British Columbia Abandons Climate Leadership

Posted on August 19, 2016 by admin

George Hoberg
August 19, 2016

Clean Energy Canada corrects BC gov p. 12 graph

After repeated delays, Premier Christy Clark announced British Columbia’s new climate policy today. Friday August 19, at 1 PM. As the announcement has been dragged out, any expectations for meaningful progress were very low. But even by that low bar, this plan is disappointing. The province seems to have abandoned all pretense of being a climate leader.

Climate policy experts from around the world have examined BC carbon tax a model progressive carbon policy initiative. I doubt they will be anymore.

Effective climate policies have at least 2 core ingredients: legally-enforceable carbon pollution reduction targets, and a suite of policies that can be demonstrated to meet those pollution reduction targets. Today’s plan fails both of those tests.

Targets Abandoned

The province has, shamefully, failed to comply with its 2020 pollution reduction target. In fact, the 2020 target is completely ignored in today’s plan. But the province of BC is currently required by law to reduce its GHG emissions by 33% by 2020; it’s right there in the Greenhouse Gas Reduction Targets Act (Section 2.1). While the government never commented on it, the government-appointed Climate Leadership Team acknowledged that the 2020 target couldn’t be met.

But the Climate Leadership Team proposed a sensible alternative: an ambitious 2030 target of 40% reduction below 2007 levels. But the government ignored that call. The only remaining target is for 2050, which is too far in the future to guide near term decisions. So we no longer have meaningful emission reduction targets.

Plainly Inadequate Policies

The policies proposed in the plan can’t credibly put us on a path to meet that 2050 target.

BC uses 2007 as its baseline year. In that year, emissions were 66.3 million tonnes. In 2012, it was able to achieve it 6% interim reduction target, but since then emissions have started to come back up and in 2014 (in the inventory figures just released) BC’s emissions were 62.7 million tonnes, 5.5% below the 2007 baseline.

The plan claims to reduce emissions by 25 million tonnes by 2050 below projected 2050 emissions (It doesn’t provide a 2050 business as usual projection but look like it’s 77 MT). So even if they achieve the projected reductions (see below), 2050 emissions are projected to be 52 million tonnes (this according to Clean Energy Canada – the province did not include the projection in its bizarre graph on p. 12). BC’s legislated emission target for 2050 is 13 MT tonnes – so there’s a 39 MT gap in the plan. In other words, the government’s plan, even if implemented, would not even get the province half way to where it needs to be.

Using forests for reductions

Even the limited policies offered by the plan are poorly supported and not credible in their current form. The plan claims to get half of the reductions by 2050 (12 MT) by “enhancing the carbon storage potential of BC’s forests.” There is no rationale provided in the document for that 12 MT figure, and there are no accompanying commitments to regulation or funding to achieve that level of reduction.

There are real and cost-effective ways to use forests to reduce the province’s greenhouse gas emissions. The challenge is the complexity of designing and measuring forest sector reductions. That complexity makes it harder to ensure that emission reductions are real and verifiable. If the province is intending to rely increasingly on forest emission reductions, it will need a much more vigilant regulatory program, and substantially more investment, than we’ve had in the past.

Forestry can play a role in emissions reductions but, if we want to make the sort of reductions required to meet that 2050 target, it can’t substitute for reducing emissions from fossil fuel use and industrial processes.

Maybe now’s the time for federal leadership

Canada has committed to reducing its emissions by 30% (from 2005 levels) by 2030. BC, once an ambitious climate leader, now proposes virtually no reductions by 2030 (if all their policies are implemented successfully emissions would be only 3% lower (not a typo)). Provincial initiatives are failing to put Canada on a path to meet our international commitments.

I’ve long been skeptical of the Canadian approach of letting provinces lead on climate policy. Today’s disappointing actions by the BC government strengthen the argument that it is time for the federal government to step in and show real leadership on climate policy.

Note: I’m part of the Pacific Institute for Climate Solutions Forest Carbon Mitigation Project, but the views expressed here are solely my own.

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Time for the Hard Work on Meaningful Climate Policy

Posted on July 21, 2016 by admin

This blog was reproduced in IRPP’s Policy Options.

George Hoberg
July 21, 2016

Trudeau with the premiers at a November 2015 meeting

The premiers are meeting in Whitehorse this week, and climate and energy are on the agenda again. For long-frustrated Canadian climate hawks, it’s remarkably refreshing to have a federal government verbally committed to climate action, and a provincial government in Alberta finally taking action to cap the increase in oil sands emissions. But it is also important to keep in mind how far we from having a meaningful climate policy in Canada.

A meaningful climate plan needs to have, at minimum, two core ingredients. First, a jurisdiction needs a measurable, enforceable climate target in terms of a level of reductions in greenhouses gases over a specified time period. Second, there must be real, enforceable policies in place that can reasonably be expected to achieve that climate target. Canada is doing reasonably well on the first ingredient, but is a long way from having the second in place.

Canada does have a real climate target. The Harper government committed, in the run up to the Paris Accord last December, to reducing emissions by 30% below 2005 levels by 2030, and the Trudeau government seems intent to stay with this target for the time being. According to Simon Donner, this target might be consistent with Canada’s fair share of international reductions to meet a 2°C, although nowhere near sufficient to meet Paris’ bolder 1.5°C target (that would require more than a 90% reduction). Our 30% by 2030 target would be a much stronger target if it was embodied in domestic law, but at least it provides a measurable objective to guide policy.

Canada is not currently on a path to meet this target. The latest inventory report from Environment Canada shows just how far off we are.

A more optimistic scenario comes from the work of Dave Sawyer and Chris Bataille, who modelled the expected impact of current policies and also recently introduced policies like the Alberta climate plan and Ontario’s cap and trade plan. Even if those policies and plans are faithfully implemented, Canada only gets one half of the way there to its 30% by 2030 target (110 million tonnes short of its 2030 goal of 524 million tonnes, from a 2005 base of 749 million tonnes).

