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The Progressive Economics Forum

How green are BC’s climate policies?

One of the most striking contradictions in BC’s climate action plan is the oil and gas industry. Greg Amos in The Hook, quotes our “green” premier out on the campaign trail in the northeast:

“Let me tell you what’s happened in the energy industry in British Columbia in the last eight years: thirteen billion dollars of investment,” Campbell told a crowd of about 60 at Sudeten Hall.

… “We’re not just going to build a great new northern energy corridor, we’re going to build a great opportunity with the Asia-Pacific; we’re going to open new opportunities for British Columbians,” he said. He also outlined unconventional natural gas reserves in the Horn River Basin that he said could power 650 million homes for 15 years.

So this is the dark side of the green agenda: more oil and gas expansion. Given the street cred of Premier Campbell on the climate change file, one might expect the opposite: an end to new oil and gas extraction, perhaps even a wind-down of existing projects. After all, extracting oil and gas emits huge greenhouse gases, accounting for a big slice of our provincial total emissions. And that is just the extraction, as we only count burning of those fossil fuels if done in BC. Once they cross the US border, they count in the emission totals of some other jurisdiction. In other words, we only sell the crack.

For some perspective on that $13 billion of new investment that is “keeping BC strong”, BC’s greenhouse gas emissions from this sector in 2001 were equivalent to 3.7 million tonnes (Mt) of CO2 in their production and extraction plus another 5.7 Mt from “fugitive sources”: pipeline leaks, venting and flaring (in both of these I have added in coal, which accounts for a smaller portion but is hard to cleave off in the data). This was 15.5% of BC’s total emissions that year, and the number goes up to 20.4% if also count fossil fuel burning to generate electricity.

Fast forward to 2006, the last year for which we have data, and emissions from production and extraction more than doubled to 8.1 Mt. Another 6.5 Mt came from fugitive sources. So fossil fuel production writ large amounted to 23.4% of BC’s emissions, up from 15.5%. One bit of good news is less use of fossil fuels in generating electricity, dropping to 1.5 Mt, although our total rises to 25.8% if we count those, too. Because these data are already three years out of date, it is reasonable to assume that they have continued to grow in 2007 and 2008, alongside major increases in energy prices.

In the big picture, BC emissions in 2006 were a total of 1.5 Mt higher than in 2001, an increase of 2.5%. That means other sectors of the economy stayed flat or even decreased their emissions slightly, while fossil fuel emissions surged. So yes, the carbon tax is nice and deserves applause, alongside other good initiatives. But the notion that the BC government is green is a large stretch, and new emissions from planned expansion will dwarf any beneficial impacts of the carbon tax. For example, Mark Jaccard (the only economist in Canada who models these things) estimates that the carbon tax will reduce BC’s emissions by 3 Mt in 2020 relative to “business as usual” whereas additional emissions from oil and gas were more than that over five-year period between 2001 and 2006.

And it is not like the oil and gas patch is a huge employer. Oil and gas extraction employed 3,600 workers in 2006, although that had dropped to 2,200 in 2008. Both are up from 1,800 in 2001. There may be a 1-2,000 other jobs on top of these in “support activities” for oil and gas, although it is hard to tell from the stats (both mining, which directly employed 14,300 in 2008, and oil and gas are included, and these support activities amounted to 9,300 jobs in 2008, so most of that is probably mining-related). But BC had 2.3 million jobs in 2008, so at best, the sector employs 0.1-0.2% of our workforce.

To accept an expansion of oil and gas, given its share of total emissions, would appear to be fundamentally undermine BC’s ability to meet its GHG reduction targets. Only if all other sectors of the economy delivered larger reductions as an “offset” could BC’s climate plan be realized.

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Comments

Comment from Dave Thompson
Time: April 16, 2009, 3:08 pm

Another good post Marc.

We have a long-term problem in Canada, and that is that in a world where oil is getting tougher to find, the ‘free market’ will be encouraging Canada to increase its output.

In the future, when we’re well past world peak oil, what will global oil flows look like? Canada will be digging and pumping and exporting even more of it than it is now.

CCS is not the answer. It’s costly, and the long term storage element is unproven, and for tarsands it is unsuitable at even the capturing element. There is no fully integrated, commercial-scale CCS operation anywhere in the world; at this point, it’s essentially just PR.

It looks like the only way Canada is going to reduce its extraction-related GHGs is if we have some serious policies aimed at reducing GHG emissions. In a nutshell we will need a high carbon price – whether we do it by a tax, cap-and-trade, or other forms of regulation.

Any of those would have financial impacts on individuals, not just ‘polluting industries’ (we should all be honest here), so they will need to build in progressive distribution of revenues into the instrument design.

Better that this redistribution be through public spending on energy efficiency subsidies for low and middle income households, rather than tax reductions.

Comment from Dave Thompson
Time: April 16, 2009, 3:11 pm

PS let’s bear in mind that regulation other than tax or cap-and-trade doesn’t generate any revenue for redistribution to middle and low income households. But it will impose a financial cost on them. This alone should rule it out for red-leaning progressives.

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