Crank Up The Power: Canada’s Astounding Opportunity for Success Through Electrification and Decarbonization

At a per capita emissions rate of 19.4 metric tonnes of COequivalents per person, Canada’s intensity of greenhouse gas emissions is 3-fold greater than the global average and ranks near the top among OECD countries.1,2 Canada’s oil and gas sector accounts for a disproportionally high percentage of national emissions when compare to most other advanced economies.

Under the International Energy Agency’s Sustainable Development scenario, global demand for oil should peak prior to 2025.By 2030, demand for oil is projected to decline by 10% advancing to about a 30% decline by 2030. The IEA anticipates that global demand for natural gas will increase by 10% over the next 20 years as gas replaces coal as a thermal fuel in many countries.

Given the importance of the oil and gas sector to the national economy, a simplistic assessment could lead one to conclude that continued demand for traditional energy products over the next 11 years will limit Canada’sability to control emissions. Projecting forward over the mid-term climate change mitigation period from 2030 to 2050, the Sustainable Development scenario is characterized by deep decarbonization of practices and one could express concern over the health of Canada’s economy as the global demand fortraditional energy products diminishes.

Simplistic conclusions as to impact of Canada’s oil and gas sector on short-term opportunities to cut emission and on the long-term economic outlook of the country under the Sustainable Development scenario, are erroneous and ignore the importance of Canada’s vast energy resources outside of fossil fuels. Canada is, in fact, ahead of almost all advanced economies in transitioning to a low carbon economy and is well positioned for success through cost-efficient early adoption of decarbonized practices.

Under Sustainable Development, the pillars of transition for advanced economies are near complete decarbonization of the electricity supply sector over the next 20-30 years, improved energy efficiencies across economic sectors, progressive electrification of transportation and many industrial practices, and fuel switching to zero and low carbon alternatives.

Sustainable development begins with universal access to electricity produced by zero emissions energy sources. In 2017, coal provided 45% of the world’s energy used to produce power.3 Globally, 484 g of carbon dioxide are released per kWh and this intensity of emissions is largely the result of coal combustion.3 Under the Sustainable Development scenario, this intensity of emissions is projected to decline by 86% over the next 20 years as coal power plants are phased out and replaced by zero and lower emissions options.3 This transition occurs along with a massive switch to electric vehicles and electrification of many industrial processes. With Sustainable Development, the IEA forecasts 930 million electric vehicles (equivalent tohalf of the global fleet) on the roads by 2040.3 Charging these vehicles with emissions-free electricity is an essential component of the technical pathway that limits future surface warming to well below 2°C.

In North America, a continuation of current practices will increase the demand for electricity by about 20% above current levels.3 However, with the projected improvements in the efficiency of energy and material use under the Sustainable Development scenario, the demand for power will be restricted to about an 8% increase.3 Improvements in energy efficiency will largely offset much of the higher demand coming from wide-spread electrification of transportation and industrial practices.

Canada has a competitive advantage under the Sustainable Development scenario, based on a wealth of zero-emissions, hydro, renewables, nuclear and biomass resources, along with expertise in commercial scale carbon capture and storage. With clean electricity, decarbonization of practices can be completed over a shorter time period and at minimal cost with maximum benefits. Eighty percent of Canada’s population lives in provinces that produce near zero emissions electricity. The intensity of emissions from the aggregate of power production in Ontario, Quebec, BC, Manitoba, Newfoundland and Labrador, and PEI is currently 14 g CO2/kWh.4,5 This figure is 3% of the global average and electricity production in these provinces can rightly be classified as emissions free.3 Coal and natural gas are major contributors to power supply in Alberta, Saskatchewan, New Brunswick and NovaScotia. When these emissions are averaged with zero emissions sources across the country, the net intensity of emissions from the production of electricity in Canada is 25% of the global average.3,4,5   

When compared to the challenges facing most industrialized countries, the time-frame and costs for an orderly transition to a fully decarbonized electricity grid across Canada are far less onerous. A green corridor of transmission from BC to Manitoba would facilitate the flow of zero-emissions hydro electricity to grids that are currently lacking access. This system could be supplemented with increased grid penetration by renewables. Saskatchewan has made a substantial investment in developing expertise in commercial scale capture and storage of carbon emissions from thermal power production. Conceivably, this expertise could facilitate conversion of coal-fired power plants to BioEnergy with Carbon Capture and Storage (BECCS). BECCS would function to withdraw atmospheric carbon dioxide with permanent isolation and storage in geological formations. An electricity supply mix consisting of hydro, renewables and BECCS would switch the production of electricity in Saskatchewan and Alberta from a source of significant emissions to net atmospheric drawdown of carbon dioxide. With carbon pricing in place, BECCS utilities could be paid per unit of carbon withdrawn from the atmosphere.

BC has recently updated the provincial climate action plan such that market-based systems of carbon pricing are supplemented by low-carbon fuel standards, methane reduction targets applied to the oil and gas sector, and a cap and trade system applied to quotas for automakers to sell zero emissions vehicles.6 A rebate system will be available to emissions-intensive trade exposed industries whereby carbon fees paid by these industries will be partially or wholly rebated through implementation of advanced technologies that reduce the intensity of emissions. Carbon pricing and other complimentary “technology neutral” market-based systems applied to industry and transportation will encourage electrification and fuel switching to zero and low emissions options. BC has established a year 2040 target of 100% zero emission new vehicle sales.Rather than impede the economy, BC’s aggressive and ambitious climate action is anticipated to stimulate new financial opportunities.  

The consumer that purchases an EV in Quebec or BC or otherwise switches to electrified transportation will substantially cut their personal carbon footprint. The energy efficiency and cost differentials are such that this consumer will realize at least about an 80% saving in operating an EV when compared to a conventional gas or diesel fueled vehicle.7With clean electricity, as the price of carbon goes up so does the incentive to switch to zero or low emissions options for personal transportation.