Current and recently announced policies only get us half way to target

Where will Canada get the remaining 110 million tonnes of required reductions? There are many potentially effective options – pricing through a carbon tax or cap and trade, regulations, or some combination. Over the past week we have heard fresh commitments from the Trudeau government to introduce a nationwide carbon price even if some provinces are opposed. But there’s no signal, publicly at least, what the level of the price floor will be. Nor is there any indication of how the national price would be coordinated with existing provincial climate policies. The highest carbon tax in Canada is currently BC’s $30 a tonne (a level, we’ve known for some time, that won’t enable BC to meet its own provincial climate target). Alberta will be moving part of its economy to $30 per tonne in 2018, but the Quebec (and soon Ontario price) is only around $16 per tonne. Pledging to establish a carbon price is virtually meaningless unless you specify the price and design, and demonstrate how it will achieve Canada’s target.

Canada clearly needs new, bold policies to close the gap and meet its 2030 target. Until now we’ve relied almost exclusively on uncoordinated provincial initiatives: a carbon tax in BC, a ban on coal in Ontario, cap and trade in Quebec, and mixture of pricing and regulatory instruments in Alberta. One important consequence of that is that we have yet to have any kind of national discussion about appropriate burden sharing among the provinces. At present there are widely varying costs of carbon across the provinces. Alberta’s bold new plan, as significant a step as it is, doesn’t actually reduce Alberta’s emissions (p. 26). If Canada is to reduce its emission by 30% by 2030, what should each province’s share of that national reduction be? It seems hard to imagine a political agreement where other provinces reduce their emissions by even more than 30% to allow Alberta to continue its current level of emissions.

I hope the premiers can make some major strides towards addressing these issues this week. But that seems unlikely. It’s long past time for the Government of Canada to do what federal governments should do: show real leadership on vitally important national policies. Canada doesn’t just need carbon pricing – we need carbon pricing and climate policies that are actually strong enough to meet our commitments to the international community and future generations. We have a long way to go.

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Over to You, Mr. Trudeau: The Political Perils of Kinder Morgan’s Trans Mountain Expansion

Posted on May 20, 2016 by admin

George Hoberg
May 20, 2016

The National Energy Board has recommended the approval of Kinder Morgan’s Trans Mountain Expansion Project with 157 conditions. Yesterday’s decision brings the regulatory process created by Stephen Harper to an end. The decision is now squarely in the lap of the Trudeau government, although the government of British Columbia also needs to take a stance.

Trudeau has created two supplementary processes: a climate test, which is underway for Trans Mountain, and 3-person consultation panel. The climate test will look at the impact of the pipeline on upstream GHG emissions, and a draft of that analysis was also released yesterday. The 3-person panel will be consulting further with First Nations, affected communities, and the public, and is charged with reporting by November 1. These supplementary processes can provide the basis for a rationale for Trudeau departing from the NEB recommendations, but there’s no guarantee they will be used that way.

The BC government also needs to decide whether the project is in BC’s interest. Premier Clark was originally hoping for some political cover from that difficult political choice through the Equivalency Agreement, which handed full responsibility for project review and assessment to the federal government. In January, the BC Supreme Court invalidated that agreement. The BC government has initiated a process for its review, which will include First Nations consultation, but has yet to provide a timeline for completion. The court’s ruling clarified that BC can impose it’s own conditions on the pipeline in BC, but not in a way that has the effect of denying approval to a federally-approved pipeline.

Pledging to multiple incompatible objectives

These additional processes don’t change the fact the decision ultimately comes down to an exceptionally challenging political choice by Prime Minister Trudeau. Trudeau has repeatedly promoted the importance of supporting the Alberta oil sector by diversifying the market for oil sands. But he also ran on the slogan that “governments grant permits, but communities grant permission.” More than a dozen lower mainland municipalities are opposed to the project, including Burnaby, Surrey, and Vancouver. Vancouver Mayor Gregor Robertson, a close political ally of Trudeau, just launched a major campaign against the pipeline. Public opinion in BC is opposed to the pipeline by a margin of 45% to 36%, and opposition appears to be more intense in the vote-rich Lower Mainland.

Trudeau has also pledged reconciliation with First Nations and the full implementation of the UN Declaration on the Rights of Indigenous People. The declaration calls for “free, prior, and informed consent,” a departure from current Canadian law emphasizing consultation and accommodation. A number of First Nations, including the Coast Salish groups Tsleil-Waututh, Squamish, and Musqueam in the Burrard Inlet and surrounding areas, are vehemently opposed to the project. The Tsleil-Waututh have crafted an elaborate legal strategy to defend their rights and resist the construction of a new pipeline, including forging an alliance with indigenous groups on the Salish Sea from across the 49th parallel.

Trudeau has also sought to establish Canada as a leader in combatting climate change, and pledged to meet the national target of reducing emissions by 30% by 2030. It’s hard to see how enabling significant expansion of the oil sands, the fastest growing source of Canadian emissions, will put Canada on a path to compliance.

Trudeau can’t keep pledging to do multiple incompatible things. To govern is to choose, and it’s close to time for him to make the difficult political choice on Kinder Morgan’s proposal.

Posted in Energy Pipelines | 1 Comment

Recommendation to reject divestment at UBC deeply flawed

Posted on February 10, 2016 by admin

George Hoberg
February 10, 2016

Last week, the Finance Committee of the UBC Board of Governors voted to endorse the recommendation of its Responsible Investment Policy Committee and reject fossil fuel divestment. The principal rationale for rejecting divestment is that “it would not be consistent with the board’s fiduciary obligation to endowment donors.” This conclusion relies on a faulty definition of the Board’s fiduciary obligations with respect to the endowment, and rests on assumptions about financial returns under divestment that are unsupported by any evidence presented by the committee (and, in fact, are directly contradicted by the publicly-available literature). Furthermore, the Finance Committee’s interpretation of fiduciary duty appears to contradict research from the UBC Allard School of Law and an external legal opinion sought by the University of Toronto President’s Advisory Committee on Divestment.

