Abrogation and Distortion in Canadian Climate Policy: Commentary on Prentice’s Copenhagen Commitment Speech

Posted on February 3, 2010 by admin

George Hoberg

Canada's Environment Minister, Jim Prentice

Canada's Environment Minister, Jim Prentice

February 4, 2010

On January 30, Canada’s Minister of Environment, Jim Prentice, finally announced the country’s commitment to greenhouse gas mitigation under the Copenhagen Accord. Its target for 2020 is a 17 percent reduction below 2005 levels. In a speech at the University of Calgary on February 1, Prentice provided a spirited justification for this target. While it is certainly welcome news that Canada has made a formal commitment to reduce greenhouse gases under the Copenhagen Accord, the target and the government’s justification for it are troubling.

1. Weakening. The new target represents a weakening of the previously stated government target of 20% below 2006 levels; 2020 emissions would be 6% higher under the new target than the old. Canada’s GHG emissions actually declined between 2005 and 2006, so not only is the per cent reduction lower but it is from a lower base.

2. Abrogation of climate policy sovereignty. The text of the Canadian submission is also remarkable because it explicitly ties Canada’s commitment to the actions of another country, the United States. Canada’s formal target is a 17% reduction by 2020 “to be aligned with the final economy-wide emissions target of the United States in enacted legislation.” Since the election of Barack Obama, the Harper government has abandoned its “made in Canada” approach and advocated harmonization with a North American regime with American leadership. In his Calgary speech, Prentice reinforced and extended this message: “Our determination to harmonize our climate change policy with that of the United States also extends beyond greenhouse gas emission targets: we need to proceed even further in aligning our regulations…[W]e will only adopt a cap-and-trade regime if the United States signals that it wants to do the same. Our position on harmonization applies equally to regulation… Canada can go down either road—cap-and-trade or regulation—but we will go down neither road alone.”

I am not naïve about the challenges Canada confronts as a small, open economy adjacent to the world’s largest economy – a substantial fraction of my academic work (e.g., Sleeping with an Elephant and Capacity for Choice) has been about this challenge. But I can never recall such a blatant and resolute proclamation that Canadian policy will be dictated by American policy.

3. Distortion. In his Calgary speech, Prentice showed his Harper Conservative credentials by ridiculing his critics with distorted facts. He mocked the opposition by pointing to their private members’s bill, Bill C-311, which he claimed “proposed a 40 per cent reduction in greenhouse gas emissions from 1990 levels.” But the bill calls for 25%, not 40%, reduction below 1990 levels. He attacked the Province of Quebec, a vocal critic of the federal government’s inaction on climate, for its new vehicle emission standards: “Let’s be clear: It’s absolutely counter-productive and utterly pointless for Canada and Canadian businesses to strike out on their own, to set and to pursue targets that will ultimately create barriers to trade and put us at a competitive disadvantage. One of the most glaring examples of the folly of attempting to go it alone in an integrated North American economy is the new, and unique, vehicle regulations introduced by Quebec. These ensure that consumers will basically have to leave that province to buy their vehicles, to avoid levies of up to five thousand dollars, because seventy-five percent of the latest car and truck models don’t conform to the new rules.”

His claim that the policy would increase the cost of a car by up to $5000 is, according to Quebec regulatory officials, a significant distortion. And while Quebec may have moved ahead of the federal government, it is hardly striking out on its own: According to a story in the Financial Post, Quebec has adopted the same standards as California and 14 Northeastern US states neighbouring Quebec. British Columbia is also adopting them. (And, oddly, even the federal government of Canada is planning to adopt them shortly.) Undoubtedly, regulatory diversity has a cost when product markets are highly integrated. This divergence has emerged in North America because the federal government in both countries have been much slower to respond to the climate imperative than subnational jurisdictions.

4. Lack of Preparation. Prentice also exaggerated his government’s preparation in moving forward with climate policy if the United States does act. In stating that his government could harmonize with either a US regulatory or cap and trade approach, he stated that “We’ve already completed much of the extensive analysis and consultation work required to prepare us for both of those options.” It is reasonable to say that the government has performed extensive analysis and consultation regarding the regulatory approach reflected in its “Turning the Corner” Regulatory Framework for Industrial GHG Emissions. That approach, however, is unlikely to be able to achieve Canada’s target, among other reason because it is designed on the basis of intensity targets rather than any broader emissions cap. But the government has not proposed, analyzed, or consulted widely about a cap and trade approach. (Or if it has, it is secret.)

It is precisely this vacuum in policy formulation that produced the surprisingly heated conflict over an analysis commissioned by several environmental groups about the impacts of a realistic mix of policy instruments to meet the government’s prior “20% by 2020” target. Yes, the US Congressional process is notoriously slow. But the stunning lack of progress in Canada in designing a serious greenhouse gas reduction policy creates a real risk that Canada will be completely unprepared if the US finally gets its climate act together. Among other things, Canada will need to address the delicate issues around the oil sands and the related challenges around regional burden sharing. A meaningful national dialogue on climate policy design is long overdue.

In their book Hot Air, Simpson, Jaccard, and Rivers conclude with an 8-point “smell test” on whether or not politicians are serious about their commitment to climate action. Number 1 on the list is “If targets are proposed, but the politicians setting them do not detail how they will be reached, assume failure.” Canada has now revised its target and formalized it in a UN commitment. But it has no plan on how to achieve that target, and no process to develop a plan.

5. A Superpower without Sovereignty. In his Calgary speech, Prentice also chose to talk tough about the oil sands. In surprisingly strong language, he spoke of the need to improve the image of the oil sands or “we will be cast as a global poster child for environmentally unsound resource development.” To avoid that fate, Prentice stated that “we need to up our game, in terms of both environmental vigilance and in terms of our communication efforts.” While such commitments are welcome from Canada’s environment minister, the federal government thus far has done virtually nothing to address the environmental problems of the oil sands, and Prentice did not mention any new plans or initiatives. His statements on oil sands would thus fail Hot Air’s smell test number 1 as well.

In urging action to improve the reputation of the oil sands, Prentice revived Harper’s notion of Canada as a “clean energy superpower.” Harper Initially proposed the concept of Canada as an emerging “energy superpower” in a 2006 speech in London. The notion was dismantled by academics shortly thereafter – Canada does not have the economic and political means and will to be an energy superpower. When the “clean” adjective was added, the notion became even more farfetched. While Canada might have vast potential to export hydroelectricity, the geopolitical clout it does have is with its vast reserves in the oil sands. Barring unforeseen technological advances, it is hard to imagine how the oil sands will be able to legitimately claim status as clean energy.

Indeed, it is quite remarkable that Prentice could claim that Canada aspires to being a superpower of any kind at the same time as he abandons Canada’s climate policy sovereignty by tethering Canada’s climate actions to American policies in its Copenhagen Accord commitment.

The Up Side. There is a potential bright side to how the Harper Conservatives have positioned Canada on climate. Their submission to the Copenhagen Accord validates that international process and will increase moral pressure on Canada to act. More important, if the US does enact climate legislation, the pressure on Canada to follow suit will be immense. The Harper government may be hoping the Obama’s climate efforts will be stymied. But if not, they will be hard pressed not to live up to their commitments, and will have significant political cover to address the opponents to climate action in Alberta.

Posted in Climate Action Policy, Oil Sands | 2 Comments

Addressing the Regional Equity Implications of Climate Policy in Canada

Posted on January 12, 2010 by admin

George Hoberg and Stephanie Taylorfirst-ministers-cp-250-58221

January 12, 2010 (with February 2, 2010 updates)

 

Canada has committed to reduce greenhouse gases by 20% below 2006 levels by 2020. The federal government has yet to release any credible plan for meeting those targets or an analysis of what the impacts of meeting those targets would be. In this policy and analytical vacuum, NGOs and think tanks have begun to put forward policy scenarios and cost estimates. The most prominent analysis was that released by the Pembina Institute and the David Suzuki Foundation (DSF) in October 2009, which prompted a strong backlash from politicians and the media.  Alberta Premier Ed Stelmach characterized the policy proposal as nothing more than a regional wealth transfer, saying “there won’t be another wealth transfer to Ottawa under my watch. There’s already one wealth transfer program and that’s equalization.” The National Post editorial board went further, arguing that “such an effort would shake the very pillars of Confederation.” The Canada West Foundation (CWF) joined the criticism, stating that the disproportionate burden to be borne by Alberta and Saskatchewan made the policy scenarios unfair and doomed to failure. Of the Pembina/DSF report, the CWF states that “[t]ough luck is the message we are hearing, and this is not only unfair but counterproductive in terms of implementing effective climate change policy in Canada” (p. 16).

