Climate change is the pre-eminent topic these days, especially as the conversation continues at the United Nations Conference of the Parties (COP-24) this week. The hoped-for outcome is a set of “rules” to implement Article 6[1] of the 2015 Paris Agreement, which in our view has a slim chance of success given opposition by several nations -- including Russia, the United States, Saudi Arabia, and Kuwait. To be clear, these are not rules of law but rather an agreement among countries to cooperate, something that looks to be in short supply these days.
British Columbia’s timing is impeccable, releasing its latest strategy last week — CleanBC.[2] Put simply, despite the list of activities, the foundational element of the plan is the electrification of transportation, buildings, and industry along with continuing efforts to improve energy efficiency throughout the economy. This theme is consistent with the direction espoused by International Energy Agency’s most recent World Energy Outlook,[3] even though the IEA’s scenarios for primary energy demand remain firmly rooted in extensive fossil fuel use for at least the next few decades.
British Columbia’s aspirations and intentions are laudable, if too inwardly-focused. Where we have an advantage over almost every other nation and sub-national jurisdiction in the world is our starting point — an existing >95% clean electricity system, coupled with a steep “price” on carbon via the province’s $35/tonne carbon tax. But whether we admit it or not, the results of CleanBC, should they be achieved, will have zero effect on the level, pattern, or growth of global greenhouse gas emissions[4] — after all, B.C.s annual emissions are equal to two days of emissions from China.
At the same time, the challenges of energy transformation envisaged by CleanBC are significant. They include the costs of the physical transformation of infrastructure and sectors, which are sure to impact the cost of goods and services for the average British Columbian. For example, the price of zero emissions vehicles is out of reach for many British Columbians, regardless of subsidies (which themselves require higher taxes on B.C. households and businesses). Decisions to invest in energy efficiency are not so much about the deployment of capital as an immediate cash flow issue for most businesses and home owners. Many people have a low threshold for visible, government-mandated price/cost increases, as the people of France have recently shown.
It is worth repeating that B.C. is a very small and open economy. We are not market makers but instead are price-takers and traders. A substantial portion of government revenues needed to pay for the programs and subsidies identified in CleanBC comes from the province’s merchandise exports in sectors that happen to be prone to “carbon leakage” effects.[5] But these are exactly the materials -- energy, forest products, minerals/metals, and agri-food -- demanded by the rest of world, particularly in Asia, because of the combined effects of population growth and widespread middle-class standard of living aspirations.
British Columbia has an opportunity to gain from the slow global shift to a lower GHG future, provided we can avoid our established tendencies to impose self-inflicted costs, set unrealistic targets, and substitute endless process for action.
The Business Council believes the concepts and initiatives outlined in Building a Low Carbon Economy: Industry in Action,[6] and the objectives of the MOU to establish a low-carbon industrial strategy recently signed by the Council and the province, [7] are pragmatic and can leverage B.C.’s expertise and natural endowments of energy, raw materials, and other products demanded by the world. When it comes to climate change, British Columbia can have a positive global effect, not by trimming our own infinitesimal and statistically irrelevant GHG emissions, but instead by helping emerging economies — notably China, by far the world’s largest GHG emitter — via marketing and selling the province’s relatively low greenhouse gas building materials, energy resources, minerals and metals, and food products.
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[1] https://www.carbon-mechanisms.de/en/introduction/the-paris-agreement-and-article-6/.
[2] https://cleanbc.gov.bc.ca/.
[3] International Energy Agency, World Energy Outlook 2018. https://www.iea.org/newsroom/news/2018/june/weo-2018.html.
[4] British Columbia greenhouse gases are 0.2% of global emissions.
[5] Carbon leakage refers to the situation that may occur if, for reasons of costs related to climate policies, domestic businesses were to transfer production to other countries with laxer emission constraints, or lose market share to suppliers located elsewhere. This could lead to an increase in total emissions. The risk of carbon leakage may be higher in certain energy-intensive industries.