The Board’s narrow definition of fiduciary duty is not supported by law

My expertise is in environmental policy, and not the law of trusts. But the literature review that I’ve done about fiduciary responsibility reveals that the Finance Committee’s statement that the Board’s fiduciary duty is the donors is unsupportable. The Association of Governing Board’s defines fiduciary duty like this: “Fiduciary responsibility entails three particular duties to the institution, commonly known as the fiduciary duties of care, loyalty, and obedience. Taken together, they require board members to make careful, good-faith decisions in the best interest of the institution consistent with its public or charitable mission, independent of undue influence from any party or from financial interests.”

Fiduciary duty has its origins in common law, and in some jurisdictions is codified in statutes. British Columbia has a Trustees Act that codifies as the law on fiduciary duty as embodying a standard of care whereby “a trustee must exercise the care, skill, diligence and judgment that a prudent investor would exercise in making investments.”

The Board’s duty is not to donors per se, but for the purposes for which the endowment was established. That purpose is guided by the University Act, s. 19.1, which states that “The members of the board of a university must act in the best interests of the university.” Board policies also clarify the endowment’s purpose. The Board’s Endowment Management policy states that “The University is committed to ensuring that the endowment funds maintained in the endowment pool are used in such a way as to maximize their benefits for the advancement of education at the University, including educational and research activities carried on by the University which benefit society generally.” The Board’s Endowment Responsible Investment Policy defines its “primary fiduciary responsibility” as “acting in the best interest of the University and its stakeholders.” It continues, “When  considering divestment, the University must consider the interest of its multiple stakeholders, which include students, faculty, staff, alumni, donors, the government and taxpayers.” [i]

Traditionally, fiduciary duty has been understood to emphasize financial criteria, particularly pursuing the best possible return over the long run with due consideration to risk. Investment criteria, however, are not limited to financial gain. UBC, for example, has broadened its criteria to include Environmental, Social, and Governance (ESG) principles. The normal expectation is that such screening will either increase or at least not jeopardize financial returns. In principle, screening investments for non-financial criteria, even if it did sacrifice financial return, could be consistent with fiduciary duty as long as the beneficiaries of the trust made this value choice explicit (see the Richardson memo cited below). But that’s not the issue for fossil fuel divestment as there is no evidence divestment will materially decrease returns, and indeed growing body evidence that maintaining fossil fuel investments may decrease returns (see next section).

As a side note: The legal opinion solicited by the Board states ”Divestment is compatible with the fiduciary standard if alternative investments are available with a higher rate of return having regard to the relevant risk.” This statement must be an error, as it is inconsistent with the understanding of fiduciary duty in the literature, which states that such screening should be permissible so long as it does not jeopardize financial returns.

The Board’s assumption that divestment creates a financial risks is not supported by evidence

The Finance Committee appears to assume, without citing any evidence, that divesting the endowment of fossil fuels would create financial risk. Our Responsible Investment Proposal, and our September 15 research update, both cite a substantial body of research showing that fossil free funds would have experienced either similar or higher returns.  Given the weight of this evidence, the burden of proof should be on the Board to demonstrate that there would be a financial risk. Yet no such analysis has been provided.

Moreover, concern has been increasing in the investment community about the long term financial risks of exposure to fossil fuel stocks, given that most of the reserves on the books for fossil fuel companies will become stranded assets as the world moves to address the climate crisis.  Arguably, fiduciary duty requires that the Board examine the long-term financial risks from holding fossil fuel stocks (See the Kosky-Minsky report, especially p. 25).

The Finance Committee rejects divestment on the grounds that it is inconsistent with their fiduciary duty. Yet their legal standard for fiduciary duty is flawed, and they do not support their concern of the financial risk of divestment with evidence. Fiduciary duty requires the the Board “exercise the care, skill, diligence and judgment that a prudent investor would exercise in making investments.” The Board does not seem to have done the due diligence necessary to fairly consider the divestment proposal.

Further Reading

An external legal opinion (pg. 18) obtained by University of Toronto contradicts UBC, instead finding fiduciary duty does allow for divestment.
“After considering all the evidence and given the long-term nature of the University’s obligations with respect to the Funds, the Committee concludes that divesting from the University’s direct holdings in fossil fuels companies whose actions blatantly disregard the 1.5-degree threshold (or any evolution of this standard, upwards or downwards, as the best scientific and policy evidence produces a new consensus) would be consistent with the University’s fiduciary duties and the long-term financial best interests of the beneficiaries of the trusts. “

Professor Benjamin Richardson, “Legality of Socially-Responsible Investing (SRI) by University Endowment Funds,” Memorandum to UBC Board of Governors Finance Committee, August 3, 2013. This Memorandum states “because SRI emphasizes a long-term approach to investing financial capital in a manner that addresses ongoing and emerging concerns such as climate change and respect for basic human rights, SRI is arguably quite compatible with the purpose of an endowment fund. To manage and preserve the endowment in perpetuity for the benefit of current and future generations of students, staff and other stakeholders in the university requires being attentive to ESG issues of long-term financial salience.” The Memorandum concludes, “there is no insurmountable fiduciary or trusts law barrier to UBC’s endowment funds practising SRI. Rather, the legal imperative is increasingly that these funds must be managed for SRI purposes – SRI should be viewed as a way to legally fulfill the purpose of endowment funds and to nurture the wider best interests of the university and its members.”

[i] At an earlier point in the document, the policy does say “Fiduciary responsibility dictates that UBC invest and act solely in accordance with the requirements of its donors in accordance with the common law investment standards for trustees.” However, this statement is inconsistent with the more accurate characterization of fiduciary duty found later in the document, and the common law and statutory law on it. The sentence would correctly characterize the concept if it had said “Fiduciary responsibility dictates that UBC invest and act solely in accordance with the requirements of its donors AND in accordance with the common law investment standards for trustees.” Donors can dictate specific investment practices in their deeds, and when they do they must be honoured by trustees. But there’s no evidence that much of the Board’s endowment is constrained in that way.

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Major New Legal Obstacle for Northern Gateway Pipeline

Posted on January 13, 2016 by admin

January 13, 2016
George Hoberg

A BC Supreme Court judge today invalidated the agreement between the BC and federal governments on the environmental assessment process used to support the approval of Enbridge’s Northern Gateway Pipeline. While the decision does not directly overturn the federal government’s conditional approval decision, it does have major implications for the legality of the project.