(February 2 update:) The CWF expanded upon this point in a January 2010 report, in which they emphasized the negative economic effects for the rest of the country if the West were to bear a disproportionate burden of carbon emissions reductions: “the western Canadian economy is critically important to the rest of the national economy [emphasis theirs]… Hence, if the oil and gas sector that underpins so much of the western economy is hamstrung by policies aimed at curbing greenhouse gas emissions, the whole country will suffer” (p. 4).

 

Background on Regional Equity in the Canadian Federation

 

In a federation such as Canada, regional equity issues are inevitable, and much of Canadian political history has been about how to address them. The most obvious example is equalization payments made through the federal Equalization Program, which seeks to maintain a roughly equal level of government services across the country by transferring federal money to poorer provinces. Equalization payments are determined by taking the difference between a province’s revenue-raising capacity and the average revenue-raising capacity of all provinces. Another example would be Employment Insurance payments to citizens, for which eligibility is tied to a province’s unemployment rate. Both examples are the subject of much dispute by provinces.

 

Given the vastly different natural resource endowments of provinces, and the effect that these natural resources have on provincial economies, the federal government has sought to include resource revenues in equalization payment calculations. However, a series of exemptions previously shielded nearly all of this natural resource-derived provincial revenue from inclusion in the calculations. As a result, despite all the heated rhetoric emanating from the province, Alberta’s vast resource wealth has not historically been included directly in the equalization formula.  In the 2007 budget, a new equalization formula was introduced, in which 50% of natural resource revenues would be included in the equalization formula. This angered Nova Scotia and Newfoundland and Labrador, both of which had signed offshore oil and gas development agreements with the federal government that excluded their offshore resources from inclusion in their equalization calculations. As a result, the federal government gave all provinces the choice of adopting the new formula or retaining the previous formula, which effectively shielded natural resource revenues from inclusion in the equalization formula.

 

Regional Equity Implications of Climate Policy

 

Climate policy figures prominently in considerations of regional equity as well. Just as different provinces have different natural resource endowments, they also have different greenhouse gas emissions (which are often tied to their natural resources). The most affected provinces are those whose economies are disproportionately dependent on fossil fuels, namely Alberta and Saskatchewan.  As a result, these provinces would be expected to achieve greater greenhouse gas emission reductions than the rest of the country. Because the policy instruments under consideration – a carbon tax or a cap and trade system* – would create new revenue flows to the federal government, some Westerners are concerned that a regional wealth transfer between the West and the East will result. (February 2 update:) Others, such as the CWF, are concerned that the opposite will occur – that the negative economic impacts of GHG reduction policies in the West (namely in the oil sands) will infect the rest of the country, bringing with it a painful economic malaise.

 

Serious climate policies do not necessarily result in a regional transfer of wealth, however. It depends on how they are designed. In particular, regional distributional consequences of climate action would be strongly influenced by how the carbon-based government revenues were allocated by governments.

For example, even the controversial Pembina Institute and DSF analysis proposed that a portion of the revenue from carbon pricing go toward payments to individuals to compensate for regional variations in household energy cost increases (Albertans would receive the highest payments – p. 9) and payments to certain manufacturing sectors (such as mineral mining and metal smelting)  to ensure that output levels would not drop below 2008 levels. But most of the new revenues in their policy scenarios were used to reduce personal income tax rates. That policy has many advantages, but it would have a less direct impact on the regional distribution of economic activity. If regional balancing was considered more important than income tax reduction, the mix of fiscal policies for allocating the carbon revenues could be changed to emphasize those that put a greater emphasis on differential costs of compliance or some other relevant factor.

 

A valuable December 2009 report by Snoddon and Wigle for the Institute for Research on Public Policy went further. They model a policy scenario where all carbon tax revenues are allocated back to provinces in proportion to their initial emissions, and then allows the provinces to decide how to allocate the revenue. In their model, because of revenue recycling, Alberta and Saskatchewan are actually better off after the climate policy is put in place (p. 11).

 

The regional impacts of climate policies are not inevitable and they are certainly not something generated by a modelling exercise commissioned by environmental groups. They are policy design choices made by governments.

 

Conclusion: We Need Real Dialogue Now

 

Addressing the climate crisis will result in increased costs to consumers and producers; as we move to internalize the cost of greenhouse gas emissions, this outcome is inevitable. These costs will only increase the longer it takes for policy to be implemented. As the Pembina/DSF analysis made clear, economic growth is still possible, even in the hardest hit provinces under their policy scenario. Under their assumptions, growth will be reduced from business-as-usual levels, but it is still robust economic growth. It is true that there will be a change in the regional redistribution of costs and benefits of carbon-intensive economic activities. But this does not need to lead to the type of tax revenue grab that many Westerners fear. To the extent that we wish to limit regional impacts we have a range of fiscal policy tools to do so, such as decentralized revenue recycling and even broader policies like the Equalization Program.

 

Given the urgency of the climate change problem, it is necessary for Canada to have a reasoned debate about how to address the regional impacts of climate policy. We may decide that some degree of regional redistribution is a good idea because the economy will need to adjust to pricing carbon. But if we choose to minimize the regional implications of the policy, there are policy tools available to do that.  There is no doubt that such a debate will be a significant challenge to the federation, but it is hardly an insurmountable obstacle to climate policy.  What is most critical is that this debate begin immediately so that we can make progress on developing and implementing a climate policy in a timely fashion. Perhaps, like Nixon in China, our Conservative Albertan Prime Minister is ideally placed to begin this debate. If he continues to refuse to exercise constructive leadership on this issue, civil society will need step forward to facilitate this dialogue.

 

 

* A cap and trade system would not necessarily generate government revenues. Government revenues would be available if allowances were auctioned off, as many economists would prefer. However, it is also possible to distribute allowances for free, as the bill passed in the US House would do. Free granting of allowances based on current or historical emissions is another policy tool available to address the distributional consequences of climate policy.

 

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Should Scientists be Advocates? The Case of Dr. James Hansen

Posted on November 9, 2009 by admin

Andrea Rivers and George Hoberg

November 9, 2009

Hansen at a coal mining protest, where he was arrested.

Hansen at a coal mining protest, where he was arrested.

 

The appropriate relationship between science and politics has been a persistent challenge for modern governance. Sound policymaking relies on mobilizing expertise, so scientists are frequently called upon to become involved in the political process. Expertise is also a political resource, so politicians and interest groups use science and scientists as part of their political strategy. As a result, science becomes politicized, creating risks for both the political process and the role of science (Mills, 2000; Lackey, 2006).
One of the most challenging dilemmas in the science-policy interface is whether scientists should be advocates, and if so under what conditions. This blog explores that question by looking at the controversial case of Dr. James Hansen. Hansen, head of the NASA Goddard Institute for Space Studies and adjunct professor at Columbia University, is a renowned climatologist yet also increasingly well known for his advocacy.  

Four Models of Scientists and Politics

The literature on advocacy in science and policy contains four models: traditional, science communication, expert advocacy, and political advocacy. An overview of these models helps to evaluate Hansen’s actions as a scientist and advocate, providing a revealing case study of the implications and consequences of science advocacy.  

The traditional model separates science from politics with the expectation that scientists should put forth objective data when pertinent without further involvement in the policy process (Lach et al, 2003).  This model suggests Hansen should remain strictly within his area of research, as he did for a significant portion of his career.

