions. LNG Canada plans to drastically increase our emissions by expanding fracking for the next 40 years, they’re just looking for a way to greenwash it,” she said.
“We need to get to work actually reducing our pollution levels instead of betting our future on a theoretical agreement that has yet to be finalized.”
The Narwhal did not receive a response to requests for comment from the provincial NDP or the Liberals by publication time.
Donner said one of his key concerns is the “cherry picking” of natural resource industries that might benefit from a system that allows Canada to claim credits for lower carbon exports.
“What if it turns out that the way we grow our fruits and vegetables, particularly where it’s done in hot houses, is actually higher carbon emitting than the production that happens in other countries, the U.S. included, that we import fruits and vegetables from,” he said.
“The concept isn’t bad, but it’s just ignoring all the practicalities of it,” said Donner, who questioned the focus on ITMOs when the rulebook for international emissions reductions trading has yet to be finalized.
That uncertainty isn’t expected to be resolved this year with the United Nations climate conference delayed until November 2021 due to the COVID-19 pandemic.
“It makes it feel like more of a marketing, lobbying argument than a real system,” Donner said.
“I just think all of the other aspects of the CleanBC plan are great and that’s where the effort should be going.”
B.C. business leaders, however, are calling on the province to do more to promote B.C. natural resource industries as part of the climate solution, noting the sector is key to B.C.’s post-pandemic recovery.
Business leaders say natural resources critical to post-coronavirus pandemic recovery
Last month, the Business Council of British Columbia released a report citing the MNP research and calling on the province to maximize B.C.’s low-carbon advantage, arguing that a competitive industrial sector will be critical to the post-pandemic economic recovery.
“The industrial sector, which produces the goods we and the global marketplace need, is the backbone of B.C.’s export economy and is essential to recovery, hiring and creating new jobs,” the report says.
A new Ipsos poll conducted for the Business Council of Alberta suggests a significant number of Canadians agree there’s a role for natural resource industries in the economic recovery.
Using the Ipsos online panel, 1,003 Canadians were surveyed online between Aug. 24 and 27 for the poll, which found 75 per cent of respondents believe the COVID-19 recovery should both support natural resource industries and protect the environment.
When asked whether the recovery should be used to make green investments or get existing businesses back on their feet, 54 per cent of respondents said existing businesses should be the priority, while 27 per cent want to see a green recovery prioritized.
The business council’s report suggests B.C. can do both by supporting its natural resource industries.
Critics, meanwhile, contend that the continued promotion of extractive industries is at odds with emissions-reduction goals. A July report from the Canadian Centre for Policy Alternatives and the Corporate Mapping Project found that, should B.C. proceed with all proposed LNG projects, the province would exceed its 2050 climate targets by 227 per cent.
Business Council of B.C. calls for carbon tax break
In its report, the business council calls on the government to develop a business investment strategy that markets B.C. as a lower carbon producer of key commodities, to embrace carbon offsets and investment in nature-based solutions as a means to meet emissions targets and to exempt heavy industries that compete in international markets from the full carbon tax.
“On average, our energy and commodity exports have half the climate change-causing greenhouse gas (GHG) intensity of our competition,” the business council’s report says.
But B.C.’s industries “face a significant competitive disadvantage compared to global competitors” because of the carbon tax, it says.
B.C. is “the only jurisdiction with carbon pricing without a comprehensive approach to protection for its trade-exposed industries,” the report says.
“If B.C. products aren’t competitive in the marketplace, the products will come from elsewhere, at a proven higher carbon content,”it continues.
The ministry statement didn’t say whether the government is considering carbon tax protections for industry, but the province has delayed until next year an increase to the carbon tax, citing the coronavirus pandemic. The levy was initially supposed to take effect this past April.
The ministry statement also pointed to the CleanBC industrial incentive program, which reduces the cost of the carbon tax above $30 per tonne for industrial operations that have lower emissions than world-leading competitors.
“The lower emitting a facility is, the more carbon tax payment it can receive in return,” the statement said. “This provides a strong incentive for large facilities to invest in cleaner operations in B.C. and reduce emissions.
Mark Jaccard, the director of the school of resource and environmental management at Simon Fraser University, said he agrees with industry’s argument that the carbon tax puts them at a disadvantage by raising their costs relative to their competitors, but he said there’s a contradiction in asking for a carbon tax break while simultaneously calling for a plan to promote your products as low carbon.
“It’s disingenuous,” he said.
Jaccard cautioned that there may not be much of a market for lower carbon products anyway — unless countries put climate tariffs in place.
“Who’s willing to pay more for the low-emission aluminum? There’s nobody. But there would be if there was a system of global carbon pricing,” he said.
“We need countries like Canada to put tariffs on or to join with other countries in climate clubs and when that happens then you might have a system where everybody’s constrained to be reducing emissions and there would be more value for products whose production involves less emissions,” he said.
“We are nowhere near an agreement like that.”