Isn’t Northern Gateway already dead?

Most Canadian energy observers believe the Northern Gateway Pipeline, despite its conditional approval by the Harper government in June 2014, is essentially dead. Nonetheless, Enbridge did restate its confidence in the project earlier this week. The project is subject to a number of legal challenges.  Most of the challenges are in federal courts and about alleged flaws in the federal government’s decision-making process. Today’s decision by a BC court judge was not considered one of the most significant challenges, but it does target a critical ingredient in the regulatory approval process.

BC abdicated its regulatory authority under the Environmental Assessment Act

At issue in this case was the BC government’s “equivalency agreement” with the federal government on the environmental assessment and regulatory review process for the pipeline projects. Environmental assessments have several stages, from project proposal, to scoping, to hearings and the actual assessment and report. The final stage is a decision by the appropriate regulatory authority. BC’s Environmental Assessment Act Section 17 clearly calls for a final decision on whether to issue an environmental assessment certificate. When BC entered the equivalency agreement, it not only agreed to defer to the assessment procedures used by the federal government, but also gave up its authority to issue an EA certificate. The most important part of the ruling is judge’s decision that BC had no grounds to give up final decision-making authority. As a result, the equivalency agreement is invalidated, and the province needs to make a decision on whether or not to approve the project.

BC failed in its duty to consult appropriately with First Nations

The parts of the decision about First Nations consultation, which have received all the attention in the instant press on the decsion, are an intriguing combination of limited and expansive. On the one hand, the judge ruled that the province did not have to consult about entering the equivalency agreement (consistent with previous judicial rulings on similar issues. But there was an obligation to consult First Nations about whether or not to terminate the equivalency agreement once BC made its formal opposition to the pipeline known. The province argued that the equivalency agreement transferred the obligation to consult to the Federal government, but the BC Supreme Court judge in this case disagreed. Note this case is not about the adequacy of federal government consultation with First Nations – those decisions are pending in federal court. In this case, since the BC government did not engage in direct consultations with First Nations during the process, the judge ruled it did not uphold its duty. Prior to exercising its final authority under the Environmental Assessment Act, the province must consult First Nations.

Provinces can impose conditions on interprovincial pipelines

In a new twist on regulatory federalism in Canada, the judge in this case ruled that despite federal paramountcy over interprovincial pipeline approvals, it would be permissible for the provincial government to impose certain conditions on interprovincial pipeline approvals. The province could not use its regulatory authority to deny an approval to a pipeline that the federal government approved, but it could add conditions to the federal government’s conditions.

Implications for pipeline proposals

If this decision sticks, the Northern Gateway Project can’t proceed without several additional steps by the BC government. Last we heard, the BC government was strongly opposed to the project. And this judge ruled that the province can’t block an interprovincial pipeline project approved by the federal government.

As a result, the decision shifts the intergovernmental politics of pipelines. For an equivalency agreement to pass muster, BC would be able to defer the assessment process to the federal government, but it would need to issue its own final decision. The current process, where BC submits strenuous objections to the pipeline but then defers the final decision to the federal regulator, would no longer workable.

This decision also has direct implication for the Kinder Morgan Trans Mountain Expansion project, because that regulatory review process is being conducted according to the same equivalency agreement. There are fewer direct implications for Energy East because BC’s Environmental Assessment Act and the particular equivalency agreement are not in play. If the other provinces’ EA acts and equivalency agreements are similar, then there could be important implications.

Of course, this decision could be overturned or altered on appeal. I don’t know what counts as finality of regulatory decisions anymore. Stay tuned.

Posted in Energy Pipelines | 1 Comment

Bending the Curve: Alberta’s Tectonic Shift in Climate Policy

Posted on November 22, 2015 by admin

George Hoberg
November 22, 2015

Rachel Notley’s Government of Alberta made history today by transforming her province from a renegade to a leader on climate policy. The province announced today that it will introduce a $30 per tonne economy wide carbon pricing (starting at $20 per tonne in 2017 and increasing to $30 in 2018). It will also cap carbon emissions from oil sands facilities at 100 million tonnes, compared to about 70 million today. That is designed to allow for growth from the facilities currently under construction. The province will also phase out coal use for electricity by 2030, and require 30% of its electricity to be generated by renewables by 2030.

These changes are monumental. While the details of the carbon price will need to be analyzed, its $30 level matches BC’s current carbon price, the highest in Canada. The cap and trade regime being operated by Quebec and California currently has a price of about $16 per tonne (although that price is likely to increase somewhat by 2018).

The overall emissions cap is also important, signalling a limit on the growth the oil sands impact on our climate. It does not cap oil sands production, but increased production beyond the level of those facilities under construction will only be able to occur if innovation drives down carbon intensity of oil sands significantly.

These changes fundamentally alter the politics of Canada. It will make it much easier for Canada to become a constructive player in global climate policy. The meeting tomorrow between Trudeau and the premiers can be much more productive with this bold move by Alberta in advance. If other provinces want to claim the mantle of climate leadership, they are going to have to step up their game, creating the potential for a “race to the top” in Canadian environmental policy. It will contribute, as Notley stated, to “a significant de-escalation worldwide of Alberta’s oil sands.”

These changes are testimony to two fundamental political changes. The first is a concerted resistance movement to new oil sands transportation infrastructure in both Canada and the United States.  While there are many sources of this resistance, to many anti-pipeline activists, resistance has always been first and foremost about forcing climate policy change. Notley referred to this indirectly when she described Obama’s denial of the Keystone XL pipeline application as a “kick in the teeth”. The second dramatic political shift is Notley herself, beaming from the podium. Her May 2015 election brought decades of Conservative rule to an end, allowing this tectonic shift, a reminder that elections matter more than anything else.

There’s a lot more work to be done. Remember that we need to completely decarbonize the energy system by mid-century. But today is a day for celebration. Alberta has bent its carbon emissions curve, and provided a lever to Canada to show real climate leadership.

Here’s the Panel’s Climate Leadership report.