A second model, science communication, acknowledges the distinction between science and politics but implies that scientists should do more then simply hand off their data. They should be interpreting and explaining their findings to both policy makers and the public. After all, they are often on the leading edge of knowledge in their respective areas (Mills and Clark, 2001). Hansen, on the fore front of knowledge in climatology and modeling, made a well-known appeal to a Congressional committee in 1988 to take acknowledge the reality of global warming and take the threat of climate change seriously. This appeal included results of his research and future climate projections, falling under this model of science communication.

The expert advocacy model is based on the belief that scientists should be involved by communicating their research with an ethical obligation to act as advocates (Mills and Clark,  2001).  Advocacy in this form is defined as the process of informing policy makers, managers, and the general public about issues that arise in one’s area of expertise (Brussard and Tull, 2007). Dr. Hansen’s research has led him to believe that 350 parts per million (ppm) is the safe limit for atmospheric carbon dioxide, and therefore should be acknowledged in emissions reduction policies. The acceptable limit was previously thought by many scientists to be in the range of 450 ppm. Hansen, with help from others, has communicated this perceived quantity for target atmospheric CO2 to policy makers and the public. His findings have been recognized and well received by some, spawning new global initiatives for climate action. This model holds that scientists are qualified to be involved in decision-making processes, but it deems advocacy for specific policy preferences as inappropriate (Lackey, 2006).

Under the final model, which we call political advocacy, a scientist advocates a position beyond their core are of scientific expertise. In this case, according to Lackey, the arguments “ sound like science, read like science, are presented by people who cloak   themselves in the accouterments of science but who are actually offering nothing but policy advocacy masquerading as science” (Lackey, 2006, p. 15).

Hansen’s recent activities definitely reflect this concept of political advocacy.  His political advocacy is evident in his participation in coal-related protests in Washington and West Virginia; references to coal plants as  “death factories”; an appearance in a UK court to testify on behalf of climate activists; letters to Prime Minister Gordon Brown, the Obamas and the Government of Australia stating his position on climate change, necessary emissions reductions and policy recommendations. Hansen has controversially opposed the Waxman-Markey Bill and presented his own policy suggestions such as carbon taxation instead of cap and trade. Eileen Claussen, President of the Pew Center on Global Climate Change speaks on Hansen’s policy suggestions:  “I wish he would stick to what he really knows because I don’t think he has a realistic view of what is politically possible, or what the best policies would be to deal with this problem” (Kolbert, 2009, p. 44). Claussen is pointing the distinction between expert advocacy and political advocacy. Hansen’s expertise makes him well positioned to advocate a safe level of greenhouse gases in the atmosphere, but he is not an acknowledged authority on the relative merits of climate policy instruments or on the political process.

Advocacy and Credibility

Underlying all of these models is the inherent risk of credibility loss, which significantly increases the farther scientists move away from the traditional model and from their area of expertise. Although Hansen has been recognized as a highly respected scientist for decades it appears that his venture into the political realm has tarnished his credibility as a research scientist. This change is exemplified by the controversy over Hansen as the 2009 recepient of American Meteorological Society’s highest honor, The Carl-Gustaf Rossby Research Medal.  Specifically, this controversy surrounded the public communication component of the award and the argument that Hansen conforms scientific data to his political opinions. In Hansen’s defense it could be argued that, conversely, his science has shaped his political views. Even if true, Hansen’s credibility as a scientist still suffers.

Credibility within the science community is critically important as its loss can compromise the utilization of research results (Aycrigg et al. 2006) and jeopardize the important contributions that science can offer to policy decisions (Pielke 2004). It is recognized that “science, politics and policy are inextricably connected” (Pielke, 2004, p. 406) and for this reason it is important for scientists like Hansen to move beyond the traditional model and communicate their science to policy makers and the public. Yet, the higher risks to credibility associated with political advocacy may be too great as they can compromise the contribution of potentially important research in policy-relevant issues.

 

Print Sources

Aycrigg, J.L., G.R. Feldman, R.T. Lackey, A.B. Pidgorna, D.A. Rupp, J.M. Scott, D.I. Stanish, and R.K. Steinhorst. 2006. “Policy advocacy in science: prevalence, perspectives, and implications for conservation biologists.” Conservation Biology 21: 29-35

Bowen, Mark. 2008. Censoring Science: Global Warming and the Political Attack on Dr. James Hansen. New York: Penguin.

Brussard, P. F. and J. C. Tull. 2007. “Conservation biology and four types of advocacy.” Conservation Biology 21: 21-24

Kolbert, Elizabeth. 2009. “The Catastrophist.” The New Yorker.  29 June 2009. p. 39-45

Lach, D.L., P.C List, B.S. Steel, and B.A. Shindler. 2003. “Advocacy and credibility of ecological scientists in resource decionmaking: a regional study.” Bioscience 53(2): 170-178

Lackey, R. T. 2007. “Science, scientists and policy advocacy.” Conservation Biology 21: 12-17

Mills, T. J. 2000. Position advocacy by scientists risks science credibility and may be unethical. Northwest Science 74(2): 165- 168

Mills, T. J. and R. N. Clark. 2001. Roles of research scientists in natural resource decision-making. Forest Ecology and Management 153: 189-198

Pielke, R.A. 2004. “When scientists politicize science: making sense of controversy over the skeptical environmentalist.” Environmental Science and Policy 7: 405-417 

Posted in Climate Action Policy | 1 Comment

Climate policy cost report casts light on the coming reckoning for the Canadian federation

Posted on October 30, 2009 by admin

 

George Hoberg and Stephanie Taylorclimate-leadership-report-en-cover

October 30, 2009

This week the Pembina Institute and the David Suzuki Foundation jointly released a report that finds that Canada can meet its greenhouse gas emissions reduction target – and even more stringent goals – without bringing the economy to a halt. While acknowledging that the policies necessitated by emissions reduction targets will have different effects for different provinces, the report emphasizes that the impact on economic growth for even the most carbon-intensive provinces will be relatively modest.

As expected, the report has prompted hyperbolic responses from the defenders of Canada’s fossil energy establishment:  several Western provinces, federal Minister of the Environment Jim Prentice, and the Globe and Mail editorial board. Prentice characterized the report’s findings as “irresponsible” and stressed that Canada could meet its targets through other means, namely by harmonizing its climate change plan with the United States’ as-yet-unfinalized plan. He also made it clear that the costs of any emissions reduction plan must be acceptable to all regions of the country. Such agreement over an effective climate action plan is all but impossible as long as Alberta refuses to “touch the brake” on its oil sands operations. And even before factoring in provincial reactions, such hyperbole coming from the federal Minister of the Environment casts doubt on the sincerity of Canada’s commitment to its own greenhouse gas emission reduction target by 2020.

Politicians from Alberta and Saskatchewan were even more vocal in their opposition to the report. Alberta premier Ed Stelmach denounced the report’s recommendations as nothing more than a wealth transfer to other parts of the country: “There won’t be another wealth transfer to Ottawa under my watch. There is already one wealth transfer program and that’s equalization.” Saskatchewan Energy Minister Bill Boyd echoed Stelmach’s “wealth transfer” theme, adding that technology is the key to combating climate change. Alberta and Saskatchewan have placed large amounts of faith and money in carbon capture and storage (CCS) technology, despite questions surrounding its reliability and cost-effectiveness. Recently the federal government has joined in, pumping $343-million into a CCS-equipped coal-fired generation plant in Wabamun, Alberta while declaring that “Carbon capture and storage has the potential to help us balance our need for energy with our duty to protect the environment.”

This dismissive and defiant rhetoric is part of a long history of resistance and denial that at some point Canada, and especially Alberta, would need to reconcile its energy and climate policies with modern notions of sustainability and, especially, an evolving international climate regime. The ghost of the National Energy Program has given Western provinces a de facto veto over national climate change policy.