The concentration of oil and gas sector activities in Canada does not impede electrification and decarbonization of the transportation,industry and building sectors across Canada. While demand exists, oil and gas rich provinces have every right to continue with extraction and sales of product. If Canada were to “turn off the tap” on oil and gas production, demand would be met from other sources with no effect on global emissions. In Canada, under a Sustainable Development scenario, transport of traditional energy products may well warrant new pipeline construction. Twinning of the Trans Mountain pipeline could be justified provided that the economics of pricing and duration of demand are favorable, and the project meets environmental standards. Traditional energy industries must, however, contribute to the national efforts by minimizing emissions from their operations. In BC, the massive energy-intensive liquified natural gas project will be powered by GHG-free electricity rather than traditional fossil fuels.  

Within Canada, an efficient process of emissions reduction over the next 11 years will not be characterized by a uniform 30% cut in emissions from 2005 levels in each province. Ontario, Quebec, BC and Manitoba produce clean electricity and are not encumbered by a substantial portion of provincial emissions coming the oil and gas sector. The short-term abatement costs are much lower in these provinces when compared to Alberta and Saskatchewan. As such systems of carbon pricing and supplementary policies would result in market-drive fair share of burden across the country based on regional circumstance. Deeper cuts in Ontario, Quebec, BC and Manitoba would compensate for higher rates of emissions from Saskatchewan and Alberta. As the transition to complete zero-emissions electricity supply is extended across the country, additional abatement opportunities will become available in Alberta, Saskatchewan, New Brunswick and Nova Scotia. Ultimately, under a global Sustainable Development scenario, as economies decarbonize over the longer term extending to mid-century and beyond, declining demand for oil and eventually natural gas will inevitably lead to adown turn in Canada’s traditional energy sector.

References:

  1. Government of Canada. Greenhouse gas emissions. https://www.canada.ca/en/environment-climate-change/services/environmental-indicators/greenhouse-gas-emissions.html.
  2. CLIMATEWATCH. GHG emissions. https://www.climatewatchdata.org/ghg-emissions?source=31&version=1.
  3. International Energy Agency. World Energy Outlook 2018. OECD/IEA.
  4. Government of Canada. National Energy Board. https://www.neb-one.gc.ca/nrg/ntgrtd/mrkt/nrgsstmprfls/ab-eng.html.
  5. Statistics Canada. Data. Population estimates,quarterly. https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1710000901.
  6. Government of British Columbia. Clean BC.  https://www2.gov.bc.ca/assets/gov/environment/climate-change/action/cleanbc/cleanbc_2018-bc-climate-strategy.pdf.
  7. Canadian Automobile Association. Driver Costs Calculator. https://www.caa.ca/carcosts/.

The Ontario Government’s Tear Down and Replacement of the Provincial Climate Action Plan Would Increase the Target for Year 2030 Emissions by 27%

A Rollback of Ontario’s Ambition to Control Emissions Would Undermine Canada’s Ability to Meet International Obligations Under the Paris Agreement

The global pathway to limit future surface warming to well below 2°C and ideally 1.5°C above pre-industrial temperatures is dependent on transitioning the energy sector of advanced economies. The pillars of this transition are decarbonization of electricity supply, electrification of transportation and many industrial practices, fuel switching to zero and low emissions options and a substantial improvement in energy efficiencies across economic sectors. These transitions will drive down demand for fossils fuel resulting a substantial reduction in emissions from the global oil and gas sector. The Sustainable Development scenario described in the International Energy Agency’s 2018 World Energy Outlook projects a 26% decline in the global demand for oil by the 2040. A key component of this energy transition is 930 million electric vehicles, equal to half of the global fleet, on the roads by 2040.

In Canada, the oil and gas and transportation sectors are the major contributors to emissions with oil and sector activities accounting for 26% of the national total. While only 15% of Canadians live in Alberta and Saskatchewan, these oil and gas rich provinces account for nearly half of Canada’s total emissions at a per capita intensity that is 4-fold greater than the national average.


Under the Paris Agreement, Canada has pledged to reduce national emissions by 30% in the year 2030 relative to emissions on record for 2005. As is the case for almost all countries, this level of ambition is adequate must be increased if future surface warming is to be held to well below 2°C. In general, using the year 1990 as a baseline, advanced economies should target at least a 40% cut in emissions by 2030 advancing to deep decarbonization by mid-century.

While there are opportunities to cut methane emissions from upstream oil and gas sector activities, there is a practical limit as to what can be accomplished in this sector. In addition, access to zero emissions hydro, renewables and nuclear power varies across the country. The economies of Quebec, Ontario, Manitoba and BC are not overly encumbered by emissions from traditional energy resource extraction and have ready access to zero emissions energy sources to produce electricity. As such these provinces are well positioned to achieve ambitious cuts in GHG emissions. Quebec and BC have established aggressive targets of emissions reduction that are aligned with regional obligations to limit future surface to well below 2°C. BC has targeted a 40% cut in emission (relative to a 2005 baseline) while Quebec aims to reduce emissions by 37.5% using emissions on record for 1990 as a baseline.

Nationally, success in controlling emissions over the short-term mitigation period extending to 2030 would be based on low rates of emissions from Ontario, Quebec, BC and Manitoba, that would compensate for emissions associated with continued production of oil and gas in Saskatchewan and Alberta. Going forward to mid-century and beyond, global demand for fossil fuels would decline as would emissions from a declining oil and gas sector in Western Canada.

The previous government in Ontario had implemented an aggressive climate action plan that targeted a 37% cut in emissions using 1990 as a benchmark. By shutting down coal-fired power plants, and establishing a near zero emissions electricity supply sector, Ontario was (and is) well positioned to drive down emissions in the transportation, industry and buildings sectors of the provincial economy. A well-designed plan in Ontario, could readily meet regional obligations and match the level of ambition contained in the climate action plans of Quebec and BC.