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Game over for Keystone KXL: How environmentalists created Obama’s new climate test

Posted on November 6, 2015 by admin

George Hoberg
November 6, 2015

Environmentalists protesting Keystone XL at White House

Obama’s decision today to reject the Keystone XL pipeline brings a seven year saga to a close (well, except for the lawsuits). It is an extraordinary victory for the climate movement, but in this post I wanted to focus on the narrower issue of the rationale for today’s decision. It is extraordinary in how it vindicates the symbolic power of the pipeline.

US environmentalists transformed the Keystone XL decision into a test of climate leadership. 350.org’s Bill McKibben, echoing climate scientist James Hansen, repeatedly used the frame of the pipeline being a fuse to one of “the largest carbon bombs on the planet,” the exploitation of which would mean “game over for the climate.”

Obama sent a powerful signal about his climate views and this particular pipeline in his famous Georgetown speech in June 2013, where he spelled out the “climate test”:

“Allowing the Keystone pipeline to be built requires a finding that doing so would be in our nation’s interest. And our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution. The net effects of the pipeline’s impact on our climate will be absolutely critical to determining whether this project is allowed to go forward.”

I was struck that today’s was not based on a decision that Keystone XL “would significant exacerbate” GHG emissions. Instead, today’s decision states “the proposed project by itself is unlikely to significant impact the level of GHG-intensive extraction of oil sands” (p. 29). Despite finding little measurable impact on GHG emissions, the Record of Decision continued, “it is critical for the United States to prioritize actions that are not perceived as enabling further GHG emissions globally.”

The decision cites the broader standard of the “net effects of the pipeline’s impact on our climate,” but makes that about global political reaction, not modelling estimates. In effect, the decision transforms Obama’s climate test into a broader consideration of the impact of the decision of global climate politics:

“A key consideration at this time is that granting a Presidential Permit for this proposed Project would undermine U.S. climate leadership and thereby have an adverse impact on encouraging other States to combat climate change and work to achieve and implement a robust and meaningful global climate agreement. Strong climate targets and an effective global climate agreement would lead to a reduction in global GHG emissions that would have a direct and beneficial impact on the national security and other interests of the United States.”

In his public remarks, Obama stressed the role model justification for the decision: “Today, we’re continuing to lead by example, because ultimately, if we’re gonna prevent large parts of this Earth from becoming not only inhospitable but uninhabitable in our lifetimes, we’re gonna have to keep some fossil fuels in the ground rather than burn them and release more dangerous pollution into the sky.”

The climate movement, remarkably, transformed Keystone XL into a line in the sand on climate. Today, the very symbolic magnification of importance they manufactured was used as the core rationale for the rejection decision.

What an extraordinary victory!

Addendum: A lot of great journalism and commentary has emerged around this decision by Obama in the broader context.

From the architect of the campaign, Bill McKibben, in The New Yorker
Ben Adler on the activist campaign on Vox
David Roberts on the misguided critique of activism on Vox
Brad Blumer on Obama’s rationale on Vox
Elena Shor with a thorough 7+ year timeline on Politico

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The Softwood Lumber Dispute – a Hoberg Course Brief

Posted on October 9, 2015 by admin

George Hoberg and Gabrielle Schittecatte
October 10, 2015

Since before Confederation, trade in lumber between Canada and the United States has been politically contentious.  The modern conflict began in 1982, when the US softwood industry asked the US government to impose countervailing duties on imports from Canada. As Canada’s largest lumber producer, British Columbia has been strongly affected by US trade actions.

US lumber interests argue that Canadian policies have the effect of subsidizing lumber exports to the US, giving Canadian lumber an unfair advantage and making them inconsistent with the US Trade Act and free trade agreements. The biggest source of concern has been how stumpage (the price paid by a forest company for what is a publically owned tree) is set in the country. In most of the US, where private forest land dominates, trees are priced by markets. Because of the public land model north of the border, stumpage in Canada, including BC, is set administratively. The US has long argued that the way stumpage is calculated amounts to an unfair subsidy. The US has also complained about direct subsidies to the forest sector, limitations on log exports, and cut control policies.

In the early 1980s the US lumber industry petitioned the US Department of Commerce (DoC) to implement its countervailing duties, a tax the US would then charge Canada on its softwood exports. The DoC declined to do so. In 1986 the US lumber industry again petitioned the DoC to establish countervailing duties, which it agreed to at a level of 15%. However, before this could take place Canada agreed to a Memorandum of Understanding (MOU) which established a phased export tariff. In essence, Canada, in order to decrease tensions on the matter, agreed to tax itself so at least revenues would remain within the country.

In 1991 Canada withdrew from the MOU and the US industry petitioned the DoC again to implement countervailing duties, which it did at a level of 6.5%. This decision was reviewed under the Canadian-US Free Trade Agreement (a predecessor of NAFTA). The review panel ruled in Canada’s favour, finding that the DoC had not made a convincing case under the US Trade Act. Consequently, Congress amended the Trade Act to make it easier to demonstrate the existence of an illegal subsidy. In response, Canada agreed to the 1996 Softwood Lumber Agreement, which was planned to last five years. This agreement determined that a certain amount of softwood exports would be allowed tax free, but that above this level there would be substantial export fees.

In 2001 the Softwood Lumber Agreement expired, and the US forest industry again applied for countervailing duties. This time, the DoC agreed to impose even higher duties, at 27.2%. Canada again challenged the decision under the dispute settlement mechanisms of both NAFTA and the World Trade Organization (WTO), virtually all of which ruled in Canada’s favour.

At the same time, the BC government embarked on an extensive policy reform designed in part to address US criticisms by substantially increasing the role of market forces in determining stumpage and other aspects of BC forest policy. The 2003 Forest Revitalization Plan included a 20% take back of harvesting rights, half of which were allocated to auctions to create a system of market-based pricing. Appurtenancy was eliminated, along with other reforms to “bring the market back in.” One key part of the justification for these changes was to address the concerns raised by the US in the softwood lumber dispute.