National newspapers joined the condemnation. The lead Globe and Mail editorial yesterday denounced the report:  “its all-out attack on the oil and gas sector is politically and economically unacceptable, and would euthanize a vital Canadian industry.” It says the report’s policy recommendations are “unsaleable and dangerous.” In its most extreme rhetoric, it proclaims “Canada cannot take its national unity for granted and must not, in the service of international obligations, allow itself to be immolated by a government policy of such wrenching dislocation.”  The National Post editorial board joined in the hyperbole, rejecting the report because it “would shake the very pillars of Confederation.” A National Post commentary joined the editorial excess, claiming “there will be blood.” Reactions from farther west are not so shrill. Vancouver Sun columnist Craig McInnes claims the report demonstrates that “with a political will, there’s a way.”

The Report

Pembina and DSF enlisted MK Jaccard and Associates (MKJA) to consider the feasibility and cost of two greenhouse gas emissions reduction targets: 1) a 25 percent reduction below 1990 levels by 2020, as proposed by environmental NGOs (ENGOs), and 2) a 20 percent reduction below 2006 levels by 2020, the Canadian government’s proposed target. Both scenarios were found to be feasible, though only with significantly stricter policy packages than those proposed thus far by the provincial and federal governments. Of particular interest are the carbon dioxide equivalent emissions prices under each scenario: $50/tonne in 2010 rising to $200/tonne in 2020 under the ENGO scenario, and $40/tonne in 2010 with an increase to $100/tonne in 2020 given the government’s target.

Unfortunately, even the stringent policy packages proposed by MKJA (including carbon pricing) are not enough to reach the emissions reduction targets in either scenario.  Thus, the policy package examined by the authors includes purchasing of international offsets, pursuit of carbon capture and storage (for the environmental option), and a number of other policy responses to close the gap.

Economic Impacts:  National and Regional

Under both scenarios, the report projects that Canada will experience significant economic growth, but not quite as much as it would under the “business as usual” (BAU) scenario of no new controls. Under the BAU scenario, Canadian GDP is projected to grow 27% by 2020. Under the scenario implementing the Government of Canada’s target, GDP would grow 25% by 2020, and under the environmental group target scenario, GDP would grow 22%. The changes in GDP growth are projected to have different affects on different provinces. Growth will be less than projected under BAU in all regions except Manitoba and Ontario. The gap between GDP under both policy scenarios and under BAU is by far the largest in Alberta at 8% under the government scenario and 12 percent under the ENGO scenario.

The number of jobs will increase between 2010 and 2020 in all provinces. Interestingly, job growth will exceed business as usual (BAU) levels under both scenarios in BC, Manitoba, Ontario and Quebec. Alberta is the sole province to whose job growth is less than BAU levels under both scenarios, though it is important not to confuse reduced job growth with negative job growth. Pre-tax salaries in 2020 will also continue to grow under both scenarios, but at a slower rate than under BAU in all regions except Manitoba, which grows faster than under BAU.

GDP per capita will continue to grow in all regions under both climate policy scenarios, though the change from BAU levels will be greatest under the ENGO scenario. Under BAU, Alberta would see per capita GDP growth of 42%, as opposed to 25% under the ENGO scenarios and 31%under the government scenario. As the authors point out, this model does not account for the effects of population growth on GDP per capita. Specifically, population growth in Alberta is likely to be lower under both policy scenarios than under BAU (due to a relative decrease in expected energy sector jobs), which will lead to higher GDP per capita numbers than those projected under the policy scenarios. 

Conclusion

 As the report clearly shows, effective climate action is possible in Canada without plunging the country, or even the Western provinces, into economic chaos. The report’s authors should be congratulated for advancing the climate policy debate in Canada. By conducting serious economic policy analysis on what needs to be done to significantly reduce Canada’s greenhouse gas emissions, they have spoken truth to power. In so doing, however, they’ve exposed the hypocrisy of Canada’s persistent claims that it is committed to emission reduction targets without having a plan or the political will to do meet those targets. By being transparent about the regional impacts of climate policies, the report also challenges the foundation of political-economic power in the West, and provoked a formidable rhetorical backlash.

If Canada wants to be a responsible member of the international community, it will need to reduce its greenhouse gas emissions, and do so significantly and relatively quickly. This cannot be done without significantly raising the cost of energy production from fossil fuels, including the oil sands as well as coal and natural gas. The Canadian economy will need to adjust to these changes, and the impacts of these costs will have differential impact on regions, just as the regional endowment of fossil energy and the wealth generated from that has had differential impacts on regions. The fact that some areas in Western Canada will not grow as much as they might otherwise cannot be used as a justification for failing to act on our generation’s greatest challenge.

 

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Congratulations Elinor Ostrom on Your Nobel Prize in Economics!

Posted on October 12, 2009 by admin

George Hoberg

October 12, 2009ostrom

GreenPolicyProf wants to send a major shoutout to Elinor Ostrom, the co-winner of this year’s Nobel Prize in Economics.

Ostrom’s award is notable for several reasons. First, she is the first woman to win the prize in economics. Second, while a number of previous Nobel prize winners were given their awards for their contributions to the understanding of political behavior (e.g., Buchanan), she is the first recipient of the economic prize to actually be a political scientist by training.

Most importantly, she was given the award for her contributions to governance for sustainability. Her most influential work has explored the conditions under which local users of natural resources can develop effective mechanisms for ensuring sustainability. According to the Nobel committee,

Elinor Ostrom has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized. Based on numerous studies of user-managed fish stocks, pastures, woods, lakes, and groundwater basins, Ostrom concludes that the outcomes are, more often than not, better than predicted by standard theories. She observes that resource users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts of interest, and she characterizes the rules that promote successful outcomes.

The Nobel committee’s provides descriptions of her work designed for the public and for specialists,

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Why the BC Utilities Commission Rejected BC Hydro’s Long Term Plan

Posted on August 1, 2009 by admin

George Hoberg (with research assistance by Lisa Jung)equipment-at-toba-small1
August 1, 2009 (updated below on September 24, 2009)

On July 27, 2009, the British Columbia Utilities Commission stunned the BC energy sector by rejecting the Long Term Acquisition Plan (LTAP) of BC Hydro. The LTAP forecasts future electricity demand growth and details how BC Hydro plans to meet its future electricity needs.

The Commission made six major determinations. It approved two major parts of the LTAP – BC Hydro’s “load forecast” for future electricity demand, and the reliance on the Burrard Thermal natural gas generating plant for 900 MW of dependable capacity. But the commission rejected four parts of the LTAP: 

  1. The Commission ruled that BC Hydro “has not adequately addressed the self‐sufficiency obligation established” by the BC government.
  2. The Commission rejected BC Hydro’s plan for “Demand-Side Measures” – the efforts to reduce demand by increasing efficiency – because they were not adequately supported by analysis.
  3. The Commission rejected BC Hydro’s plan to reduce its reliance on energy from the Burrard Thermal unit for planning purposes.
  4. The Commission did not endorse a specific target amount of electricity for the “2008 Clean Power Call,” the process through which BC Hydro acquires new power from private producers.

Because the four issues were so fundamental to the overall plan, the Commission rejected the LTAP as a whole.

The BCUC decision has provoked significant reaction from interest groups and the media. Critics of private power projects, including the BC New Democratic Party, have declared victory, claiming the decision is a rejection of the BC government’s plan to rely on private power for future electricity supply. Climate activists have blasted the recommendation to increase reliance on the fossil fuel fired Burrard Thermal plant, calling it “a serious blow to the clean energy transition and climate leadership in British Columbia.” First Nations denounced the Commission for creating roadblocks to their ability to use green power projects to promote economic development.

A closer look at the details of the decision suggests quite a different interpretation, however. For the most part, the Commission is critical of the lack of evidence or analysis underlying BC Hydro’s plan. The decision is best viewed not as a challenge to government policy, but as a criticism of BC Hydro for not providing sufficient evidence that it was complying with government policy. The one exception to this conclusion is the refusal to endorse BC Hydro’s desire to reduce reliance on Burrard Thermal. That decision is harder to understand and seems more at odds with government policy.

Failure to adequately address self-sufficiency obligation

Arguably the most important part of the Commission’s ruling is that BC Hydro did not adequately address the self-sufficiency obligation described in law. All the other negative decisions can be linked to this core finding.