The new government of Ontario has chosen to cancel the cap and trade program and otherwise dismantle what would have been an effective set of climate policies put in place by the previous government. The revised target year 2030 emissions reduction target is a staggering 27% higher that the target put forward by the previous government. In the absence of economy-wide market-based carbon pricing all that remains is an Output Based Allocations system of carbon pricing/trading that would apply to companies in select industries, a collection of poorly defined “command and control” regulatory policies and a “Carbon Trust Fund” whereby businesses are paid to take on emissions reduction projects. Canada’s Ecofiscal Commission has reviewed the new plan; however, this assessment is limited by the lack of detail and transparency in the information provided by the government. In their assessment, the Ecofiscal Commission concludes:

“It’s not clear that the plan will even get Ontario to its new, less ambitious target. There’s no transparency on how the emission reduction numbers were developed. The plan provides little detail on what the proposed policies will look like, how they might interact with each other, or what kind of technological and behavioural change they assume. As it stands, it is not clear that Ontario can reach its new 2030 target with this plan.”
Canada’s Ecofiscal Commission. https://ecofiscal.ca/2018/11/29/air-look-ontarios-new-climate-policy/.

The new government in Ontario has simply set a year 2030 target to reduce emissions that matched Canada’s pledge under the Paris Agreement and then fashioned a set of outcomes that add up to this number. In reality, a 27% increase in the year 2030 emissions target is grossly irresponsible and does not begin to acknowledge the opportunity, and indeed the obligation, for Ontario to fully contribute to the national and international effort.

In the absence of carbon pricing as part of an effective climate action plan in Ontario, it is doubtful that Canada would be able to meet international commitments under the Paris Agreement. As it stands, Ontario’s token gesture of a revised climate action plan does not satisfy the minimal criteria specified in the Pan Canadian Framework on Clean Growth and Climate Change. However, under the PCF, the carbon fee and dividend along with other policies within the Greenhouse Gas Pollution Pricing Act are to be implemented within non-compliant provinces. Ontario has filed for intervenor status on behalf of the province of Saskatchewan in the court challenge to the GGPPA. Legal opinion suggests this challenge will not be upheld. Assuming that the court challenge fails, the Federal government will step in and provide the necessary leadership on climate policy that is currently lacking in Ontario.

International Energy Agency 2018 World Energy Outlook: Sustainable Development with Well Below 2 C in Surface Warming

There is No Moral or Economic Justification for Inaction

The 2018 World Energy Outlook published by the International Energy Agency projects energy demands, supplies and costs under scenarios of a continuation of Current Policies, a New Policies scenario that incorporates commitments made by countries under the Paris Agreement as Nationally Determined Contributions, and a Sustainable Development scenario that would limit future surface warming to well below 2°C. The analysis projects radical differences, between scenarios, in the demand for oil and coal and in the expenditures required to meet this demand. Under the Current Policies scenario, world demand for oil is projected to increase by 27% by the year 2040. In marked contrast, under the New Policies scenario, year 2040 demand for oil is projected to be 12% greater than current levels. If, however, global ambitions to curtail future greenhouse gas emissions were aligned with the Sustainable Development scenario, world demand for oil would decline by an estimated 26% and the demand for coal would drop by 57% over the next 21 years. A year 2040 crude oil price of $137 (2017 $/barrel) is projected under the Current Policies scenario. This price is double the projection for future oil price under the low demand Sustainable Development scenario.

Declining demand under the Sustainable Development scenario would follow implementation of carbon pricing and other policies leading to improved energy efficiencies, fuel switching to low and zero emissions options and widespread electrification of practices within the industry and transportation sectors. Under Sustainable Development, the IEA anticipates a massive transition to electric vehicles such that by 2040 half of the global passenger car fleet would be electric. In addition, the IEA projects a 40% improvement in the fuel efficiency of vehicles propelled by conventional gasoline and diesel fuels.
The IEA projects massive differences in the cost of developing future supplies of oil under the three scenarios. A continuation of current policies will require an investment of over $25 trillion to develop oil and gas supplies over the next 21 years. In contrast, under Sustainable Development, the costs of meeting future demands are cut by almost 50%. This savings in cost equates to 15% of global GDP in 2017.

The IEA estimates that the cost savings with much lower demand for oil would largely offset the necessary investment in renewables, electricity networks and energy efficiencies. Under the Sustainable Development scenario, energy related greenhouse gas emissions would drop by 46% and the United Nations Sustainability Goal of universal access to electricity and clean cooking would be achieved. Improved indoor and outdoor air quality would result in an estimated 3 million fewer early deaths from air pollution.

A recent Stanford University study (Burke, et. al. 2018, Nature. 557:549) modelled the effect various scenarios of future surface warming on global GPD by the end of the century. As is well documented, a continuation of current policies would impose the extreme costs and hardships of unmitigated climate change on future generations. However, if future surface warming were limited to 1.7-1.8°C above pre-industrial temperatures, the scale of damage would be diminished such that global GDP would be 10-20% higher than estimates based on 3-4°C of surface warming.

The net benefits of progressive decarbonization of practices are obvious and the costs of transition can be readily managed through the implementation of carbon pricing and other policies within well designed climate action plans. There is no moral or economic justification for inaction. All that is required is political will to implement effective climate policies among the current generation of decision makers.

A Rollback of Policies to Limit Deforestation in the Brazilian Amazon Would Seriously Undermine the Gobal Effort to Mitigate Climate Change

Certified Zero Deforestation: An Effective Response to a Global Threat

“With most of the Amazon under his control, few national leaders will have more power to harm or help the world’s fight against climate change than Bolsonaro.”                                               Climate Home News (Oct 29, 2018)

In 2004, at the peak of deforestation of the Brazilian Amazon, 27,772 square kilometers of forests were cleared. Emissions from the narrow sector of land use change and forestry in Brazil accounted for 2.8% of global greenhouse gas emissions at the height of deforestation. The total area of the Amazon has declined by 19% since the beginnings of mass deforestation in the 1970s.1

Since 2004, national programs to preserve the Brazilian Amazon have led to a 76% drop in deforestation rates and cut emissions from land use change and forestry by 72%.2 Clearly, efforts to curtail deforestation in Brazil have been successful and Brazil is a world leader in advancing programs of Reducing Emissions from Deforestation and Degradation (REDD). This work is ongoing and REDD programs in the Amazon and around the world must continue to advance.

