This very long piece is the last of a four-part series on B.C.’s climate action plan. Part One addressed B.C.’s GHG reduction targets. Part Two addressed how that plan is at risk of being co-opted by Big Oil. Part Three took a closer look at the B.C. Climate Leadership Team’s recommendations for the carbon tax. This analysis explores how the oil and gas industry, and especially the LNG industry, might financially benefit from hidden subsidies recommended by that advisory body.
Like so many other governments around the world, British Columbia’s Liberal government led by Premier Christy Clark has been duped by the barons of Big Oil.
Beguiled by the petroleum industry’s promises of new investment and jobs, the Clark government has repeatedly proved itself a patsy in acceding to the LNG industry’s every demand.
In the process, it has subjugated B.C.’s global-leading 2008 climate action plan to its misguided vision for the unchecked exploitation of non-renewable natural gas.
It has broken its own law, in failing to meet B.C.’s legislated targets for provincial greenhouse gas reductions.
And it has tugged its forelock, at every turn, to meet each new industry demand for special treatment and locked-in subsidies and tax concessions that are fully underwritten by B.C. taxpayers.
This analysis explores how that taxpayer-subsidized boon to Big Oil stands to be further entrenched under the recommendations for updating B.C.’s climate action plan last fall by the government’s handpicked Climate Leadership Team (CLT).
The Ludicrous Foundation of B.C.’s Climate Avoidance Plan
As I have explained in previous installments, B.C.’s greenhouse gas reduction plan is woefully off-track. The CLT has suggested a plan to help remedy that situation, mainly through a long-term commitment to a 12-fold increase in B.C.’s carbon tax.[view:in_this_series=block_1]
Several other recommended measures that I address below are largely aimed at subsidizing B.C.’s worst carbon polluters, to help them offset the added carbon emissions they hope to impose upon B.C. in the name of economic development.
Underlying that project is the Clark government’s abiding obsession with LNG as B.C.’s principal driver of new resource development.
It intends to further aggravate B.C.’s GHG emissions challenges with a forthcoming climate “action” plan — more accurately, a climate action avoidance plan — that is sure to be tailor-made for the province’s largest industrial polluters.
More drilling rigs and roads. More scars on our land base. More fracking and seismic instability. More water waste and groundwater poisoning. More pipelines. More energy burned in B.C. to produce still more non-renewable energy destined to be burned in far-flung places. And many, many times more greenhouse gas emissions.
All to “liberate” the “dream” of building plants on B.C.’s Pacific coast that will liquefy natural gas by chilling it to -160°C and ship it halfway around the world to China and other countries.
All in a rush to profit from that product that other countries are now struggling to sell because there is already far too much of it on the market.
It is to be a climate action plan aimed at largely undoing the anticipated damage from a new LNG industry that may never ultimately materialize in British Columbia, ironically, because it is so demonstrably unnecessary — a victim of its own global rapacity and redundancy.
It is an industry that is struggling to cope with the falling price of a product it wants to wish upon our choking world.
A product that has been devalued by the global glut of LNG that it has created from overproduction and from the world’s suddenly serious attempts to reduce its dependency on fossil fuels.
A product that at least one study from the Canadian Centre for Policy Alternatives shows will be devastating for B.C.’s environment and may well increase global GHG emissions over at least the next fifty years, compared to even building state-of-the-art coal plants.
Indeed, it is an industry that should have no future in B.C. if we are truly concerned about shifting to a low-carbon economy, about mitigating avoidable greenhouse gas emissions, and about seriously combating global warming.
That should be the central, unwavering message from British Columbia’s environmental community and from all those who should know better.
Which makes it all the harder to fathom why the environmentalists and academics who served on the CLT ever agreed to embrace a climate action plan that is innately dedicated to advancing the Premier’s LNG vision and to offsetting its negative impacts largely at taxpayers’ expense.
Accepting that vision for increased carbon emissions as the starting point for renewed climate action plan will make it even more challenging and more costly to meet British Columbia’s legislated GHG reduction targets.
This is the fundamental point that compromised the CLT’s mandate and mission, which it failed to articulate and which must be soundly rejected.