The self-sufficiency requirements arise from the BC Government’s 2007 Energy Plan, and are legally articulated in Special Direction 10 (SD 10) under the Utilities Commission Act. The policy requires that the province achieve energy and capacity self-sufficiency by 2016. In addition, the government also requires “insurance” by requiring BC Hydro to become capable of “exceeding, as soon as practicable but no later than 2026, the electricity supply obligations by at least 3,000 gigawatt hours per year and by the capacity required to integrate that energy in the most cost‐effective manner.”  BC Hydro’s LTAP did not address how this additional 3,000 GWhr/yr would be acquired, claiming that it was too early to plan for that. The Commission disagreed with what it referred to as BC Hydro’s “just in time” approach. It ruled that BC Hydro had not adequately addressed this requirement, and requested that BC Hydro focus on developing a phased in approach to meeting the requirement for self sufficiency with insurance in its next submission (p. 45). This is a clear case of the Commission applying government policy to BC Hydro’s LTAP and finding the utility’s rationale insufficient.

Inadequately supported demand-side measures plan

The 2007 Energy Plan requires that BC Hydro “acquire 50 per cent of BC Hydro’s incremental resource needs through conservation by 2020.” In its LTAP, BC Hydro proposed to go well beyond this target – it proposed to meet 72% of the increased demand through demand-side measures (DSM) (p. 74). But the Commission rejected the DSM plan because “it cannot determine whether BC Hydro’s DSM Plan complies with section 44.1 of the Act.” The relevant part of section 44.1 of the Utilities Commission Act states that the LTAP needs to contain ”a plan of how the public utility intends to reduce the demand… by taking cost‐effective demand‐side measures.”

The Commission was not satisfied with the level of analysis behind the DSM plan for two reasons. First, the Commission criticized BC Hydro for not having a plan for DSM after 2020, raising additional concerns about how the self-sufficiency requirement would be met. Second, the Commission criticized the way that BC Hydro assessed the cost-effectiveness of DSM. BC Hydro justified its choice to go as far as 72% by arguing that anything less would forego substantial cost savings. It justified the choice not to go beyond 72%, even though there would be cost savings over new supply sources, because it considers the deliverability of DSM at that level to be too uncertain to rely upon (p. 73). The Commission found this style of analysis insufficient. The Commission argues that to be consistent with the cost-effectiveness test in the Act, BC Hydro needs to compare the relative cost-effectiveness of DSM by calculating the unit energy costs of DSM programs on a program‐by-program basis, and then compare those to “supply‐side alternatives on an equivalent basis” (p. 85). Here again, the Commission is requiring more thorough analysis in order to make a determination about whether the LTAP is consistent with government policy.

Rejecting the proposal to reduce reliance on Burrard Thermal

BC Hydro uses the natural gas-fired Burrard Thermal plant only when needed to meet peak demand. The plant is old and expensive to run, and the air pollution impacts on the Lower Mainland of BC are significant. The LTAP proposed to continue to rely on the plant for 900 MW of dependable capacity, and to reduce its reliance on Burrard Thermal to 3,000 GWh/year of energy for planning purposes, less than half of the 6,100 GWh/yr it had relied on previously.

The Commission agreed with the plan to rely on 900 MW of capacity, but rejected BC Hydro’s proposal to reduce reliance on Burrard to 3,000 GWh/yr. Again, the Commission was very critical of the type of analysis BC Hydro presented:  “BC Hydro acknowledges that this conclusion was not derived from simple factual analysis and includes its professional judgment and careful consideration of context.” A big part of that professional judgment was an analysis of “social license” – BC Hydro argued that relying on the plant for more than the 3,000 GWh/yr would provoke so much public opposition that it would be unsustainable. The Commission rejected this argument, and recommended BC Hydro improve its “stakeholder engagement management” (p. 115). The Commission recommended BC Hydro plan for 5,000 GWh/yr, less than the 6,100 in the previous plan, but significantly more than the 3,000 proposed by BC Hydro.

The logic for this part of the Commission’s decision is more elusive than in the other areas in which it rejected BC Hydro’s proposals. However, it is consistent with the core finding that BC Hydro has not adequately provided for self-sufficiency (with insurance) as required by law, and that it might be premature to wind down Burrard Thermal as quickly as BC Hydro proposed. If that was the Commission’s rationale, it did not state it very clearly. This is also a case where the Commission decision seems to fly directly in the face of government policy. The 2007 BC Energy Plan, policy action 22, states the Government supports BC Hydro plans to phase out Burrard Thermal. The Commission maintains, and BC Hydro concurs (p. 105) that the language in this policy action is non-legislated and advisory, and lacks the force of law.

Refusal to endorse specific target for 2008 Clean Power Call

Given its forecast of future demand, its proposal for demand-side measures, and its assessment of existing and committed resources, BC Hydro argued there was a supply gap that needed to be addressed, and that it should do so in part by soliciting proposals for clean energy from private power producers. While there was some fluctuation in numbers throughout the process, BC Hydro’s formal request was that the Commission endorse a Clean Power Call target of 3,000 GWh/yr (p. 122). The Commission refuses to endorse any specific target for the Clean Power Call. It bases this decision on the fact that the other parts of the plan that provide the basis for the amount of new resources needed are so flawed — the failure to provide for self-sufficiency, the inadequate demonstration of cost-effectiveness of the DSM plan, and the lack of evidence for the reduction in Burrard Thermal – that it has no basis to decide what the amount of new resource should be.

While the Commission rejects a specific magnitude for the call for new power, its decision should not be read as a rejection of the government’s policy to rely on private power producers, whether for run of the river or other sources, for new electricity generation. The entire analysis by the Commission is done within the framework of the government’s 2007 Energy Plan, and the Commission makes clear that BC Hydro continues to have the authority to enter into energy purchase agreements with private power producers (p. 127).

Concluding Thoughts

As this analysis suggests, the Commission’s rejection of the LTAP is best viewed not as a challenge to government policy, but as a criticism of BC Hydro for not providing sufficient evidence that it was complying with government policy. In most cases, the logic of the Commission argument seems quite clear. In one important case, the rejection of BC Hydro’s proposal to reduce reliance on Burrard Thermal, the Commission’s logic is harder to follow. Indeed, it is surprising that the Commission was so harsh on BC Hydro’s reasoning in many areas, yet so weak in its own supporting analysis on such a critical issue before it.

It is possible that the Commission’s insistence of more rigorous analysis is merely a cloak for policy disagreements with the government. While I doubt this is the case, even if it is, the government has the opportunity and the means to clarify policy by issuing more specific direction to the Commission. Indeed, the government has already signaled that it has no intention of increasing reliance on the Burrard Thermal plant.

While the decision certainly creates short term confusion, it may have valuable benefits in the medium and long term. BC Hydro will be forced to provide more rigorous and transparent justification for its decisions – the Commission requires that a new LTAP be submitted by June 30, 2010 (p. 151).

In my view, one lesson of the decision, and the controversy over it, is the illustration of the limitations of using quasi-judicial proceedings to make public policy decisions so crucial to the province. Perhaps the BC government will take this opportunity to engage in a more open, public dialogue about BC’s energy future, an argument this blog has promoted several times before.

September 24, 2009 update by Lisa Jung:

Despite the BCUC decision on the 2008 LTAP it was ‘full steam ahead’ for the plan according to Energy Minister Blair Lekstrom, and that regardless of the decision, or any decision, “the BC government has no plans to increase the use of Burrard”. Lekstrom’s reaction to the Commission directives was that it was ‘surprising’ and increasing reliance on Burrard was ‘not in the cards’ for the government, which they would be making clear. And it did become clear that the government did not accept the BCUC decision, particularly on Burrard and its impact on the government’s plans for private power (see also The Province, The Globe and Mail). At the time, all that the government would divulge was that there are some parts of the decision that need to be clarified, to both the industry and the Commission.

In its 2009 Throne Speech the BC government clarified that the BCUC “will receive specific direction.”  This statement was directly followed in the speech by an emphasis on the importance of phasing out Burrard and the government’s green energy goals. In other words, Burrard will be phased out and the BCUC will have to comply with all parts of the Energy Plan, at least eventually.