Forested areas in South America contain 33% of the global total of forest sequestered carbon.3 Rainforests have by far the highest density of carbon stock per unit of land area. Ultimately, climate change mitigation will require a transition from deforestation to programs of reforestation and afforestation in the Amazon and other areas on earth. Re-establishing and even extending the original area of the Amazon rainforest is vitally important to transition global forests from a source of emissions to net carbon dioxide withdrawal. Atmospheric carbon dioxide withdrawal via natural systems is viewed as an absolute requirement if future surface warming is to be limited to well below 2°C.

There are valid arguments that advanced economies have not stepped up with adequate levels of support for REDD programs in Brazil and other tropical rainforest countries. Norway has committed $1 billion to Amazon Fund based on Brazil achieving targets for emissions reduction from the forestry sector.4 REDD programs are among the most-cost effective avenues of emissions reductions and there are mechanisms under the Paris agreement that would facilitate the flow of carbon offsets in exchange for investment into REDD programs that achieve verified emissions curtailments.

Brazil is not dependent upon an expansion of pasturelands into the Amazon for continued success as a producer of agriculture commodities. Pastureland recovery, restoration of agricultural lands and integrated systems of livestock-crop-forest land use are examples of programs that can increase the density of agriculture productivity and cut greenhouse gas emissions while maintaining forested areas.5

This brings us to the recent election of Jair Bolsonaro as the President of Brazil. Mr. Bolsonaro has threatened to rollback important climate, environmental and social polices in Brazil that have served to limit deforestation and exploitation of the Amazon.6 The election of Mr. Bolsonaro may well be among the more urgent items on the global agenda for combating climate. Mr. Bolsonaro has promised to eliminate the Ministry of the Environment which is responsible for policing illegal deforestation and logging activities in the Amazon and transfer these responsibilities to the Ministry of Agriculture.6 The Ministry of Agriculture is largely controlled by the “Beef Caucus” which consists of a group of politicians that are opposed to land conservation measures and advocate for an expansion of agricultural lands.6 In essence, under the leadership of Jair Bolsonaro, the Amazon could be re-opened for exploitation and resource extraction without consequence. Historically pastureland expansion has accounted for 80% of deforestation in the Amazon.7 A “wild-west” of unrestricted mining and logging operations along with an expansion of pastureland could re-establish dangerous rates of deforestation.

Mismanagement of the Amazon by the Brazil government will have global consequences and will contribute to a future whereby the extreme costs and hardships of unmitigated climate damage will be imposed on all nations. With an increase in the global level of ambition to combat climate change comes a responsibility for advanced economies to contribute to the efforts of developing countries to limit deforestation and degradation of forests. The international community is also obliged to impose economic and political pressure on rogue nations intent on following practices that would exploit and diminish vital natural ecosystems.

Brazil’s economy is highly dependent upon on the export of commodities with the majority of products destined for China. A coordinated international effort supported by China could react to evidence of deforestation by imposing sanctions and tariffs designed to impact the Brazilian economy. The international community could demand that Brazil implement a framework of risk-based due diligence applied to the agriculture supply chain. Measures to trace supply chains, such as electronic tagging of cows at birth, could identify products coming from practices that are damaging and unsustainable.8 The private sector, both domestically and internationally, could suspend contracts with suppliers of beef raised on deforested lands. Consumers could demand that Brazilian products are certified as “zero deforestation”.

Within advanced economies, there is little appetite for products associated with deforestation or exploitation of the Amazon. A quick international response to the Mr. Bolsonaro’s stated intensions to deregulate land use would send a strong message that these actions would be detrimental to the Brazilian economy. Mr. Bolsonaro and members of the “Beef Caucus” may not understand climate change and the impacts of unregulated deforestation. These politicians apparently view the Amazon as a resource that can be exploited for short-term profits. The message must be sent by governments, and by private sector companies and consumers (domestically and internationally) that it will be highly unprofitable to roll back policies that protect the Amazon.

References
1. https://rainforests.mongabay.com/amazon/deforestation_calculations.html
2. http://cait.wri.org/
3. https://www.uncclearn.org/sites/default/files/inventory/a-i4793e.pdf
4. ttps://www.edf.org/sites/default/files/10438_Brazil_national_and_state_REDD_report.pdf
5. https://ccafs.cgiar.org/bigfacts/#theme=evidence-of-success&subtheme=policiesprograms&casestudy=policiesprogramsCs1
6. http://www.climatechangenews.com/2018/10/08/bolsonaro-made-grim-threats-amazon-people/
7. https://news.mongabay.com/2009/01/beef-drives-80-of-amazon-deforestation/
8. https://news.mongabay.com/2018/11/deforestation-linked-brazilian-beef-still-flowing-into-international-markets-report/

Prairie Resilience: A Token Gesture of a Climate Action Plan

After a summer of raging wildfires, air quality alerts and scorching temperatures across much of Canada, the government of Saskatchewan has added further details to what is now a long-delayed plan to cut greenhouse gas emissions. The announcement by Environment Minister Dustin Duncan of a flexible, hybrid carbon pricing/emissions allowance trading system provides some measure of control over emissions from heavy industry. However, these industries account for only 10% of provincial emissions and, if successful, the system would result in about a 1% cut in provincial emissions.

With this announcement, the government has confirmed that Prairie Resilience: A Made in Saskatchewan Climate Change Strategy will go forward. Within the plan is a commitment to reduce methane emissions from upstream oil and gas sector activities by 40%. In addition, grid penetration by renewables (wind, solar and hydro) will increase such that these zero emissions energy sources will account for 50% of power production by 2030.