— DeSmog Canada (@DeSmogCanada) July 27, 2016
The most rational response to any problem is to first address it by doing less of the thing that is the problem, not the opposite.
You wouldn’t council a drug addict to take even more drugs as a way to kick their habit.
You wouldn’t advise a person mired in debt to max out their credit cards and to apply for new ones as a path to reducing their spending.
You wouldn’t urge someone who is drowning to keep gulping the stuff that is sinking them as they dog paddle their way back to safety.
So why on Earth would anyone think that the way to solve our global warming crisis is to intensify fossil fuel developments in Canada that we can readily live without and that will only compound the problem they are creating?
How crazy must we be to think that the best way to lower greenhouse gas emissions that are threatening our planet’s very existence is to launch a new carbon-intensive industry in B.C. that we don’t have, don’t need and can’t afford?
Nuttier still is planning to do that when the bottom has fallen out of the global LNG market, leaving exporting countries like Australia holding the bag for that industry’s environmental and social costs, with virtually nothing of worth for taxpayers to show for it.
Carbon emissions are the problem we want to solve.
It makes no sense to invite more of them, only to have to offset them, as we also try to eliminate the ones we are already producing at a rate that exceeds our efforts to reduce them.
Yet that is precisely what the CLT plan struggles to achieve, largely by transferring the risks and costs of the most onerous climate actions that would be required to follow that nonsensical course, from the largest industrial polluters, to B.C. taxpayers and families.
We need to reject that plan to further subsidize B.C.’s worst carbon polluters, and instead, make them more accountable for the actions and costs that will flow from eliminating their unwanted emissions.
This much is evident.
The well-meaning members of the CLT who care deeply about reducing British Columbia’s greenhouse gas emissions got outplayed by their government and industry colleagues.
The LNG representatives and advocates who sat on the CLT well understood that its “consensus” recommendations to increase and expand the carbon tax would never be adopted by the B.C. Liberal government.
They signed onto that package not for what it purports to demand in terms of right-pricing carbon; but rather, for what it might help to legitimize in further subsidizing their industries’ obligations to reduce their emission intensity levels, if not their actual emission outputs.
They signed onto it knowing that it would be “cherry-picked” by the Clark government, notwithstanding the CLT’s contention that its recommendations must be accepted a total indivisible package.
They signed onto it hoping that at least some of the hidden subsidies, regulatory concessions, risk avoidance measures and tax relief policies that stand to benefit their industries would be embraced by the government.
In short, they signed onto to that CLT “consensus package” because of what it does not demand. And also because of the enormous “wriggle room” for climate action avoidance that it provides, through its lack of specificity and through its lip service to future policy reviews and business relief measures in the interests of “global competitiveness.”
The Clark government will not support all of the measures that the CLT has recommended to most benefit B.C.’s largest carbon polluters. Yet the CLT’s report provides it with plenty of new ammunition to double down on its failing LNG vision with new mitigation measures that will principally mitigate industries’ costs of paying for their own carbon pollution.
Revisiting the B.C. Liberals’ LNG Subsidy Plan
The CLT suggested several actions that would especially benefit the LNG industry, the oil and gas industry, and more broadly, carbon intensive industries.
To appreciate the scope of those suggested hidden subsidies for LNG in particular, it helps to know a little about the incredibly generous tax arrangements that the Clark government has already extended to those huge firms, in furtherance of its LNG strategy.
Key among those is the infrastructure royalty credit program, which was introduced in 2004 by the Campbell administration to encourage natural gas exploration and development.
For a great analysis of the true hidden cost of that program, check out this piece from blogger Norman Farrell, who has written extensively on the subject.
The royalty credit program grants companies deductions from the royalties they would otherwise have to pay on the natural gas they extract. It is a well-hidden subsidy that is really a tax expenditure and that has poured billions into the pockets of the oil and gas industry over the last 12 years.
It was arguably a defensible trade-off for government back in the days when that royalty credit was at least partially offset by the billions of dollars in natural gas revenues that that industry returned to the provincial treasury from its investments.
But today, it is harder than ever to justify.
