Carbon Tax

Alberta’s new carbon tax
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Alberta’s new carbon tax

Originally posted at Skeptical Science on December 31, 2015

http://alberta.ca/documents/climate/climate-leadership-report-to-minister.pdfOn Sunday November 22nd, 2015, Alberta’s new centre-left Premier, Rachel Notley, announced that the province would be introducing an economy-wide carbon tax priced at $30 per tonne of CO2 equivalent, to be phased in in 2016 and 2017. Observers had been expecting new efforts to mitigate emissions since Notley’s election in May 2015, but the scope and ambition of this policy took many by surprise.

Alberta, of course, is the home of the Athabasca oil sands and is one of the largest per-capita GHG emitters of any jurisdiction in the world. The new plan was nevertheless endorsed by environmental groups, First Nations and by the biggest oil companies, an extraordinary consensus that many would not have thought possible.

How was this done? I will try and explain the new policy as far as I can (the details are not all available yet), but the short answer is that a huge amount of credit is due to the panel of experts led by University of Alberta energy economist Andrew Leach and his fellow panelists. Not only did they listen to what all Albertans had to say, but they were thoughtful in framing a policy that is acceptable to almost everyone.

The background

Alberta is the wealthiest province in Canada, with a population of 4.1 million.  In 2013, greenhouse gas emissions were 267 Mt CO2 equivalent, about 65 tonnes per capita, which compares with the average for the rest of Canada of about 15 tonnes. Among US states only North Dakota and Wyoming are worse. Alberta’s fugitive emissions of methane alone amount to 29 Mt CO2e, about 7 tonnes per person, which is a little more than the average for all GHGs per-capita emissions in the world.

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B.C. lowballing fugitive methane emissions from natural gas industry

This was first published at Corporate Knights. I have added in this re-post some footnotes with details of calculations along with comments and references below the main article. I have also done a rough estimation of the emissions associated with the addition of one 18 million tonne per year LNG project (excluding end-use emissions) and the effect that this will have on BC’s emissions targets.


Photo by Jesús Rodríguez Fernández (creative commons)

The push by British Columbia to develop a new liquefied natural gas (LNG) export industry raises questions about the impact such activities would have on greenhouse gas emissions, both within the province and globally.

One of the single most important factors relates to the amount of methane and carbon dioxide that gets released into the atmosphere, either deliberately through venting or by accident as so-called fugitive emissions. Fugitive emissions are the result of valves and meters that release, by design, small quantities of gas. But they can also come from faulty equipment and from operators that fail to follow regulations.

According to the B.C. Greenhouse Gas Inventory Report 2012, there were 78,000 tonnes of fugitive methane emissions [1] from the oil and natural gas industry that year. B.C. produced 41 billion cubic metres of gas in 2012 [2]. This means about 0.28 per cent of the gas produced was released into the atmosphere [3].

By North American standards, this is a very low estimate. The U.S. Environmental Protection Agency (EPA) uses a figure of 1.5 per cent leakage [4], more than five times higher. Recent research led by the U.S. non-profit group, Environmental Defense Fund (EDF), shows that even the EPA estimates may be too low by a factor of 1.5 [5]. B.C.’s estimate, in other words, would be about one-eighth of what has been estimated for the American gas industry.
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Shell: internal carbon pricing and the limits of big oil company action on climate

Originally posted at Skeptical Science on March 24th, 2015.

Shell evaluates all of its projects using a shadow carbon tax of $40 per tonne of carbon dioxide. That’s great. But why is the company still exploring in the Arctic and busy exploiting the Alberta oil sands?

Of all of the big fossil-fuel companies, Shell has adopted perhaps the most constructive position on climate change mitigation. Recently, the company’s CEO, Ben van Buerden told an industry conference:

You cannot talk credibly about lowering emissions globally if, for example, you are slow to acknowledge climate change; if you undermine calls for an effective carbon price; and if you always descend into the ‘jobs versus environment’ argument in the public debate.

Shell employs engineer David Hone as their full-time Climate Change Advisor. Hone has written a small ebook Putting the Genie Back: 2°C Will Be Harder Than We Think, priced at just 99¢ and he writes a climate change blog that should be part of every climate-policy geek’s balanced diet.

Shell also has a position they call Vice President CO2, currently occupied by Angus Gillespie. Here’s Gillespie talking recently at Stanford on the company’s internal shadow carbon pricing strategy (hat-tip to John Mashey). It’s worth watching if only for Gillespie’s vivid example of the limitations of looking at averages. The slides can be downloaded here.

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Pipelines cause climate change, let’s talk about it

Stephen Harper’s government does not want Canadians to talk about climate change when considering the environmental impact of new pipelines to move bitumen from Alberta to foreign markets. Buried in the provisions of the Omnibus Bill C-38, the  Conservative government has placed clauses that restrict citizens’ rights to make submissions on climate change when testifying at environmental impact hearings.