The government of Saskatchewan champions the role of innovation in combatting climate change. Without doubt, Saskatchewan has made an important contribution in advancing commercial scale carbon capture and storage technology. CCS will be applied to various industrial processes as economies progressively decarbonize over the next 40 years. However, the application of CCS to coal-fired power plants is misplaced and this option for the production of electricity is unlikely to compete with 0 emissions alternatives. The $1.2 billion investment in CCS at Boundary Dam will cut provincial emissions by only 0.7% annually. Due to cost considerations, plans to replicate CCS at other coal-fired facilities in the province have been shelved.

In assessing provincial emissions, the government points to the contribution of agricultural soils. Indeed, zero-till farming practices in Saskatchewan have transitioned agricultural soils from a source of emissions to active withdrawal of atmospheric carbon dioxide. In 2015, 11.4 million tonnes of CO2 were sequestered by the farmlands in Saskatchewan. However, this soil uptake of carbon balances emissions that took place over many decades of earlier farming practices. Further, soil carbon sinks were in place by 2005 and must be included in calculating baseline emissions if they are to be used in developing targets for controlling future emissions.

Current annual emissions in Saskatchewan, approximate 67 tonnes of carbon dioxide equivalents per person. This level of per capita emissions is over 3-fold greater than the national average and among the highest in the world. Extensive agriculture and oil and gas sector activities along with a continued reliance on coal-fired power plants are the major contributors to the high rates of emissions from Saskatchewan. In the absence of climate policies, the government estimates that annual emissions would increase from 69 to 81 million tonnes between 2005 and 2030. With the implementation of Saskatchewan’s climate action plan, projections for year 2030 emissions are similar to emissions on record for the 2005 and Saskatchewan would fall well short of regional obligations to contribute to the national efforts to combat climate change. Under the Paris agreement, Canada has committed to cut year 2030 emissions by at least 30% relative to emissions on record for 2005.

Saskatchewan has an opportunity to implement a more ambitious climate action plan. In contrast to the government’s stated opinion, the majority of economists and a growing list of large corporations, including the conventional energy giants Shell, ExxonMobil and BP, are strong proponents of carbon pricing mechanisms. By putting a price on greenhouse gas pollution, consumers and industry are incentivised to change practices to more efficient, lower cost, lower emissions options.

BC’s revenue neutral carbon fee was initiated in 2008. Relative to the 2005 baseline, gasoline sales per person in BC have dropped by 10% and emissions have declined by 5%. Carbon fee revenues are recycled back into the economy via cuts in other taxes such that the net effect of the tax shift has been beneficial to tax payers. BC’s GDP has grown by 21% since 2005 and the carbon tax has had little to no discernible effect on the economic performance. Over the same time period, in the absence of meaningful climate policies, per person gasoline sales in Saskatchewan have increased by 16% and provincial emission went up 10%.

Saskatchewan could commit to a phase out of coal-fired power plants by 2030 and could implement an economy-wide carbon pricing system. A gradual transition to a low carbon economy could be managed by promoting growth in new industries. Saskatchewan’s long history of innovation in agriculture should invaluable given the importance of land use, efficient food production and the role of biomass in a decarbonized future.

Committing to an ambitious climate action plan that transitions consumer and industry practices to low carbon alternatives requires visionary political leadership that thinks beyond the constraints of short-term electoral cycles and the temporary inconvenience of higher fossil fuel prices. Strong leadership is required if we are to avoid imposing the severe costs and damages of unchecked climate change on future generations.

Data sources: Statistics Canada, Canada’s National Greenhouse Gas Inventory, Pan-Canadian Framework on Clean Growth and Climate Change, Climate Leadership Council, Government of Saskatchewan White Paper on Climate Change, and Prairie Resilience: A Made-in-Saskatchewan Climate Change Strategy.

Carbon Pricing in BC – It Works: The How and Why this is Important to Canada’s Efforts to Combat Climate Change

The searing temperatures across much of Canada and raging wildfires in BC that characterized the summer of 2018 could be a harbinger of the upcoming heated political debate on the role of carbon pricing within national and provincial climate action plans. The issue of implementation of the Liberal government’s Pan Canadian Framework on Clean Growth and Climate Change may well emerge as the central issue in next year’s federal election.

In Canada, the majority of politicians on the right of the political spectrum oppose carbon pricing. Carbon taxes and emissions trading systems are often criticized as costly and ineffective in reducing emissions. Opponents of carbon pricing raise concerns that an increase in the costs of emissions intensive fuels and practices will place an unfair burden on industry and consumers and that industry and jobs will be motivated to relocate to more “business friendly” jurisdictions without carbon pricing.

This brings us to the real-world experience with carbon pricing in British Columbia. In 2008, BC introduced North America’s first broad based carbon tax. The tax applies to fossil fuel purchase and use and covers approximately 70% of provincial emissions. As of April 1st, 2018, BC’s carbon tax is $35 per tonne of CO2. This price will increase at annual increments of $5 arriving at $50 per tonne by 2021. BC’s carbon tax is revenue neutral and is offset by cuts in other taxes. At the current level, the carbon tax adds ¢7.78 per litre to the cost of gasoline and ¢8.95 per litre to the cost of diesel fuel. Since inception of the carbon tax, consumption of all fuels has declined by 17.4% per capita and declining combustion of fossil fuels has been a major contributor to the 5% curtailment of provincial greenhouse gas emissions since 2007. In 2016, per capita greenhouse gas emissions in BC were 12.6 metric tonnes of carbon dioxide per person. This rate of emissions was 35% below the national average. Imposition of a carbon tax in BC has had little, if any, discernible effect on economic performance. BC’s GDP increased by 21% between 2007 and 2016 and this rate of economic growth exceeded the national rate by nearly 6%. Overall, cuts to income and other taxes were such that the aggregate effect of the revenue neutral carbon tax has been a net benefit to tax payers in BC.