The Clark government recently approved yet another $120-million in tax breaks to 10 energy companies under that program, ostensibly, to “buy” ongoing industry investment in British Columbia’s northeastern region.
Yet the province is only expecting to collect $128 million in natural gas royalties this year — almost a dollar-for-dollar subsidy.
It was exactly a year ago, in the dead of summer that the Clark government pushed through its Liquefied Natural Gas Act Projects Agreement Act over the objections of the opposition.
That Act paved the way for the government to enter into the Petronas precedent, a 25-year, ironclad sweetheart deal aimed at landing the proposed Pacific NorthWest LNG project in Prince Rupert. (See my critiques in the Georgia Straight here.)
It also allowed the government to enter into similar project agreements with other LNG consortiums, without the requirement for legislative debate and approval.
The Petronas precedent set the floor for LNG subsidies in B.C. It guaranteed Pacific Northwest LNG ridiculously low corporate income tax rates, ongoing LNG tax credits and taxpayer-backed indemnities that would all be locked-in until for 25 years.
Initially the government planned to set the LNG industry’s tax on net income at seven per cent. When the industry balked, the government caved like a cheap campstool. It cut that rate in half, to 3.5 per cent, until at least 2037, when it may rise to five per cent.
To further sweeten the pot, the tax on net operating income from liquefaction activities, which is applicable for companies that technically don’t have a net income, was set at a mere 1.5 per cent.
Plus, any tax that the companies pay at the 1.5 per cent rate on their net operating income is only notionally payable in the short run. Their supposed tax “contributions” are actually set aside and accrued in a tax pool that can be later used to reduce the amount of income tax payable at the 3.5 per cent rate, after an LNG facility’s net operating loss account and its capital investment account are reduced to zero.
On top of that sweetheart deal, the Petronas precedent guaranteed that the current Natural Gas Tax Credit will also be locked-in for 25 years.
That tax credit, which reduces the amount of corporate income tax that LNG plants would otherwise have to pay from 11 per cent to as little as eight percent, will be increased next January.
The amount they will be able to deduct for the cost of any natural gas delivered to their facilities will rise from 0.5 per cent to three percent. And that tax credit can also be carried forward from previous years to reduce those companies’ corporate income taxes in future years.
Think of that.
Those oil and gas behemoths have now been guaranteed a special 25-year tax freeze, at rock-bottom tax rates, and a 25-year tax credit that will be six times higher next January than it is today.
It is an outrageous sell-out to the world’s richest oil companies that provides them a 25-year contractual tax benefit and tax certainty that no other industry or individual enjoys.
And it doesn’t stop there.
As I explained in my last analysis on the carbon tax, the gas industry is now also benefiting from the Clark government’s repeal of its predecessor’s Cap-and-Trade Act.
Instead of being obliged to reduce its carbon emissions under annually declining hard caps on emissions levels, the LNG industry is now subject to a new Greenhouse Gas Industrial Reporting and Control Act that only obliges it to meet prescribed carbon intensity levels.
Under the new regime, B.C.’s LNG companies can pollute without limit.
They are allowed to emit 0.16 tonnes of carbon dioxide for every tonne of LNG exported, without penalty. Beyond that threshold, theoretically, the companies must either purchase market-based emissions offsets or pay into a technology fund at the rate of $25 per tonne.
But the government will actually subsidize that penalty by as much 100 per cent for LNG plants that barely exceed the new intensity benchmark. That subsidy declines to “only” 50 per cent of the penalty that would otherwise be applicable for those who emit 0.23 tonnes of CO2 emissions.
Given that almost all of the proposed LNG plants plan to produce C02 emissions that vastly exceed the allowable emissions intensity benchmark, it is yet another whopping gift to polluters. It makes a mockery of the government’s claim that B.C. will have the “cleanest LNG industry in the world.”
And here’s the capper.
The Petronas precedent also gave those Asian state-oil monopolies a special 25-year indemnity that is underwritten by B.C. taxpayers.
That indemnity will save them harmless from any so-called “discriminatory events.”
It assured the LNG industry that any companies covered under such project agreements would not have to face any industry-specific carbon taxes or any new industry-specific GHG reduction initiatives for at least 25 years.