This statement has created mixed reactions: those that represent IPP interests and environmentalists who support them have been reassured that they will have a place in BC’s future for new sources of clean and renewable electricity. However those that oppose new private power generation are disappointed to say the least. Groups like Western Canada Wilderness Committee (WCWC) are critical of the speech, arguing it is ‘green-washing’ and therefore misleading. The BC Citizens for Public Power criticized the throne speech for being a ‘flagrant disregard’ for the BCUC’s decision and that there will be economic hardships imposed for some British Columbians by adopting more expensive private power alternatives.

The tensions are still high and differences remain, but all of this raises more questions: whether the BC Liberal Government has violated the BCUC’s independence by acting after the fact, and how independence will be maintained in the future if the BCUC does not endorse all of which the government wants to do.

 

Posted in British Columbia Electricity | 5 Comments

The Political Dilemma of Climate Action: a Four-Part Overview

Posted on July 21, 2009 by admin

George Hobergg8_summit_family_113242gm-e

Addressing the monumental challenge of climate change requires the best available science, but it also demands concerted, coordinated, and courageous political action by policy makers at all levels of government. This post outlines the political challenge of climate action, and sets an agenda for future posts. We would of course welcome your input on any of these ideas.

 

1. There is a climate emergency that justifies urgent action for deep cuts in carbon emissions. In the wake of the publication of the 2007 report of the Intergovernmental Panel on Climate Change, thinking among scientists and concerned political leaders seemed to coalesce around the view that avoiding “dangerous anthropogenic interference” in the atmosphere required keeping global temperatures from increasing more than 2 degrees C above pre-industrial levels. That temperature objective would require reductions in greenhouse gases by about 80% by 2050. More recently, a number of prominent climate scientists have argued that this emission and temperature target are likely to be insufficient to avoid dangerous climate impacts.

In a future post, we’ll outline the evolution of scientific thinking about what levels of greenhouse gases in the atmosphere may pose dangers to humanity.

2. Climate action poses a harsh political dilemma for policy makers. Despite this emerging consensus on the urgency of climate action, policy makers are not responding with apparent urgency. While targets of two degrees and/or 80% emission reductions have found their way into EU policy, declarations of the G8 and Major Economies Forum, and the climate bill passed by the US House of Representatives, few concrete actions have been adopted thus far that promise to drive emissions down as sharply and as quickly as needed.

The nature of the climate problem creates massive challenges for politicians who need continued support from voters. Costs and benefits are separated in both place and time, and uncertainty is pervasive. Climate stability is a collective good shared globally, but mitigation costs are borne locally by energy users and others currently benefiting from greenhouse gas generating activities. Both the energy system and the climate system have immense inertia, so rapid decarbonization is a formidable technical and economic challenge, and the payback in terms of response from atmospheric greenhouse gas concentrations is both surprisingly slow and highly uncertain.

 

As a result of these problem characteristics, the political dilemma of climate action in a nutshell is that the costs of action are here, now, and relatively certain, but the benefits of action are global, distant in time, and highly uncertain. To internalize the externalities created by greenhouse gas emitting activities, politicians have to raise energy prices, imposing costs on voters and powerful interest groups.  Yet politicians have been reluctant to do so, because the benefits are globally diffused, long term, and highly uncertain.

 

Without a massive shift in public attitudes that either tolerates or demands these increased costs, the dramatic policy action required by the climate emergency is unlikely. But promoting that attitude shift is extremely difficult. The general public has not responded thus far to the cavalcade of scientific studies sounding alarm. It is more likely to respond to experience. But for the most part, the alarming consequences of climate change are science-based projections, not currently experienced by the public. By the time the effects are sufficiently apparent to prompt public demands for political action, it will almost certainly be too late. The characteristics of the climate problem undermine citizen mobilization and paralyze policy makers.

 

In a future post, we will explore the potential for social movements, especially a youth movement, to overcome the climate apathy of the general public.

 

3. Climate fatalism can be effectively countered. One potentially debilitating threat to political mobilization is the idea that the climate challenge is just too formidable – that no matter what we do, “we are doomed,” and thus costly, aggressive action on greenhouse gases is futile. One way to counter this belief is to raise awareness about existing studies on the technical feasibility and costs of mitigating climate change. Most of the analyses of the costs of deep cuts in emissions, including the Stern Report, the 2007 IPCC report, and Jaccard’s Sustainable Fossil Fuels show that deep cuts are technically feasible and won’t bankrupt the economy. The Stern Report estimates that achieving 80% reductions will cost about 1% of GDP. Jaccard argues that carbon emissions can be eliminated from the energy system by increasing the percent of the average household budget from 6% to 10% (p. 316). Careful projections of the costs of transforming the energy system suggest that addressing the climate challenge is both feasible and affordable – hardly the end of civilization as we know it suggested by “peak oil” advocates.

 

In a future post, we will provide an overview of the current evidence on the economic impacts of deep cuts in greenhouse gases.

 

4. The distributional impacts of higher energy prices need to be addressed. Another threat to the legitimacy of aggressive action on climate change is the distributional impact of the resulting increase in energy and related prices. Distributional issues across nations, especially between developed and developing nations, are probably the single greatest obstacle to an effective global agreement to address climate change. Even within developed countries, distributional issues between people with different income levels are also a significant political issue. While the overall economic impact of deep cuts may be modest, energy price increases will be felt disproportionately by lower income groups for whom energy costs are a higher fraction of household budgets. Finally, addressing the economic impact on particular sectors that are affected by the transition away from greenhouse-gas intensive activities will also be a political challenge. If these distributional issues cannot be addressed, the legitimacy of climate action policies will be undermined.

 

A future post will provide an overview of mechanisms available to address the distributional consequences of raising energy prices to address climate change.

 

We welcome your feedback idea on this overall conceptualization, or any of the parts we propose to address.

 

Posted in Climate Action Policy | Leave a comment

The “California Effect” on Canadian Energy and Climate Policies

Posted on July 6, 2009 by admin

George Hoberg and Gordon McCullough

Canada is increasingly recognized as a laggard on policies designed to mitigate climate change. Recently, the Canadian government has been scrambling to respond to regulatory initiatives emanating from south of the border. The actions of California, the largest American state, seem to be having particularly powerful effects on the Canadian regulatory agenda.arnold-harper

These pressures seem somewhat ironic, given the persistent concern of environmental groups that trade liberalization creates downward pressure on environmental policies.  This critique assumes that with increased exposure to international trade, domestic governments will try to give their firms a competitive advantage by reducing regulatory costs, creating a regulatory chill that promotes a race to the bottom.

A Race to the Top? The California Effect

Researchers have identified a competing phenomenon, arguing that it can be in the strategic interest of governments and firms in heavily regulated markets to promote comparable standards for less regulated competitors. Instead of a race to the bottom, there is a potential for upward harmonization — a “race to the top.” UC Berkeley business professor David Vogel, the most prominent exponent of this view, has labeled this phenomenon the “California effect” after the state that has led the way in a number of environmental standards and managed to pull a number of other jurisdictions along with it.

The California effect has emerged because of the state’s market size and its leadership in environmental standard setting. If the state was a nation, its economy would be ranked 8th in the world, slightly higher than Canada. Access to the California market is contingent on products being compliant with California standards, so the state’s standard setting can have a significant impact on industries selling into its gigantic market.

 

The archetypical California effect has been on automobile emission standards. Since the problem of smog in the Los Angeles basin was first linked to growing automobile use in the 1960s, California has led the way in regulating tailpipe emissions in the United States. The Clean Air Act, first enacted by the US Congress in 1963 and amended a number of times since then, has created a special exemption for California, allowing it to enact standards more rigorous than US federal standards so long as federal regulators give them permission. The history of US automobile emission regulation has been one of California adopting a standard, and then, after a delay, the federal government catching up and adopting the California standard as the national standard. Just as the federal government would catch up, California would lurch out ahead again, creating a ratcheting up effect. This dynamic spilled over into jurisdictions, as Canadian, Asian, and European automakers adopted standards similar to those in the US once their technical and economic feasibility had been demonstrated.