The BC experiment with carbon pricing is now in its 10th year and performance data from 2017 and 2018 will continue to emerge. The real-world experience with revenue neutral carbon pricing in BC supports the models developed by economists and other experts in climate policy as to the efficacy and cost effectiveness of carbon pricing.

Over the past 10 years a much different scenario of fuel use and greenhouse gas pollution has transpired in Saskatchewan. Saskatchewan has yet to enact meaningful climate change legislation and is stridently opposed to the implementation of economy wide carbon pricing. Since 2007, greenhouse gas emissions from Saskatchewan have increased by 8.5% and net sales of gasoline has gone up by nearly 30%. The per capita annual rate of greenhouse gas emissions in Saskatchewan is among highest in the world and at 67 tonnes per person is over 5-fold greater than the rate of emissions from BC. Emissions from an expanded fleet of light duty trucks in the province has increased by nearly 50% over the last 10 years.

Zero and very low emissions alternatives to carbon intensive fossil fuel use are becoming increasingly cost-competitive. Technical advances in the transportation sector are such that electric vehicles are beginning to approach cost parity with conventional internal combustion vehicles. Over the next 5 years, options for electric vehicles will expand to include pickup trucks and heavy-duty road vehicles. Electrification of road vehicles in conjunction with decarbonization of the electricity supply sector are core components of pathways leading to a greater than 80% cut in emissions within advanced economies by mid-century. Well designed climate action plans contain carbon pricing and other policies that function to accelerate these transitions.

Ultimately, Canada must target a 30-40% cut in emissions by 2030, progressing to deep decarbonization by mid-century if we are to meet our regional obligations under the Paris Agreement. During this transition, new economic opportunities will evolve as energy use shifts away from fossil fuels to low and zero emissions alternatives. Job opportunities and economic growth in emerging sectors are projected to offset and may well exceed the inevitable downturn in traditional energy sectors.

The Pan Canadian Framework on Clean Growth and Climate Change is designed as a stop gap measure that will be imposed on provinces that fail to implement effective climate action plans. In the absence of economy-wide carbon pricing mechanisms, these plans are dependent on a complex web of non-market policies that are unlikely to adequately drive changes in consumer and industrial practices to lower emissions options. An opposition to carbon pricing mechanisms is an opposition to meeting Canada’s international obligation under the Paris Agreement. Canada can either commit to a pathway of progressive decarbonization or continue to follow business as usual practices and fail to contribute to the global effort to avoid the extreme costs and hardships of unmitigated climate change. Future generations may well look back on the 2019 federal election as a defining point for the nation.

Data sources:
1. Statistics Canada. https://www150.statcan.gc.ca/n1/en/type/data
2. Government of British Colombia. https://www2.gov.bc.ca/gov/content/environment/climate-change/planning-and action/carbon-tax.

 

The Root Cause of Canada’s Upcoming “War on Carbon Pricing” is a Failure of Leadership Within the Governments of Saskatchewan and Ontario

The recent show of solidarity between Ontario premier Doug Ford and Saskatchewan’s Scott Moe in opposing the federal government’s carbon pricing backstop provision within the Pan Canadian Framework on Clean Growth and Climate Change can only be ascribed to either ignorance as to the design of effective climate action plans or outright climate change denial.

Mr. Moe and Mr. Ford are of the opinion, that carbon pricing is costly and ineffective in reducing greenhouse gas emissions. This position flies against the conclusions and recommendations of climate economists, leading climate policy organizations, and a growing number of major corporations. The Intergovernmental Panel on Climate Change and the World Bank are strong proponents of carbon pricing. On the business side, the traditional energy giants, Shell and BP, are among the corporate founders of the Climate Leadership Council. CLC advocates for immediate imposition of a carbon levy of $40 US per tonne of CO2 that would be applied to fossil fuels at the mine, wellhead or port of entry.

Real world experience with the longest serving carbon pricing systems allows for an assessment of costs and benefits. In California, between 2000 and 2016, greenhouse gas emissions declined by 9% while GDP grew by 37%. California hit the 2020 target for emissions reduction four years ahead of schedule and is well positioned to achieve at least a 40% cut by 2030. California’s cap and trade system covers 85% of emissions and has been instrumental in incentivizing a progressive transition to lower emissions options. Greenhouse gas emissions from the aggregate of countries of the European Union have declined by 19% relative to emissions on record for the year 1990 and these substantial cuts were accomplished without significant economic costs. The long-standing EU cap and trade system covers 45% of total emissions and has been an important economic driver of declining emissions. BC’s revenue-neutral carbon tax was introduced in 2008 and currently sits at $30 per tonne of CO2. A detailed study by economists at Duke University and the University of Ottawa concluded that the tax has lead to a 5-15% cut in emissions relative to projections in the absence of carbon pricing. The study concluded that reducing emissions in BC through carbon taxation had a “negligible effect on aggregate economic performance”.

Economy-wide carbon pricing mechanisms are the core components of effective climate action plans. By establishing a price on pollution, innovation is incentivized, as are changes in consumer and industrial practice to lower cost, lower emissions options. In the absence of carbon pricing, governments are faced with the challenge of attempting to pick winners and losers in policy development. The net result in a complex web of policies that come at a higher cost by ignoring the efficiencies of the market place.

The, now defunct, cap and trade system in Ontario was linked to the California system and was the core component of what would have been a cost-effective climate action plan designed to achieve a 37% cut in emissions by 2030. Mr. Ford’s reckless cancellation of the cap and trade system along with other components of the Ontario’s climate action plan has transpired without any indications of how and when these policies could be replaced.