If any future government changes those locked-in tax rates and benefits at a cost to those companies that is greater than $25 million in any year, or more than $50 million over five years, they will be entitled to full compensation, courtesy of B.C. taxpayers.
Similarly, any changes in government policy that impose new rules or tougher standards specific to the LNG industry, which entail higher costs relating to carbon taxes or to greenhouse gas emissions and reporting requirements, will be fully compensable above that threshold.
And the Petronas precedent further stipulated that if any other LNG project got an even sweeter deal from the government, the Pacific Northwest LNG project would get that too.
In essence, the Clark government was so desperate to land a major LNG deal, it contractually signed away British Columbia’s ability to control its own tax regime, carbon pricing and climate action strategies in specific regard to that industry.
All of it amounts to a new license to profit from uncapped carbon pollution, as it also essentially prevents governments and taxpayers from properly taxing the natural gas industry for their profits and for their pollution.
To my knowledge, the Pacific Northwest LNG project is the only project thus far formally covered by an agreement authorized under the new Act.
But the concessions granted in the Petronas precedent and by the new emissions intensity regime are potentially a major additional problem for rebalancing B.C.’s climate action plan.
They will make it that much more difficult and potentially costly for taxpayers to make the LNG industry fully pay for its carbon emissions and for its incremental emission reduction measures under any serious climate action plan.
The last thing we should be doing is tying government’s hands in how it can use its available policy measures to put more onus on industrial carbon polluters to clean up their act and to pay disproportionately more for their disproportionately high carbon emissions.
If anything, we should be revisiting the carbon tax to create differential carbon tax rates that escalate with the type and usage of fossil fuels covered by its carbon tax, similar to Norway.
We should be putting more financial pressure, not less, on B.C.’s most carbon-intensive industries to expedite the mitigation measures necessary to dramatically cut their emissions that represent such a huge proportion of B.C.’s emissions inventory.
As I suggested in my last installment, a cap-and-trade system should also be embraced to do that at the lowest possible cost, as was originally envisioned in the 2008 climate action plan.
It should be implemented in tandem with a revised carbon tax that is gradually increased over time, in a politically sensitive way that will achieve the CLT’s end goal in that regard.
And the carbon tax should also differentially adjusted to oblige B.C.’s largest polluters to pay for their process emissions and for any other emissions that are not adequately captured within a globally integrated cap-and-trade system.
We should not be exempting the LNG sector or other carbon-intensive industries from any industry-specific carbon taxes or mandatory emissions reductions requirements. Rather, we should be requiring them to bear the full brunt of the cost of their carbon pollution as we also put new standards in place to drive them more quickly to adopt cleaner technologies.
In doing that, we must remain vigilant not to devise climate action strategies that would actually further subsidize those major polluters at taxpayers’ expense.
Unfortunately, many of the CLT’s recommendations would move us in the opposite direction.
Let me now turn to some of the uncosted hidden subsidies that would be effectively extended to the LNG sector and to other carbon-intensive industries under the CLT’s recommendations.
Hidden Subsidy #1: A Potentially Lower Carbon Tax for “Trade-Exposed” Sectors
The heart of the CLT’s plan is to increase B.C.’s carbon tax by $10 per year, from 2018 to at least 2050. That would raise the cost of the carbon tax from $30 a tonne to $360 a tonne.
But here’s the catch. The largest industrial polluters — that is, the “emission-intensive, trade-exposed sectors” — might not have to pay that under the CLT’s recommendations.
The following quotes from its report are instructive:
“Establish targeted and transparent mechanisms for emission-intensive, trade-exposed sectors that mitigate the competitiveness issues created for those sectors if B.C.’s carbon pricing is materially greater than jurisdictions with which they compete, provided that such mechanisms are structured in a manner that does not adversely impact the price signal to reduce emissions. These adjustments should remain in place until such time that carbon pricing and regulatory policy equivalency with other jurisdictions is achieved.”