Despite BC’s significant policy reforms, and the victories in dispute settlement mechanisms, Canada agreed again, in 2006, to enter into an agreement where export taxes were collected if the price of lumber fell below a particular threshold. The US refused to return the $5 billion in duties inappropriately collected from the industry over the past 4 years, and Canada felt the need to agree to trade restraints to get access to the funds.  The 2006 Softwood Lumber Agreement, which would last for 7 years and be renewed for 2 more, places an export charge on lumber based on the current market price measured in price per thousand board feet. The charges on lumber increase when the market price of lumber decreases – the maximum rate is 15% if the price falls below $315, and goes to zero if the price exceeds $355. In September 2015, Canadian exporters paid a tax of $5 US because the price of lumber was in the range of $336 US and $355 US.

The agreement expires on October 12, 2015, and there are no apparent signs of active negotiations. The agreement stipulates that the US is prohibited from launching new trade actions for a year after expiration. Premier Clark is committed to renegotiating a new deal, and recently stated she would bring the matter up with the prime minister “as soon as the federal election is over.”

The longstanding softwood lumber dispute between Canada and the US has had a significant impact on the BC forest industry’s policies and profitability. The dispute prompted one of the biggest changes in the forest industry through the Forest Revitalization Act and ensuing tenure take-back. It also continues to have impacts on the price of exports to the US, and thus the vitality of the BC forest industry. These US trade pressures have pushed costs up, induced policy reforms, and been a major challenge to Canadian sovereignty.

Additional sources:

Government of Canada DFAIT site Softwood Lumber

Government of BC Softwood Lumber

Random Lengths overview of softwood lumber dispute

Coalition for Fair Lumber Imports

Posted in BC Forest Policy | Leave a comment

Formal Government Processes for Policy Production in Canada – A Hoberg Course Brief

Posted on September 21, 2015 by admin

George Hoberg
September 21, 2015

A public policy is a purposive course of action or inaction by government. Understanding where policies come from requires an understanding of how the formal processes of government work. In Canada, these processes are a combination of rules written in the Constitution Acts and federal and provincial governments, but also unwritten “conventions” that have evolved over time from their origins in the traditions of parliamentary democracy in the United Kingdom and Canada. Canada is technically a constitutional monarchy and a parliamentary democracy. It is also a federal country, meaning that constitutional powers are divided between the federal government and the provinces. The governments at both levels consist of the executive, legislative, and judicial branches. At the federal level, the legislature is made up of the elected House of Commons and the appointed Senate. The provincial governments are “unicameral”, meaning they don’t have a senate. (This post does not discuss either the Senate or the judicial branch.)

The Executive

The Queen is officially the head of state, but her work is delegated to her representatives in Canada: the Governor General at the federal level and Lieutenant Governors at the provincial level. Formal government actions – including legislation and regulations – require the approval of the Queen’s representatives. Approval or disapproval occurs with the “advice of the executive council”, the cabinet of the current government. By convention, this advice is always followed except in extraordinary circumstances.

The Prime Minister (or the premier at the provincial level) is the leader of the political party that holds the “confidence of the legislature”, meaning the support of a majority of the House (or the provincial legislature). That party, in particular its cabinet, forms “the government.” Ordinarily, this is the leader of the party with the most seats in the House of Commons (or provincial legislatures). When one party has a majority (as Harper’s Conservative Party has had from 2011 to present), who is Prime Minister is straightforward. It gets more complicated when no party wins a majority. It seems generally understood that the party that wins the most seats in an election gets the first opportunity to form a minority government. (They could also go into formal coalition with another party to form a majority.) Technically, the convention is that it’s up to the Queen’s representative, and it’s conceivable that the Prime Minister’s party could be given an opportunity to demonstrate they have the confidence of House even if they don’t win the most seats in the election.

The cabinet consists of individuals, selected by the Prime Minister usually from his or her own party in the legislature. Members of the cabinet are known as ministers, and are responsible for the management of one of the government’s major departments (e.g., Finance, Natural Resources, Environment). Deputy ministers are the senior public servant in each ministry. They are not elected, but appointed by the government to manage the ministry under the direction of the minister.

The prime minister and cabinet are executive officials, but they are also members of the elected legislature, creating a quite different arrangement from the one that exists in a separation of powers system like the United States, where members of the executive branch are prohibited from being in the legislature.

Legislatures in an Executive-Centred Parliamentary System

Despite being referred to as a parliamentary democracy, legislatures play surprisingly little direct role in modern Canadian governance. The executive-centred form of government results from the relationship between the prime minister (or premier) and the members of their party in the legislature. Members of the legislature are divided into party caucuses, which decide the party’s positions on votes that come up in the legislature. The government’s party has a caucus, and other parties represented in the legislature also have a caucus, the most important of which is the official opposition – the party outside the government that has the most seats in the legislature.

In practice, party members almost always vote in accordance with their party’s policies, known as “party discipline”, for several reasons. Members of the government party want to ensure their party continues in that role, so they need to work together to ensure their party maintains the confidence (majority support) of the legislature. In addition, party discipline is enforced by party rules that give the leader of the party the authority to discipline members who don’t follow government policy. Members can be removed from the caucus, meaning they need to sit as an independent, and the party leader also signs nomination paper when candidates run for office. These rules create powerful incentives for members of the legislature to vote how their party leader tells them to. Finally, cabinet positions are prestigious and higher-paying, so members of the caucus have additional incentives to seek the approval of the party leader who gets to select cabinet ministers if their party forms the government.

This combination of system incentives and party rules means that in Canada, governments are very centred around the prime minster (at the federal level) and premiers (at the provincial level). Legislatures must pass budgets and other legislation in order for the government to operate, but in practice, policies are proposed by the executive and other members of the government caucus vote according to the directions they are given. However, the power of the prime minister (or premier) is not unlimited. If the government caucus perceives that the policies of the government, or other actions of the leader, are jeopardizing the electoral viability of the party, they can threaten to withhold their support for the party’s positions. If a prime minister or premier can’t hold confidence of his party in the legislature, he or she is likely to resign, as Premier Gordon Campbell did in British Columbia in 2011.