In Saskatchewan, the government has released a document that describes a potential climate action plan. In “Prairie Resilience: A Made-in-Saskatchewan Climate Change Strategy”, a hybrid carbon pricing/trading system of emissions allowances applied to some industries is discussed; however, there is no mention of emissions reductions that could be achieved through implementation of the system. The document describes policies to increase the use of renewable energy sources and to cut methane emissions from upstream oil and gas sector activities by 40-45% as required to comply with federal regulations. Together, these measures are projected to cut emissions by 11 million tonnes per year. However, the plan does not contain provisions for economy wide carbon pricing, no time lines for the shut down of coal power plants are provided, and there is no mention of targets to cut total emissions from the province. Using the government’s own estimates, with implementation of the electricity and oil and gas sector policies, net emissions for the year 2030 would be similar to emissions on record for 2005. Based on available information, Saskatchewan’s proposed climate action plan would not begin to approach any concept of a fair share regional contribution to the national effort.

Nationally, Canada has committed to achieving a 30% reduction in greenhouse gas emissions by 2030. Realistically, emissions reduction would not be uniform across the country. In the near term, demand for traditional fossil fuel products will continue and per capita emissions from the oil and gas rich provinces of Saskatchewan and Alberta will grossly exceed that of other provinces. Under a successful Canadian climate action plan that extends to 2030, the excess in emissions from Saskatchewan and Alberta would be balanced by deeper cuts in other provinces. In no way does this absolve Saskatchewan’s responsibility to follow the lead of Alberta and implement an effective climate action plan that includes economy-wide carbon pricing.

To be clear, carbon pricing will lead to higher costs for emissions intensive use of fossil fuel products including gasoline. Emissions are costly and should be priced as such. However, these costs can be largely offset by revenue recycling through cuts in other taxes or rebates to consumers, industry and farmers.

Underneath the surface of grandstanding and rhetoric against carbon pricing, is a preference for inaction and preservation of business as usual practices. Legal opinion suggests that Saskatchewan’s court case against the federal carbon price is unlikely to succeed. The real game on the part of the Saskatchewan and Ontario governments is to prolong inaction on climate change and extend the “war on carbon pricing” into the timeframe of the next federal election. This sad state-of-affairs can only be described as a failure in political leadership to recognize the reality of climate change and the need to implement significant measures to curtail emissions such that the current generation of decision makers does not impose the extreme costs and hardships of severe climate damage on future generations.

At a time when all levels of government should be working together to develop effective climate action plans, the governments of Saskatchewan and Ontario have chosen to follow an alternate, confrontational agenda. This agenda may well undermine Canada’s ability to meet our international obligations under the Paris agreement.

Burn the Money: The Grossly Misleading Saskatchewan Government Report on the Cost of a Carbon Tax

Recently, the Government of Saskatchewan in conjunction with the Institute for Energy, Environment and Sustainable Communities at the University of Regina released a grossly misleading, seriously flawed study on the impact of implementing a carbon tax on the provincial economy. Based on this report, the government has attempted to justify it’s position that carbon pricing in Saskatchewan would be overly costly while accomplishing little to reduce greenhouse gas emissions. These conclusions contrast the vast body of serious academic studies and the accumulating global evidence from existing carbon pricing systems as to the cost and effectiveness of applying a price to pollution.
A recent study from Stanford University estimates that the cost of damage from extreme weather events, sea level rise, loss of agricultural productivity and other outcomes of 2.5-3°C in global warming will reduce end of century per capita global economic output by 15-25%. With a 4°C increase in temperatures, economic performance is projected to drop by more than 30%. Inadequate action on our part over the next 20-30 years to combat climate change will impose extreme costs and hardships on future generations. A Yale University study estimates a 4.25% annual rate of return on investment in climate action plans designed to effectively mitigate future climate damage. Simply put, investing in effective climate action plans in not only an obligation to future generations but an exercise in common-sense economics.

A properly designed economic analysis on the impact of carbon pricing will include a cost/benefit analysis. However, the analysis employed in the Saskatchewan government-funded report does not consider the benefits of mitigating climate change. Further, the analysis is restricted to 3 scenarios that do not begin to approach the cost efficiencies of a well-designed climate action plan. In 2 of the scenarios no consideration of redistribution of carbon fees is considered. Under these scenarios, the revenues from carbon fees simply vanish. The third scenario assumes that revenues are distributed to households without provisions for refunds to industry or any other considerations. This scenario is less costly than the “burn the money” scenarios but is far from an ideal plan tailored to the specifics of Saskatchewan’s economy.

A well-designed made in Saskatchewan climate action plan would be based on a combination of carbon pricing mechanisms and policies adapted to the specific circumstances of the provincial economy. The Saskatchewan government correctly points out that the relative contribution of emissions intensive trade exposed industries to the provincial economy is greater than is the case for Ontario or Quebec. These industries can be protected through the implementation of a hybrid carbon pricing/trading system of output-based trading allowances. This would be supplemented by additional carbon fees and policies with targeted exemptions. In a revenue neutral system, carbon fees would be distributed to households, farmers and industry using formulas designed specifically to fit the specifics of the economy of the province.

Canada’s Ecofiscal Commission concludes that carbon pricing with well-designed systems of revenue recycling will be effective in reducing emissions without significant impacts on the Canadian economy. Actual net costs extending to the year 2032 are within the margin of error in predicting future GDP growth rates.

Rather than assessing a well-designed Saskatchewan-specific program of carbon pricing and climate policies, the study focuses on absurd scenarios that ignore revenues from carbon fees or at best restrict revenue recycling to households and thus fail to support industry. Not surprisingly, based on this report, one can conclude that it is costly and inappropriate to burn the money of the people of Saskatchewan. The government should consider a responsible alternative and burn what is a grossly misleading, incomplete, and biased report on the costs of carbon pricing to the Saskatchewan economy.

Dramatic Difference in Damage Potential of Climate Change by Region in the U.S.

Damage function is the technical term used by economists in assessing the effects of weather-driven damages to the economic performance of a given region. With advances in the predictive capabilities of models of climate change, it is now possible to estimated economic impacts with increasing precision and refinement by region. A recent study in the U.S. modelled the future potential for weather driven damages to agriculture, crime, health, energy demand, labor and coastal communities and then predicted the overall effect on GDP by county in the U.S.