We should contrast this with the consideration being given to climate change in the evaluation of the Keystone XL pipeline in the United States. In June 2013, President Barack Obama said:

“The net effects of the pipeline’s impact on the climate will be absolutely critical to deciding whether this project goes forward,”

It is astonishing that an environmental  impact considered “absolutely critical” in the US decision-making process, is not even allowed to be mentioned at hearings  within Canada.

Fortunately, this restriction is being challenged in the courts by the environmental advocacy group  ForestEthics and by author Donna Sinclair,  The legal team is being led by civil rights lawyer Clayton Ruby. He is quoted as saying:

“Through legislative changes snuck into last year’s Omnibus Budget Bill C-38, the Conservative government has undermined the democratic rights of all Canadians to speak to environmental issues that impact them,” explained Mr. Ruby. “We’re challenging the legislation because it violates fundamental free speech guarantees enshrined in the Canadian Charter of Rights and Freedoms.”

The Government may argue that climate change impacts of oil transportation projects are not relevant to National Energy Board (NEB) hearings, because these effects are not the direct and local environmental effects of the pipelines and tankers themselves. However, as noted energy economist Mark Jaccard has pointed out, building new oil infrastructure does indeed have a direct effect on climate change. Pipelines facilitate and accelerate the production and consumption of petroleum, that’s the whole point of them; connecting producers to consumers, enabling both.

As Jaccard noted, global effects like climate change are just local effects that occur everywhere.

Jaccard has submitted a sworn affidavit on behalf of ForestEthics and Donna Sinclair, which details how further development of the  Alberta oil sands will contribute to climate change. He concludes:

I understand that the NEB [National Energy Board] has refused to hear submissions about “the environmental and socio-economic effects associated with upstream activities, the development of oil sands, or the downstream use of the oil transported by the pipeline.” It is my view that the exclusion of these issues skews its regulatory assessment in favour of pipeline approval and ignores the most important costs and non-costed impacts that every responsible and honest society should be considering on behalf of people living today and in future.

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The effect of cross-border shopping on BC fuel consumption estimates

  • Since the introduction of the carbon tax in 2008, BC has achieved reductions in fuel use of 17.4% per capita and even greater reductions (18.8%) relative to the rest of Canada.
  • During this period there has been a large increase in the number of Canadian vehicles crossing the BC border into the United States , especially for day trips. It is likely that the main purpose of many of these trips was shopping.
  • The current rate of Canadians visiting the US is not unprecedented. Larger numbers of Canadians crossed the border in the 1990s.
  • Although high gasoline prices are a factor in motivating the border crossings, there were many other incentives, for example, the strong Canadian dollar, as well as cheaper dairy products, clothing and electronic goods.
  • On average, a Canadian vehicle crossed the border an additional 1.3 times per year in 2012 compared to the rate  before the introduction of the carbon tax.
  • It is estimated that 1-2% of the refined petroleum product fuel consumed in BC was purchased in the United States as a consequence of the additional cross-border travel. This amount of fuel does not therefore show up in Canadian fuel sales figures, which requires us to make small adjustments to the provincial fuel-use estimates. Nevertheless, the adjusted reduction in BC fuel use over the past four years still exceeds 15% per person per year.
  • The BC carbon tax is an effective policy that has likely substantially reduced emissions, but has not harmed the economy. It is increasingly politically popular within the province.

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Update on BC’s Effective and Popular Carbon Tax

Originally posted at Skeptical Science on July 25th, 2013

Stewart Elgie and Jessica McClay of the University of Ottawa have a peer-reviewed article in press in a special issue of the journal Canadian Public Policy. The article is summarized in the report BC’s Carbon Tax shift after five years: Results. An environmental (and economic) success story. The report can be downloaded here and is summarized here.
The results are similar to a previous report that I wrote about in the article BC’s revenue-neutral carbon tax experiment, four years on: It’s working, but updated, with one more year of data.  The new data show that the carbon tax is working even better than reported previously.
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BC’s revenue-neutral carbon tax experiment, four years on: It’s working

Originally published at Skeptical Science on June 27th, 2013

Carbon taxes get the market to tell the environmental truth. Stewart Elgie

British Columbia is the only jurisdiction in North America with a revenue-neutral carbon tax that taxes greenhouse gas emissions (GHGs) from individuals and businesses alike. The tax was announced in February 2008 and was implemented in July 2008 at a rate of $10 per tonne of CO2, rising in $5 annual increments to the current price of $30/tonne. It is designed as a revenue-neutral tax, meaning that all carbon-tax proceeds collected by the government are returned in the form of income tax cuts and rebates. The tax is now raising over C$1.2 Billion per year, about C$270 per person, and the proceeds are distributed roughly equally between personal and business tax reductions.

People on low incomes get a per-person payment of C$115 annually, and homeowners who live outside the SW of the province can get additional rebates of up to $200 annually. The personal income tax reductions are focussed on earnings below C$75,000. The allocation of carbon tax revenue has to be reported in the annual budget.

Note that the carbon tax was actually revenue-negative over its first few years. In part, this was due to the tax having a bigger effect on demand than anticipated by the government. (Rivers and Schaufele, 2012) Source of graph.

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