“The scheduled annual increases in the carbon tax and the competitiveness adjustments for emission-intensive, trade-exposed sectors should be reviewed by the Province, with the support of a Climate Leadership Team, every five years, or more often where warranted, taking into consideration GHG reductions, economic competitiveness, carbon pricing and regulatory policy in other jurisdictions, and impacts on vulnerable communities.”
In other words, the CLT has thrown open the door to exempting B.C.’s worst carbon polluters from some or all of the carbon tax increases that would apply to all other British Columbians.
Its vision for carbon tax hikes is an open question for the “emission-intensive, trade-exposed sectors,” subject to future review and competitiveness considerations that are sure to mean those industries will enjoy breaks on their carbon taxes, while everyone else has to pay ever higher carbon taxes whether they like it or not.
For the LNG industry, it means that not only will it not be subject to a specifically targeted carbon tax to properly price its inordinately high carbon emissions. But it might not even have to pay the level of carbon tax this is generally applicable to individuals, families and small businesses.
Hidden Subsidy #2: A Lower Sales Tax That Will Disproportionately Benefit Large Emitters
As the CLT noted, “natural gas production accounts for 16 per cent of the province’s greenhouse gas emissions and is the largest industrial sector.” If the LNG vision ever comes to fruition, that proportion will grow by leaps and bounds, potentially doubling B.C.’s overall emission levels.
The CLT recommends many measures to address that fact, including new targets for reducing process and fugitive emissions and lots of lip service to adopting “best practices” and unspecified new regulatory standards and policies.
Its most specific recommendations are all hidden subsidies to that sector and to other industrial polluters that would cost B.C. taxpayers an unquantified bundle.
The CLT wants to lower the provincial sales tax from seven per cent to six per cent.
The biggest beneficiaries of that initiative, by far, would be B.C.’s largest corporations, typically in the natural resource sector.
They would get millions of dollars in annual tax relief, whereas most middle class families would receive a few hundred dollars a year in benefits.
The sales tax is a regressive tax that imposes the same dollar-for-dollar burden on anything subject to it, regardless of buyers’ different incomes.
A cut in the sales tax rate would most benefit those who buy the most, be they high-income wage earners or large corporations.
A middle income earner who spends even $40,000 a year on items that are subject to the sales tax — a fairly high amount — would save $400 a year on a one per cent sales tax cut.
A wealthy individual who makes ten times that amount would save ten times that amount. A large natural resource company that spends exponentially more would save exponentially more.
The CLT explained its rationale as follows:
“B.C. is competing with a number of new suppliers for a limited market. Our recommendations to reduce the PST (generally by one basis point and entirely on electricity rates) and make available transitional support for emissions-intensive, trade-exposed sectors are intended to address this reality — particularly if B.C.’s climate policy materially exceeds the stringency of our competitors.”
I noted in my last installment how the recycled money from the revenue-neutral carbon tax is already disproportionately benefiting business rather than individuals.
This recommendation from the CLT would further exacerbate that disparity, with the biggest benefits — by far — going to B.C.’s largest companies: the large natural resource companies that are B.C.’s biggest carbon polluters.
Hidden Subsidy #3: The Elimination of Sales Tax on Electricity for Industry
The CLT also recommended eliminating the PST on electricity rates for industry, noting that it does not apply to electricity purchased by individuals.
It did not quantify how much that gift to industry would cost, but suffice it to say, it would be massive — at least tens of millions of dollars annually, if not more.
That would represent an enormous gift to B.C.’s largest industrial polluters — the oil and gas industry, the forest industry, the mining industry, the cement industry and others.
It would substantially reduce the amount of revenue that would otherwise be available for crucial services, like health care, education, child protection, public safety and other social services.
Like the proposed sales tax cut, which would be financed from incremental carbon tax revenues, that measure would represent a whopping tax subsidy to big business and to B.C.’s largest energy users, at the expense of the individuals and families who depend on the services funded by those tax dollars.
It is only fair and sensible to retain that sales tax on industrial electricity, given the inordinate pressure those energy-intensive sectors put on British Columbia’s electrical system.
Even without LNG the industrial sector is expected to account for the most growth of all key sectors in the next 10 years, mostly for mining, forestry, and oil and gas activity.
