The B.C. government has announced its highly anticipated plan to regulate greenhouse gas emissions from the liquefied natural gas (LNG) industry. While the legislation gives LNG plants a stringent standard for carbon pollution, it doesn't address the rest of the natural gas supply chain and focuses heavily on the use of carbon offsets.
“LNG production releases carbon pollution all the way down the chain of production, from wellhead to waterline," said Merran Smith, director of Clean Energy Canada. "[The] legislation only addresses the last link in that chain — the port facilities where companies would chill the gas to load it aboard ships. It also allows companies to buy credits rather than actually build cleaner terminals.”
Still, Smith characterized the province's announcement as "a good start" and the province indicated regulations to govern upstream emissions from shale gas development are coming.
Facilities will be charged $25 per tonne of emissions over the limit and an incentive program will subsidize corporations’ compliance costs at an increasing rate the closer they get to meeting the target.
At the press conference in Victoria, Environment Minister Mary Polak dodged questions about the potential cost of the incentive system saying only that the government expects revenues from the LNG industry will offset the cost.
She also declined to comment on potential tax revenues from corporations involved in LNG development, citing the soon-to-be-released deal the province will offer to potential LNG investors, such as Malaysia’s Petronas. That company has already threatened to delay its multibillion-dollar project if B.C.’s original tax regime isn’t lowered.
Polak added the decision allows facilities to consider multiple options to reduce their carbon emissions. This flexibility is intended to drive innovation in the industry, she said. Operators will be able to contribute to a technology fund as part of their efforts to meet the new target, although the shape and direction of the fund has yet to be determined.
The new legislation will supercede 2008's Greenhouse Gas Reduction Act.
Upstream Emissions Account for 70% of Industry's Carbon Footprint
The lack of upstream regulation leaves the province exposed to the bulk of the pollution generated upstream of the terminals themselves, according to Matt Horne, B.C. associate regional director for the Pembina Institute.
“Shale gas development needed to fill LNG pipelines and terminals on the coast will account for 70 per cent of the total carbon pollution from the industry," Horne said. "This is not addressed directly by the new legislation. It is, however, encouraging that government has signaled its intent to deal with this at a later date."
Horne said there are already effective strategies to mitigate upstream greenhouse gas emissions. A recent Pembina Institute report, BC LNG Proposals and GHG Emissions, outlines how LNG developers can reduce emission throughout the production chain through carbon capture and sequestration, as well as eliminating venting and flaring during the fracking process. The report also notes there are significant costs associated with these practices and that no jurisdiction in Canada currently requires them.
The simplest way to address the problem, Horne said, would be to increase the carbon tax and extend it to all aspects of production, ensuring that companies are hit harder over time for failing to lower admissions.
He added that the way in which the government decides to administer both the offsets program and the technology fund will have significant implications for the success of the legislation. Without credible offsets, he said, the province can make little progress toward its emissions reduction targets.
Province Claims Natural Gas is a 'Bridge Fuel'
In its press release, the province claims "natural gas is part of a global climate solution" — a claim debunked in a new report published in the scientific journal Nature last week. The report's author Haewon McJeon concluded that abundant natural gas will actually delay climate action. Numerous reports have found upstream emissions mean natural gas is similar to coal when it comes to climate impacts.
“Given the level of LNG development targeted by the government, it remains unclear as to how the province will meet its legislated climate targets," Horne said.
The Trouble With Carbon Offsetting
Touted as an extension of the province’s push to achieve a carbon-neutral government through the purchase of offsets, the LNG program requires that all facilities purchase offsets from within British Columbia.
The province’s offset program has come under fire before. Last March, the auditor general John Doyle released a report, in spite of attempts to suppress it, heavily criticizing the program for allowing the purchase of false credits. Focusing on two projects that made up almost 70 per cent of the total offsets the government bought — the Darkwoods Forest Carbon Project and the Encana Underbalanced Drilling project — Doyle reported that the province was spending way more than market value for offsets generated by projects that were slated to go ahead regardless.
“In industry terms, they would be known as ‘free riders’ — receiving revenue ($6-million between the two) for something that would have happened anyway,” Doyle told the Globe and Mail after the report was released.
Last November, the province announced the Crown carbon offset agency, the Pacific Carbon Trust, would be enveloped within B.C.'s Climate Action Secretariat to reduce costs.
While Polak commented during the press conference that the policy will provide revenue opportunities for those with offsets — in particular First Nations — to sell there has been significant criticism of the real value of the practice to begin with.
Polak told media yesterday that all offsets purchased will adhere to international standards, and will not allow companies to claim emissions reductions at the market end of industry, for example, claiming offsets for LNG burned in lieu of coal in countries such as China.
Image Credit: B.C. Gov Photos via Flickr.