Near the end of the century, future costs of climate change damage are estimated at 1.2% of GDP for each degree C of average global surface warming above pre-industrial temperatures. A business as usual scenario of unabated emissions will result in about 5°C of surface warming at a cost to the U.S. 6% of GDP annually between 2080 and 2100.
What is perhaps more striking than the overall costs, is the extreme variation in the impacts of climate change between regions. Counties in southern states are at considerably greater risk with projected costs generally in the range of 10-30% of GDP. This contrasts with several northern states that are predicted to experience a net benefit from changing weather patterns based on longer, warmer growing seasons and thus greater production from agriculture and other savings associated with shorter winters. Ironically, political indifference to climate change tends to be concentrated in the most at risk regions of the U.S.

As the predictive models for the impacts of changing weather patterns continues to be refined, there is a tendency to focus attention on local risks and needs for adaptations. In northern, in-land regions of North America, Europe and Asia, effective adaptations could minimize risks and costs associated with changing weather patterns. In some regions, successful adaptations could lead to net economic benefits.

However, a focus on local vulnerabilities ignores the broader global reality. The situation of disproportionate damage potential between southern and norther regions in the U.S. is magnified on the global scale. Africa, small islands, coastal populations and lower latitude regions are the most climate vulnerable, at risk regions on earth. The magnitude of the damage potential in climate vulnerable countries, grossly exceeds any possible benefit that could occur within higher latitude, in-land regions of the globe.

Greenhouse gases are well mixed in the atmosphere. Under a business as usual scenario of an indefinite continuation of current practices, emissions from a coal burning power plant in Saskatchewan will contribute to costly damage and human misery including failures of food and water supply in Nigeria while having much less of a direct impact in the prairie regions of Canada.


The moral and economic justification for progressive decarbonization of economic sectors must come from an assessment of global impacts and cannot be derailed by misplaced tendencies for cost/benefit analysis to be overly focus on local issues.

The Danger of NO Nukes

Since publication of The Price of Carbon I have been challenged by some within the environmental community as to the strongly stated position in the book that nuclear power is not only safe and sustainable but required to efficiently decarbonize power grids within the timeframe required to limit future surface warming to less than 2°C.
Without doubt, the level 7 nuclear disasters at Chernobyl and Fukushima resulted in massive and costly cleanup and remediation projects that will stretch over decades. There is no denying this reality and the need to continuously advance safety in the design of nuclear power stations and to establish safe long-term solutions to manage high-level nuclear waste.
However, a narrow focus on the potential damage of future nuclear disasters and issues of waste management often leads to the conclusion that a global shutdown of nuclear power plants and full moratorium on future builds is in order. This outcome would be lead to a catastrophic increase in the use of fossil fuels to produce electricity over the next 30 years.

There are vast regions of the planet that are lacking in sufficient biomass, hydro and geothermal options to produce electricity. Renewables in the form of wind and solar are variable energy sources and grid penetration beyond 40% of total power supply becomes largely impractical based on current technologies. In the absence of hydro and geothermal, the options for baseline power production consist of fossil fuels and nuclear power. If you remove the nuclear option, the critical decarbonization of the electricity supply sector as required over the next 30 years is likely to be impractical. Given the remaining budget of emissions under a less than 2 degrees surface warming scenario there is no luxury of time to delay decarbonization of the electricity supply sector as will happen in the absence of nuclear power.

In Japan, the post-Fukushima shut-down of nuclear power stations, resulted in a compensatory increase in fossil fuel use and an 7% increase in national emissions. Japan plans to re-introduce nuclear power to the energy mix such that nuclear would contribute 20% of the total power supply by 2030. Prior to Fukushima, Japan had planned an ambitious year 2030 low emissions energy mix of 52% nuclear, 19% renewables and 29% fossil fuels. Post Fukushima the 2030 targets have been revised to 20% nuclear, 23% renewables and 56% fossil fuels. As a result, Japan’s ambitions to curtail GHG emissions and to contribute to the global effort to combat climate change have diminished since the Fukushima disaster.

India’s latest energy plans calls for no new fossil fuel power plants to be built, beyond those already under construction, until at least 2027. The massive increase in electricity supply within India over next 9 years will be covered by zero emissions hydro, renewables and nuclear power. This program is vital to the global effort of decarbonize power supply by mid-century.

In 1975, a massive storm dropped a year’s worth on rain within a 24-hour period in the drainage area of the Ru river in China leading to the collapse of the Banqiao dam. Casualties from Banqiao dam catastrophe were estimated at 171,000 deaths and with 11 million displaced. In contrast there were 0 fatalities associated with the Fukushima disaster and the Chernobyl disaster lead to 134 cases of immediate radiation sickness with 28 confirmed deaths from acute exposure. Post Chernobyl there were another 19 deaths from cancer associated acute exposure and there were 9 deaths from thyroid cancer from exposure to radioactive iodide.

Based on a statistic of early death per unit of power production, nuclear, wind, solar and hydro (including Banqiao dam collapse) are safe methods of power production. The WHO estimates that globally there are 7 million early deaths per year due to air quality issues and coal combustion accounts for well over half of this mortality.

In describing the Banqiao dam disaster my intention is not to raise concerns over the safety of hydro power but to put the safety concerns of nuclear power into context and to illustrate the damage potential of unmitigated climate change. With unchecked emissions, and subsequent future global warming the frequency and damage potential of extreme weather events will markedly increase.

The global focus to combat climate change cannot deviate from curtailment of emissions and progressive decarbonization of economic sectors. Nuclear power has a key role in providing a zero-emissions alternative to fossil fuels to produce electricity in regions that are lacking in hydro and geothermal alternatives.

Fukushima Nuclear Disaster (0 deaths)        Bianqiao Dam Failure (171,000 deaths)