As the B.C. government gradually weans itself off of the hundreds of millions of dollars in annual “dividends” it obliges B.C. Hydro to contribute (including through deferred debt), it will need every penny of its existing sales tax revenue to offset those revenue losses.
Carbon intensive industries that are already buying electricity and paying sales tax on that energy will not produce one less molecule of carbon dioxide if that sales tax is eliminated. They will only make more profit at the expense of all other carbon taxpayers.
Hidden Subsidy #4: Risk-free, Cost-free Electrification for LNG Plants
Of all the suggestions made by the CLT, perhaps none would be so costly to taxpayers as its proposal to oblige B.C. Hydro to electrify the LNG industry.
Its recommendation on that point reads as follows:
“Instruct BC Hydro to develop a strategy (generation and transmission) to supply in a competitive, timely manner the clean electricity required to facilitate electrification of upstream natural gas, LNG, and associated infrastructure. Amongst other things, the strategy should enable BC Hydro to commit to supplying new industrial projects with clean electricity by project start up, if necessary through the use of temporary natural gas generation until transmission infrastructure is available.”
The CLT rightly points out that “LNG plants … can rely on clean electricity instead of natural gas for both the liquefaction process and their auxiliary demands” to reduce their emissions.
True enough. If we are to be saddled with an LNG industry that exponentially ramps up B.C.’s carbon emissions, it makes sense to minimize those additional GHGs by requiring LNG plants to adopt e-drives or other zero emission technologies.
But the ones who should bear the cost for that should be that industry and those companies — not B.C. taxpayers.
Instead, the CLT wants BC Hydro to bear the brunt of that cost.
It wants to transfer those incremental costs and risks associated with electrifying those proposed LNG plants to the rest of us. That’s wrong.
The CLT also wants BC Hydro to incur the added costs of generating the additional electricity capacity and the untold billions of dollars in new costs that would be required to build new transmission lines and to service the added debt of that infrastructure.
It wants to guarantee those LNG companies expedited construction schedules that would transfer the risks of building those transmission lines and of supplying them with the electricity they need in accordance with their project timelines to B.C. Hydro. And it further wants to guarantee them they will be able to buy their new power at “internationally comparable” rates.
The CLT’s report put it this way:
“If a proponent wants to use clean electricity instead of gas, they need to be confident that the electricity transmission and supply will be available on the timelines they are advancing their project…One aspect of providing electricity in a competitive, timely manner is ensuring that BC Hydro is able to commit to supply contracts that provide, on reasonable commercial terms used in other jurisdictions in similar circumstances, for damages in the event of failure to deliver new supply within agreed upon time frames and, in the case of LNG, for liquidated damages in the event of interrupted supply. In the event of any damages being payable by BC Hydro, the ratepayers should not bear the burden." [Emphases added.]
That last line sounds reassuring on the surface. But if ratepayers “should not bear the burden,” and the LNG companies are not expected to bear those costs, it can only mean that the government will — meaning B.C. taxpayers.
Essentially, what the CLT is recommending is that all future LNG plants in B.C. should use so-called “outside the fence” power sourced from outside the plant, instead of the on-site “inside the fence” gas-fired power that is now typically contemplated for most projects.
The Northwest Institute for Bioregional Research rightly observed, “If ‘outside the fence’ power is sourced for LNG production, large upgrades to B.C.’s transmission and generating capacity will be needed. This could cost tens of billions of dollars, but could also generate significant income to First Nations, or crown corporations.”
I repeat, it could cost “tens of billions of dollars” that someone would have to pay, ostensibly, ratepayers, or taxpayers, if not the LNG companies.
Even without the added electrification requirements suggested by the Climate Leadership Team to power LNG plants with e-drive systems, BC Hydro anticipates that its load forecast from oil and gas will climb by almost five-fold over the next 10 years, if the Clark government’s LNG vision comes to pass.
As it stands, BC Hydro’s most recent integrated resource plan only contemplates having sufficient supply to meet an initial expected LNG load of 3,000 gigawatt hours per year, before applying its demand-side management measures.