 

At present, this California effect seems to be pressing on Canada in both direct and indirect ways. The latest round of ratcheting up automobile emissions standards is playing out, with the Obama administration recently adopting the latest California standards, putting pressure on Canada to harmonize upward to the new, more stringent standards. A second dynamic has been created by California’s low carbon fuel standard; its primary impact is to impose costs on the Canadian oil industry. A third dynamic is created by California’s emerging renewable portfolio standard for its electrical utilities. In the case, the impact is to create the potential for new markets for Canadian electricity exports.

Auto Emissions and Efficiency Standards: Pressure on Canada to Harmonize Standards

Historically, the auto emissions standards set by California and adopted by the US federal government have had a significant impact on Canada and its own regulations (Hoberg 1991). Pressure to harmonize with the United States came in 1988 when at that point Canadian standards were “3-7 times less stringent, depending on the pollutant” (Hoberg 2002, p.273). Canada increased its standard to match the US federal level of 1990 in 1998, when during that time several states had moved beyond the US federal requirements and adopted the more stringent California standard.

The recent Obama administration’s increase to existing auto emission standards creates new pressure on Canadian standards. The new US federal policy mirrors the California clean car standard which calls for cutting global warming emissions 30 per cent by 2016. Because of the standard’s stringency, Canadian manufacturers will have to assume higher costs in order to compete in the US market. Canadian auto industry analysts have raised concerns about the economic and technical feasibility of meeting the new standards. Nonetheless, Canada’s Minister of the Environment, Jim Prentice, has acknowledged to the media that Canada will need to harmonize with the American standard. A definite advantage to a uniform North American standard is that automakers will not have to customize exports for each different state.

Low Carbon Fuel Standard: Imposing New Costs on Canada

While the new California-led auto emission standards create pressure for Canada to harmonize its standards, other California initiatives have different effects. California’s new low carbon fuel standard (LCFS) will impose new costs on the Canadian energy sector, particularly the oil sands.

 

In early 2009, the California Air Resources Board implemented a low-carbon fuel standard (LCFS) program which calls for a reduction of at least 10% (or 15 MMTCO2e) in the carbon intensity of California’s transportation fuels by 2020.  The LCFS is designed to reduce California’s dependence on petroleum while creating a market for clean transportation technology, and increase the use of alternative, low-carbon fuels.

 

The LCFS framework uses carbon intensity as its standard, which is a measure of greenhouse gas emissions per unit of fuel energy delivered. Referring specifically to the Canadian oil sands, the program defines crude oil produced from oil sands and oil shale as being “high-carbon intensive” (>15 g CO2e/MJ). The LCFS requires fuel providers to ensure that the mix of fuel they sell in California’s market meets, on average, a tightening standard for greenhouse gas emissions.

With 97% of Canada’s oil reserves located in the oil sands, significant costs would be imposed on Canadian producers to comply with the LCFS as currently proposed. It would require them to reduce upstream greenhouse gas emissions by significantly modifying current extraction technology, or implementing a carbon-capture and storage system.

The Minister of Natural Resources, in a letter addressed to the Governor of California, argues that the LCFS should assign all mainstream crude oil fuel pathways the same carbon intensity, rather than distinguish among different sources of crude oil. Canadian representatives emphasize that the overwhelming majority of greenhouse gas emissions (as much as 80%) come during fuel combustion in vehicles, and that some more conventional sources of crude oil (including California’s own heavy crude oil) are more carbon intensive. By distinguishing fuel on the basis of its origin rather than its carbon footprint, Canada argues that the California standard may violate trade obligations.

At the US federal level, the Waxman-Markey Bill, also known as “The American Clean Energy and Security Act,” initially contained a LCFS mechanism, but it was removed to increase prospects for speedy passage. Canadian reaction to removing the LCFS from the bill was positive, but concerns remain about other effects of tightening carbon policies. For example, a regional consortium p. ES-5 of eleven northeastern and mid-Atlantic states has committed to developing an LCFS that is similar to California’s.

 

While the Canadian federal government is lobbying against California’s LCFS, two Canadian provinces are in the process of adopting it. Ontario and British Columbia have both committed to the same emissions reduction of 10% by 2020.

 

As the market for low-carbon fuels increases, Canadian oil producers face increased costs of production and risks to market share.

Renewable Portfolio Standard: Creating Market Opportunities for Canada?

A third avenue of California influence on Canadian energy and climate policy might be market opportunities for lower carbon electricity. With abundant hydroelectric resources, Canadian provinces like British Columbia might be able to increase power exports.

 

In 2008, California issued an Executive Order requiring its utilities to obtain 33% of their electricity supply from renewable sources by the year 2020. Senate Bill 14 (S-14-08) is the proposed legislation that outlines the steps required to meet the standard, as well as what qualifies as a renewable source of energy.

The proposed legislation defines an eligible hydroelectric generation facility as “an existing small hydroelectric generation facility of 30 megawatts or less.” New hydroelectric facilities would not be eligible renewable energy resource if they “will cause an adverse impact on instream beneficial uses or cause a change in the volume or timing of streamflow.”

A report (pg.7) by Pacific Gas & Electric Company (PG&E) found that as of 2008, BC run-of-river hydro facilities “would not be qualified as RPS eligible resources.” With a $4-billion British Columbia/California transmission system upgrade being implemented to export energy to the state by 2016, PG&E lobbied for a change to the Senate’s exemption of certain hydroelectric projects. The amendments were rejected on the grounds that British Columbia hydroelectric projects were too large and had too many adverse effects to be considered renewable. The BC Minister of Environment criticized the hydro prohibition, arguing that BC small hydro operations undergo strict and rigorous environmental assessments and that power from BC could meet California’s needs.

31 states have some version of renewable portfolio standards. While we were unable to find an analysis of their treatment of hydroelectric power, if they are similar to California’s, Canada’s ability to become a significant “clean energy” exporter will be constrained. The climate bill going through the US Congress, the Waxman-Markey Bill, contains its own renewable portfolio standard (called a Renewable Electricity Standard) of 25% by 2025. Its current definitions of renewable would exclude any significant hydropower.

The initiatives by California and other states to reduce greenhouse gases by requiring electricity producers to rely increasingly on renewable energy sources would seem to be a golden opportunity for Canadian provinces with surplus hydropower. But the current definition of renewable in California and elsewhere are ruling out virtually all Canadian hydropower.

Even if renewable portfolio standards don’t create new opportunities for Canadian power exports, California’s size and policy innovativeness ensure developments there will have profound effects well beyond the state’s borders. Canadians on the lookout for emerging environmental policy trends should keep their eye on the Golden State.

Print Resources:

 

Hoberg, George. 1991. “Sleeping with an Elephant:  The American Influence on Canadian Environmental Regulation.” Journal of Public Policy 11: 107-131.

Hoberg, George, ed. 2002. Capacity for Choice: Canada in a New North America. Toronto: University of Toronto Press.

 

Vogel, David. 1997. “Trading Up and Governing Across: Transnational Governance and Environmental Protection.” Journal of European Public Policy 4: 556-571

 

 

Posted in Climate Action Policy, Oil Sands | 1 Comment

Early Analyses of the House Passage of Climate-Energy (Waxman-Markey) Bill

Posted on June 27, 2009 by admin

George Hoberg

 

On the evening of June 26, 2009, the US House of Representatives took the historical step of passing the first bill that would directly control greenhouse gases, by a thin margin of 219 to 212, with 8 Republicans voting for the bill and 44 Democrats, mostly from coal-dependent states, voting against it. The American Clean Energy and Security Act would use a cap and trade system to reduce greenhouse gases by 17% below 2005 levels by 2020 and 83% by midcentury.

 

Post-hoc analysis thus far has been relatively limited (the bill was passed late on a Friday as Congress was moving to a recess, and the climate policy analysis community is presumably taking a bit of a break as well).