The dominance of the executive over the legislature is limited in periods of minority government. In that case, the governing party needs to get the cooperation from members of other parties to maintain the confidence of the legislature. In the case of majority government, the power of opposition parties is limited to the threat of exposure through Question Period, an opportunity for the opposition parties to formally question the actions of the government when the legislature is in session.

Voting

Members of the legislature are selected in elections, in an electoral system known as single-member, first past the post. Jurisdictions are divided into electoral districts (different for federal and provincial elections), also known as ridings, and the candidate with the most votes (not necessarily a majority) becomes the member of the legislature from that district. Provincially, the UBC Vancouver campus is in the Vancouver-Point Grey riding, represented by NDP MLA David Eby. Federally, UBC is in the Vancouver-Quadra riding, represented by Liberal MP Joyce Murray. There is no direct election for the Prime Minister or Premier. They are the leaders of the party that forms the government after the election, and they must run for election in a riding like other party members. Prime Minister Stephen Harper, for example, is the MP for Calgary-Southwest, and is Prime Minister because the party that he leads won a majority of seats in the 2011 election.

One important measure of a political system’s representativeness is how well votes get translated into seats in legislatures. Our electoral system works well in doing so when there are only two dominant parties. However, when three or more parties get significant vote shares, the potential increases significantly for distortions between the proportion of votes in the election and the proportion of seats in the legislature. Such has been the case in Canada in recent decades. For political scientists, Canada is an electoral curiosity. Duvenger’s law states that when you have single member districts and a plurality voting rule like we do, you are likely to have a two-party system. The last time a party received a majority of votes in a Canadian federal election was in 1984, and even then Brian Mulroney’s Progressive Conservative Party just barely exceeded the threshold with 50.03% of the votes. In British Columbia, since 1972, the only election when a winning party won a majority was Gordon Campbell’s BC Liberal Party in 2001.

Minority-based majorities are not the only challenge when more than two parties are competitive in our type of system. You can also have situations when the party who wins the most votes doesn’t win the most seats. In the 1996 BC election, Glen Clark’s NDP won a majority of seats even though the NDP received fewer votes than Campbell’s Liberals (the Liberals won 41.8%, the NDP 39.5%). These types of misfires are more likely happen when there are significant differences in winning margins for the parties across ridings.

These distortions between seat and votes have increased calls for electoral reform in Canada. Demands for change have increased since 2011, when Stephen Harper’s Conservative Party of Canada won a majority in the House of Commons with only 39.6% of the vote. Harper’s party forms the conservative end of the political spectrum, meaning that more than 60% of Canadian voters that year supported parties less conservative than Harper’s. The main alternative to the Canadian system is proportional representation, which is designed to ensure that seats in the legislature closely match the proportion of votes parties receive in the election. In the 2015 Canadian election, the NDP, Liberals, and Greens all formally committed to pursuing electoral reform if elected.

The Production of Policies through Formal Processes

Production of policies at the provincial level

The accompanying figures illustrate how the various formal elements of the process combine together to form a system for the production of policies. The first diagram is for Canadian provincial governments, whereas the second generalizes for both levels of Canadian government. Public policies are authorized by enabling legislation and funded by annual budgets enacted by the legislature. The executive (cabinet and PM/premier) direct the implementation of these policies, either by passing regulations (delegated legislation) or other forms of policy, through ministries (government departments). These ministries consist of public servants (bureaucrats) who work under the supervision of a cabinet minister representing the government of the day. Implementation of these policies is designed to influence the behaviour of target actors such as business or consumers.

For example, the BC Forest Practices and Range Act (FRPA) is an act of the BC Legislative

Formal process for the production of policy in Canada

Assembly. The Forest Planning and Practices Regulation was passed by cabinet under the authority of FRPA. FRPA is implemented by the Ministry of Forest, Lands, and Natural Resources Operations, under the supervision (as of 2015) of Minister Steve Thomson.  FRPA is designed to influence the behaviour of forest companies to ensure that forest management was carried out in a way that promotes a series of values built into the law, such as timber production and biodiversity.

The system also provides for feedback and checks. Business and consumers are taxed, and the revenues from those taxes flow into government treasuries to support government services. Periodically, citizens have the opportunity to vote to keep the government in power, or if they are not satisfied with the performance of the current government, replace the government with another political party.

The judicial branch also checks the actions of government. Courts can challenge Act of the legislature as inconsistent with the Constitution, and regulations or other actions of governments as inconsistent with the authority established in enabling legislation.

Additional Resources:

For a far more entertaining version, see Rick Mercer’s take on the RMR in 2009.

Posted in Course Briefs | Leave a comment

Nobody Believes You, Mr. Harper: Five Key Energy-Environment Insights from the Opening Canadian 2015 Election Debate

Posted on August 7, 2015 by admin

George Hoberg
August 7, 2015

Pipeline and climate issues took central stage in last night’s leader’s debate hosted by Maclean’s. There are five main takeaways from the debate. You can watch the debate here, and read transcripts from it here at Maclean’s. All the quotes below are taken from the Maclean’s transcription.

1. Energy and environmental issues have become central to Canadian electoral politics.

The most remarkable thing about last night’s debate is the simple fact that the party leaders spent about one-fourth of their debate on energy and climate issues, a striking change from the 2011 federal election debates where energy and environment was largely ignored. The profile of these issues is a clear indication of the remarkable success of First Nations and the environmental movement in forcing these issues onto the political agenda.

2. Opposition leaders teamed up to blame stalled infrastructure on Harper’s poor environmental policies.

Most of the focus of this debate segment was on attacks on Harper’s environmental record by the other three party leaders, although there were noteworthy exchanges and differences among the opposition party leaders as well. Mulcair and Trudeau made almost identical argument that Harper’s poor environmental record had undermined social license for new energy projects and, as a result, hurt the economy.

Trudeau began the assault:

“[N]ot only has he not helped our environment, but he’s actually slowed our economy. He cannot get our exports to market because there is no public trust anymore. People don’t trust this government to actually look out for our long-term interest. We – he hasn’t convinced communities of the rightness of his – his pipelines, of the proposals he supports. He hasn’t been working with First Nations on the kinds of partnerships that are needed if we’re going to continue to develop our natural resources. Canada will always have an element of natural resources in our economy, but the job of the Prime Minister is to get those resources to market. And in the 21st century that means being smart and responsible about the environment. Mr. Harper’s inability to understand that is exactly why he’s so struggled to actually get our economy growing in a right way anymore.”