It anticipates that demand from the LNG industry could be as much as 6,600 GWh/year, even without powering all of its proposed plants with e-drive systems.
BC Hydro also projects a mid load forecast for LNG peak demand at 360 megawatts — an amount equivalent to roughly one-third of the 1,100 MW that the $8.8 billion Site C project would create.
But that vastly underestimates the amount of power that would actually be required to power even a handful of LNG plants with e-drive systems.
For example, the proposed the Grassy Point LNG Project would alone require 1,000 MW of power. The now indefinitely delayed LNG Canada Project would require 1200 MW and a new 500 kV line from Prince George to Terrace. And the Pacific Northwest LNG Project would require at least another 700 MW of electrical energy
And those are just three of the 20 proposed LNG projects that are at least theoretically on the drawing board in British Columbia. Many of those other projects — like the proposed Kitsault Energy Project, the Canada Stewart Energy Project and the Nisga’a LNG Project — are in very remote areas that would be incredibly expensive to power via the BC Hydro grid.
If the LNG “dream” ever comes true, even without the added pressure from e-drive plants and their associated transmission, BC Hydro estimated that the oil and gas sector will consume almost double the electricity consumed by the pulp and paper sector, and much more than even the energy-intensive mining industry.
The cheapest form of energy savings is conservation. The biggest projected driver for new electricity demand is natural gas development, including LNG.
The CLT’s proposal would serve the goal of reducing emissions from LNG plants. But it would place untold new power demands on BC Hydro that would put upward pressure on Hydro rates that would otherwise be avoidable.
Bear in mind, the new Northwest Transmission Line (NWTL) along Highway 37 alone cost $716 million, up from an original budget of $395 million, when Premier Clark came to power.
A major reason for its budget increases related to expedited construction schedules, to meet timelines mandated to supply power from the new Forrest Kerr run-of-river power project and other smaller energy projects to the new Red Chris mine and other new mines in that wild and remote area of B.C.
The much shorter Iskut Extension that extended that 287 kV transmission line from Bob Quinn Substation to the mine, was also over budget. Its cost increased from $180 million to $209 million, because building new transmission lines in that part of northern B.C. are no small feat.
As Vancouver Sun columnist Vaughn Palmer recently pointed out, the budgets for four recent transmission projects, including the NWTL rose from a combined $1.4 billion to over $1.9 billion, for a collective over-run of $516 million or 36 per cent.
On top of all of those cost considerations, the requirements for consulting and accommodating First Nations’ constitutionally protected rights is a further cost challenge. Especially if commitments are made to deliver fully compensable power rights to LNG companies within their projects’ designated timelines.
In the interest of providing clean, cheap, reliable electricity to power LNG plants that would reduce their GHG pollution, the costs of properly respecting Aboriginal rights and title could be astronomical.
No one really knows how high they might be, but the CLT was altogether silent on that point, which represents another aspect of the hidden subsidy for power its industry representatives succeeded in advancing in its recommendations.
The fact is, the CLT’s recommendations for powering LNG plants could have dramatically adverse unintended consequences for taxpayers and the environment alike.
Mostly, however, they would stick taxpayers and BC Hydro with the lion’s share of costs and risks for making e-drive LNG plants more economical for the large oil companies that stand to profit from them.
If those costs and risks were properly factored into the government’s LNG vision, it would significantly alter its cost-benefit bottom line.
Yet in the absence of e-drive LNG plants, British Columbians will be left holding the bag for much of the cost and sacrifice needed to offset the added emissions those gas-fired plants will entail.
Either way, most B.C. taxpayers and most B.C. families will lose.
Hidden Subsidy #5: A Five-year Minimal Carbon Tax Holiday for Process Emissions
The CLT recommended expanding “coverage of the current carbon tax to apply to all greenhouse gas emission sources in B.C. after five years, starting with measurable GHG emissions covered by the current reporting regulation.”
Essentially it is proposing to let the oil and gas industry off the hook for paying carbon taxes on their methane process and fugitive emissions for at least five more years, until 2021 at the earliest. While it also envisions that the carbon tax will also go up for everyone else by another $40/tonne over that period.