 

The most important thing for those not intimately familiar with the US legislative process to understand is that the US Congress has two co-equal chambers, and the US Senate now needs to take up climate legislation and pass its own version. The rules in the Senate are different and more daunting – because of the threat of filibuster, you essentially need 60 votes from the 100 person Senate. Furthermore, rather than representation being based on population, as in the House, in the Senate each state gets two Senators, whether the state is as populous as California or as sparsely populated as Wyoming. As a rSenator Barbara Boxer (D-CA), Chair of the Senate Environment and Public Works Committeeesult, political opposition to climate action might be even more formidable in the Senate because farm and energy states have disproportionately more power.

 

If a climate bill is passed by the Senate, the differences between the versions from the two chambers need to be resolved in a so-called “conference committee.” The final bill needs to be derived from the versions emerging from the House and Senate. What this means is that if the Senate produces a weaker version than the House bill, the final bill will be no stronger than the House bill and will likely be weaker than it. All eyes will now thus move to California Senator Barbara Boxer, chair of the Senate Committee on Environment and Public Works which will do the heavy lifting on the bill.

 

I’ve collected what I see as the best of the early analysis here:

 

Kate Sheppard of the Grist has a great overview piece, as well as a useful overview before Friday’s passage of next steps in the Senate. The photo of the enviro dude trying to force a smile is brilliant.

 

Climate blogger Joe Romm calls it a moment to be savoured.

 

Both CQ Politics and the National Journal have good overviews of the politics of the final passage, and the CQ piece refers to upcoming Senate action.

 

The Economist has a good piece on the more problematic compromises made to get is passed, particularly the provisions to give the Agriculture Department control over defining agricultural offsets and the exemption of indirect land use change for 5 years.

 

NYT’s Dot Earth has a nice piece on the developing country perspective

 

If you are tired of vote breakdown maps and struggle with the constraints of political possibility, amuse yourself with an illiterate and hateful rant that shows up at the Daily Kos. And that was before the Minority Leader of the House, John Boehner, called the climate bill a “pile of s–t’”

 

In gathering sources I’ve relied in part on the twitter feeds of @ecopolitologist, @david_h_roberts and @kate_sheppard

Posted in Climate Action Policy | Leave a comment

Can the Oil Sands be Made Environmentally Sustainable?

Posted on June 23, 2009 by admin

oil-sands1-greened1George Hoberg and Gordon McCullough

Can the oil sands be made environmentally sustainable? Environmentalists have labeled the oil sands a source of “dirty oil” because of their considerable environmental impacts on land, water, and air. Internationally, greenhouse gas emissions have been the most significant concern about the oil sands.

One attempt to define an approach to “greening” the oil sands is a report released in April 2009 by the Canadian Energy Research Institute titled “Green Bitumen” which analyzes different alternatives to reducing carbon emissions from the oil sands. The standard for “green” oil sands used in this report is defined as the same level of greenhouse gas emissions per unit of energy as conventional oil. This standard was chosen to deflect the criticism that oil sands products are more greenhouse gas intensive than conventional oil. According to CERI, the greenhouse gas problem “is a drawback that will hinder future oil sands development.”

The Oil Sands’ Greenhouse Gas Problem

The rapid development of Alberta’s oil sands has resulted in a considerable increase in that province’s greenhouse-gas emissions. Since 1990, Alberta’s greenhouse gas emissions have increased 44%, contributing to Canada’s inability to reach Kyoto targets. With the oil sands already accounting for 5% of Canada’s greenhouse gases, there is serious concern that as oil sands development increases using current extraction methods, the greenhouse gas consequences will be unmanageable.

Currently, oil sands production produces more greenhouse gas emissions than conventional oil production because methods for extracting the bitumen, a thick, sticky form of petroleum, from the sands and upgrading the product to synthetic crude oil are very energy intensive. At present that energy is provided almost exclusively by natural gas. The natural gas is used both to create steam to separate bitumen from the sands and also as a source of hydrogen for upgrading the bitumen into synthetic crude oil.

How much more greenhouse-gas intensive oil sands are depends on how you define the product life cycle. According to a recent comprehensive study, when examining the “well to refinery gate” life cycle, producing a barrel of synthetic crude oil from the oil sands produces about 3 times more greenhouse gases than conventional oil. However, when examining the broader “well to wheels” life cycle that includes the combustion of fuel in automobiles or elsewhere, the production of synthetic crude oil from the oil sands is only 5-15% more carbon intensive than conventional oil. The difference is accounted for by the fact that the overwhelming majority (60-80%) of the carbon emitted during the fuel cycle occurs in the “vehicle use phase,” that is, combustion of refined petroleum products, mostly gasoline in automobiles.

Alternatives for reducing greenhouse gases

The CERI report analyzes the projected impacts and costs of three alternative approaches to greenhouse gas emission reductions: using nuclear power instead of natural gas as a source of steam, coal gasification combined with carbon capture and storage, and carbon capture and storage on its own.

Nuclear power could be used to fuel the extraction process by producing steam and potentially electricity. CERI assesses the potential for “small-scale nuclear facilities.” The study concluded that a nuclear facility, such as the ACR-700, could potentially produce the steam required, but the technology’s application to oil sands is “still early in development”. Of the three options, nuclear power would be the most expensive – CERI’s model projects an additional cost of $19 US/barrel. As a result, the benchmark price for oil would need to be approximately $105 US/barrel to justify this option.

The second alternative evaluated by CERI is the gasification of coal (or coke). Gasification is the process in which the coal is not burned but instead converted into a “syngas.” Syngas, some of which can actually be produced by byproducts of the oil sands process, replaces the need for natural gas. The syngas is less carbon intensive, but producing it generates large quantities of carbon, and as a result would need to be combined with carbon capture and storage. Under a gasification system combined with carbon capture and storage, achieving the “green bitumen” standard would cost an additional $13.50 US/barrel, requiring oil to be roughly $95 US/barrel to be economic.

The final alternative evaluated by CERI to transform the “dirty oil” industry into “green bitumen” is implementing a comprehensive carbon capture and storage system. The carbon capture and storage process captures carbon dioxide from gas streams emitted from development sites and stores it in reservoirs and deep rock formations permanently. The carbon capture and storage model is the most economic. It would add an additional cost of $2.25 US/barrel, requiring oil to be $85 US/barrel to be economically viable.

Policy Levers to Achieve “Green Bitumen”

Each of these alternatives would increase the costs of oil sands production, and CERI argues that the current regulatory approach does not provide sufficient incentives for firms to invest in using any of these approaches to reduce their carbon footprint. Alberta currently has a $15/ton levy for industrial producers who emit more than 100,000 tonnes, but CERI believes it would need to be about four times larger (p.47) in order to create sufficient incentives to meet the green bitumen standard.

How Green is Green Bitumen?

While this report received some media attention, it is important to note that its standard for greening the oil sands is quite limited. It is based on reducing emissions to the equivalent of conventional oil. While this would represent some progress for the oil sands and would undercut some of the “dirty oil” rhetoric, it would still involve reliance on highly carbon intensive fossil fuels with considerable greenhouse gas emissions to the atmosphere. It falls far short of the standards others have developed to eliminate or virtually eliminate greenhouse gas emissions from fossil fuels (such as that developed by Mark Jaccard in his award winning book, Sustainable Fossil Fuels, Cambridge, 2005).

The proposal to green the oil sands by increasing reliance on nuclear power has its own environmental, health, and safety risks that require careful consideration. In addition, the “dirty oil” critique by environmentalists goes beyond climate impacts to address concerns about boreal forest habitat destruction and impacts on water quantity and quality.

Bringing the greenhouse gas emissions of oil sands into line with conventional oil would represent progress, but meeting the Alberta government’s own objective of “developing the oil sands in an environmentally responsible way” requires much more. Given the planned expansion of the oil sands, their carbon emissions, even if brought in line with conventional oil, will continue to threaten Canada’s ability to achieve any meaningful greenhouse gas reduction target. Pursuing a more demanding standard for sustainability in the oil sands requires a more dramatic overhaul of regulations.

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