Mulcair taunted Harper about his record of getting pipeline projects approved:

“Mr. Harper thought that by gutting our environmental laws, somehow he could get our energy resources to market better. How’s that working out, Mr. Harper? None of those projects has gotten off the drawing board, and it’s not hard to understand why. Canadians across the country want a clear, thorough, credible environmental assessment process. Canada can be a leader around the world. We can play a positive role. But with Mr. Harper, we’ve got the worst of all worlds. Dirtier air and water, we’ve got more carbon pollution, and we’re a laggard on the world stage.”

Trudeau piled on:

“The reason environmental groups in Canada and across the United States are so concerned about Canadian oil is because Mr. Harper has turned the oil sands into the scapegoat around the world for climate change. He is – has put a big target on our oil sands, which are going to be an important part of our economy for a number of years to come, although we do have to get beyond them. And his lack of leadership on the environment is hurting Canadian jobs and Canadian relations with other countries.”

Of course that’s not quite right. It’s the environmental movement that has succeeded in framing the oil sands expansion as a major climate risk. Harper has contributed to the stigmatization of the sector by failing to take any meaningful climate action on Canada’s oil sector.

3. Opposition leaders differ on bitumen exports and pipelines

While the opposition leaders were singing the same song about the link between Harper’s environmental policy retrenchment and the failure of his oil sands export strategy, there were important differences in their positions on the merits of exporting raw bitumen. Trudeau supports Keystone XL, but Mulcair and May both oppose it. Mulcair stressed this difference with the Liberal leader: “Mr. Harper and Mr. Trudeau both agree with Keystone XL, which represents the export of 40,000 jobs. I want to create those 40,000 jobs here in Canada.”

Mulcair and Trudeau had an embarrassing exchange accusing each other supporting Energy East in English and opposing it in French. You could almost hear Harper laughing. May emphasized her opposition to Energy East, stating it “is still about export.”

May sought to drive a wedge between the NDP and environmentalists in BC by demanding to know whether Mulcair opposed the Kinder Morgan pipeline. Mulcair re-articulated his nuanced position that he would wait until the regulatory review was complete. But of course he did not do that with Northern Gateway, which he opposed long before the environmental assessment was completed. That exchange led to flashbacks of the 2013 BC election, where NDP leader Adrian Dix (remember him?) began the campaign with the same position, and disastrously changed it mid-campaign. Mulcair’s probably too smart to make the same mistake.

4. Opposition leaders need to bone up on their understanding of GHG trends

Harper has little credibility on the environmental file, and opposition leaders mocked him for it. When Harper described his climate record, May chimed in “That’s not true!” And a bit later Trudeau blurted out “Nobody believe you!” The problem is that what Harper was saying at that point was correct: “Mr. Trudeau, let’s be clear on what the record actually is. Not only do we take both the economy and the environment seriously; we are the first government in history to reduce greenhouse gas emissions while also growing our economy.” Nic Rivers, economist at the University of Ottawa, provided the numbers, direct from Environment Canada.

It is true, as May later emphasized, that the main reason for the decline was the great recession and the policy actions taken by provinces, especially Ontario. It is also true that there has been a steady rise since the 2009 nadir, and that the Harper government’s own projections show them continuing to increase substantially as the oil sands sector expands. But it is also unquestionably true that emissions for the latest year we have data (2013) are lower than when Harper took office, despite economic growth over that period.

There’s plenty of dishonesty in Harper’s statements on energy and environment to criticize. In the debate, he said more than once that Mulcair is opposed to LNG in BC, when that is not his position. His continued castigation of his opponents for pushing a carbon tax (discussed below) is another obvious example. But the opposition leaders should sharpen their understanding of and arguments about carbon emission trends.

5. Harper continued his silly demagoguery against the carbon tax, and no one responded

Since he feasted on Stephan Dion in the 2008 election, Harper has gleefully bludgeoned opponents for supporting a carbon tax. In last night’s debate, he persisted:

“The way you don’t deal with this problem is start imposing carbon taxes that will inevitably – they raise money for the government. They don’t reduce emissions. They hit consumers, and they hit consumers hard…Paul, I’ll say what I’ve said to people across the country: a carbon tax is not about reducing emissions. It’s a front. It is about getting revenue for governments that cannot control.”

There are several problems with this statement. First, while May’s fee and dividend is a carbon tax, the two main opposition parties aren’t supporting a carbon tax. Mulcair advocates cap and trade. Trudeau would let the provinces choose their instrument. More importantly, the argument that they don’t reduce emissions and are only a front for padding government finances is just not supported by the record. BC’s carbon tax has been held up as an international model of a revenue-neutral (meaning it does not raise government revenues) carbon tax that has reduced emissions while the economy grew substantially. It is true that you could use carbon pricing to increase government revenues, and there are pros and cons of doing so. But Harper’s argument that it’s a front for padding government treasuries is sheer demagoguery.

What surprised me is that not one of the three opposition leaders chose to defend carbon pricing. I’m not sure whether this is because they see defending carbon pricing as a no-win strategy against Harper, or they just chose to focus their arguments elsewhere. Whatever the reason, we ended up with a debate heavy on pipelines and remarkably unilluminating on climate policy. A basic word search shows climate issues were out-mentioned by pipelines 43-28.

Climate content 2015 2011
climate 6 10
greenhouse gas 5 3
carbon 17 0
Total climate 28 13
Pipeline content
pipeline 20 0
Keystone 6 0
Northern Gateway 6 0
Kinder Morgan 4 0
Energy East 7 0
Total pipelines 43 0

We’re still waiting for that long overdue national conversation about climate policy.

Nonetheless, congratulations to Paul Wells and Maclean’s for fostering a vigorous debate on these important issues.

Posted in Climate Action Policy, Energy Pipelines, Oil Sands | Leave a comment