In the meantime, it hopes the natural gas industry will voluntarily act to cut its process emissions by some 40 per cent, assisted by further subsidies from the forthcoming green infrastructure tax credit.
But there is no guarantee that will happen. And the only hard action recommended by the CLT to address fugitive and vented methane emissions to require “industry through regulation to implement leak detection and repair programs in line with best practices in North America.”
Why that has not already been required is beyond me.
Ditto for the CLT’s suggestion that the industry “develop best practices for methane reduction, including transparent reporting, through a collaborative initiative involving the provincial government, industry, and other stakeholders with expertise in this area…and seek alignment with Canada and other provincial jurisdictions in this regard.”
The Pembina Institute and others are right to maintain that we should not wait until 2021 to act on reducing deadly methane emissions with an earlier imposition of the carbon tax and other measures.
Yet the CLT’s most important recommendation in respect of addressing fugitive and vented emissions is this one:
“Providing that at the time of the first five year review of the Climate Leadership Plan, a new reduction goal for fugitive and vented methane emissions should be established and a determination made whether future reductions in fugitive and venting methane emissions are best achieved through expanding the coverage of the carbon tax to such emissions…[or through] a continuation on a voluntary basis of the best practices developed above for methane reduction (provided the industry has reached the 40 per cent methane reduction goal within five years), or such best practices developed for methane being mandated by regulation at that time (with such regulations to be reviewed every five years thereafter).”
In other words, under that recommendation, even after another five years’ carbon tax holiday on those emissions, it might well be that the industry will continue to be exempt from paying carbon taxes on those uncaptured process emissions.
Once again, the environmentalists and academics on the CLT got completely snookered by the industry representatives and the government mouthpieces that succeeded in rendering its carbon tax commitment almost meaningless for B.C.’s largest carbon polluters.
No wonder the oil industry representatives on the CLT signed onto that almost meaningless “commitment.”
All of these are only a handful of the effective subsidies to carbon emitters that were tacitly recommended by the CLT, mostly for the benefit of Big Oil.
It is unfortunate that the CLT offered so little in the way of specific “bullet-proof” recommendations for reducing B.C.’s carbon emissions.
British Columbians must now await the government’s Climate Action 2.0 to ascertain what more it will actually do to meet its legislated GHG reduction targets, besides buying itself more time, as suggested by the CLT, which failed to prescribe new provincial interim targets before 2030.
Hopefully it will be as detailed and progressive as Ontario’s truly excellent new climate action plan.
Just as that province’s first climate action plan largely borrowed from many of the measures adopted in B.C.’s 2008 plan, British Columbia would now be well advised to use Ontario’s new blueprint as the key resource it is for advancing climate action.
In a future article I will suggest a number of hard measures that B.C. could take to help meet its targets in the oil and gas sector and in other sectors I did not address in this analysis.
The fact is, the CLT’s recommendations for emissions reductions from buildings, forestry, agriculture, transportation and other sectors are pretty much all as vague as they are aspirational.
The good news is that, by and large, they do not overtly suggest anywhere near the level of hidden subsidies that I have highlighted above in regard to the LNG and natural gas sector. It’s just that they say so little of substance to advance the mission that the CLT was given.
The bottom line is this: the only sensible way to responsibly address British Columbia’s growing greenhouse gas emissions is to stop unecessarily adding to them in the first place.
Instead of digging ourselves ever deeper in the hole by inviting an LNG industry that British Columbians will also be expected to subsidize in addressing its added emissions, we should just say, “enough.”
We do not need that industry and do not want its added carbon pollution.
Enough. It is time to develop a serious climate action plan that embraces a low-carbon economy and that duly ensures its largest carbon polluters pay their full share of the cost of reducing those emissions.
Martyn Brown was former B.C. Premier Gordon Campbell’s long-serving chief of staff and a key architect of B.C.’s climate action plan and clean energy plan. He was the top strategic advisor to three provincial party leaders, and a former deputy minister of tourism, trade, and investment in British Columbia. A frequent contributor to the Georgia Straight, Brown is also the author of the eBook Towards a New Government in British Columbia. Contact Brown at firstname.lastname@example.org.