Sunday, April 15, 2012

Mining and Climate Change, Part 3: Multiple Issues with Conservative Party Approaches to Emissions Management

Is it sensible that the Conservative Party, which has embraced cutting environmental regulations and environmental assessment processes in the name of economic growth, could ever be a threat to Canada’s resource sector? On first blush, it would seem highly improbable that would be the case, but keep in mind that for the Conservative Party, not all natural resource sectors are created equally.

The Conservative Party’s policies significantly favour Canada’s fossil fuels sector over all other resource sectors. In fact, Conservative policies will actually jeopardize the important success of Canadian miners over the medium and long term. And it all has to do with carbon pricing (well, maybe not "all", as I can't help but recall the uneven and apparently arbitrary application of the "net benefit" provisions of the Investment Canada Act in the Potash Corp. matter a few years back).

Although the Conservative Party of Canada is not in any way, shape or form considering putting a price on greenhouse gas emissions, the fact of the matter is that it’s the only national political party in Canada which is opposed to carbon pricing. Given that we Canadians tend to change our national governments every so often, it stands to reason that in the near future, Canada will elect a government which finally decides to take real action to address climate change, and which will implement carbon pricing in an effort to reduce emissions.

Right now, it’s in part the Conservative’s lack of consideration for the imminent pricing of carbon emissions which is putting Canada’s mining sector at a disadvantage. The Conservatives are being very short-sighted, and that may disadvantage all industrial sectors.

Canada: On Target for Emissions Reduction?

A report issued earlier this week from Environment Canada, which Conservative Environment Minister Peter Kent has been keen to promote, indicates that Canada’s greenhouse gas emissions are beginning to level out, even as the Canadian economy has been growing. While this may sound like a good news story for those concerned about emissions, it’s really nothing to get all that excited about. If anything, the spin which the Conservatives are putting on this story is problematic, because if they themselves actually believe it, it’s going to continue to lead towards their intransigence to take real action on reducing emissions.

Let’s take a closer look behind the Conservative spin. That Canada’s emissions are “beginning to level off” tells me a couple of things. First, no one should be surprised that this is the case, given the significant efforts which the Province of Ontario has taken to shut down its coal-fired generating stations, and the significant hits taken by Ontario’s manufacturing sector due to the recession and the rising value of Canada’s currency and attendant Dutch Disease. In those respects, Ontario can almost single-handedly claim to be the green engine which has led to this so-called levelling of emissions. But that’s nothing to get excited about. While I suppose there remains room for Ontario to shed a lot more greenhouse gas emitting manufacturing jobs (which would be an absurd thing for anyone to hope for), the closing of coal plants here was a one-time only carbon-reducing gift from Ontario to Canada.

Second, Kent’s continued engagement on the climate change file tells me that the Conservative Party remains onboard at least with the idea that reducing our carbon emissions is a sensible policy objective for Canada to pursue. This may come as a surprise to many Conservative Party supporters who are also in denial about the reality of anthrogenic climate change (many of whom have their own political and economic agendas). The Conservative Party’s continued engagement on emissions reduction also probably comes as a surprise to most Canadians who have witnessed Canada’s actions on the world stage to sabotage international climate change agreements and to influence foreign governments to ramp down efforts to combat climate change. Whether the Conservative’s hearts are in it or not, however, it remains a policy of this government to reduce Canada’s emissions by 17% over 2005 levels by the year 2020.

To do so, the Conservatives have decided to embark on a slow-paced, sector-by-sector review of emissions, and to establish regulations mandating reductions. Last year, they came out with draft regulations which are intended to affect newly-built coal fired generation plants at some point in the future (which led to proposed coal plants rushing through their last planning hurdles, in order to get their plans in under the wire so as not to be affected by the new regulatory environment). This week, additional regulations were filed affecting the transportation sector. The Conservatives have also been planning on looking at the fossil fuels production sector, but this appears to be put off for now, due to aggressive lobbying from oil and gas industries.

It’s clear that creating a stronger regulatory framework for major emitters can have an impact on reducing greenhouse gases, although critics argue that it’s one of the more expensive choices available for governments to take (but who ever really thought Conservatives were good managers of public money?). There are, however, a couple of big problems with trying to reduce emissions in this way. First, they’re going to add significant costs to industrial operations. Second, given the added costs, industry may have no choice but to turn back to government with its hands out, seeking taxpayer subsidies in order to make the switch to cleaner technologies. That’s already been happening, and it’s leading to the third significant problem: the misallocation of public resources on a grand scale, for investment in an unproven and likely to be unsuccessful new technology: carbon capture and storage (CCS).

The Carbon Capture and Storage Swindle

It’s likely that the Conservative’s regulatory approach for the oil and gas sector is going to lead to an increased reliance on CCS, just as the Conservatives have mandated for coal. CCS is a completely untested technology which is going to have to be built pretty much from the ground up. It also comes with a substantial price tag. In Canada’s case, the Conservative government has already budgeted over $300 million for research and development into this new technology.

Carbon Capture and Storage relies on the idea that emissions can be caught before they leave a smoke stack, and stored underground for…well, maybe for eternity. Technically, it is possible to capture a significant amount of emissions, but it’s the storage aspect which is much more questionable. The spatial requirements for storage alone are significant, as it must either remain in gas form, or be supercooled into a liquid.

But stored carbon dioxide actually has industrial applications: it can be used in place of water to flush out bitumen from tar sands. Which is kind of ironic, in that the whole idea of capturing the stuff in the first place was to help with the overall reduction of emissions. Anyway, those with more technical understanding than me have written about the perils of CCS elsewhere. Suffice it to say that it’s an unproven technology that, based on the best accounts, won’t ever be implemented on a scale where it can actually do significant good.

Anyway, so am I suggesting that the Conservative’s reliance on regulations which lead to CCS is just a bait-and-switch which will cost the taxpayer significant amounts of money for little return? Well, if that’s all that I were suggesting, that would be bad enough. But there’s more to it than that. This is really about how good intentions addressed through bad public policy can lead to expensive white elephants which don’t actually help.

Avoiding White Elephants

We here in Sudbury have a certain familiarity with white elephant projects, just as I’m sure many other Canadians do. "White elephants" in this case refer to the investment of public dollars into projects which never really lived up to their expectations or paid for themselves. Sure, we here in Sudbury don’t have any Olympic Stadiums to brag about like they do in Montreal, but we do have the Highway 69 four-laning which is currently taking place at a cost of hundreds of millions of dollars at a time when personal vehicle travel is anticipated to decrease due to rising fuel prices. I know that may sound heretical to Sudbury’s car-cultured, but it’s the reality. A better choice for the investment of public dollars would have been in regional public transportation, but what we have instead is a provincial government which is keen to spend money on highways while downsizing and privatizing public transit in Northern Ontario.

In this Northern Ontario white elephant example, addressing transportation needs over a vast geography is the good issue, but the bad public policy stems from investment choices which don’t actually take into consideration our likely future circumstance. However, once those costs are sunk into a specific project, it becomes really difficult to turn things around. To now disinvest in four-laning Highway 69, for example, would be a politically difficult decision for a government to make, even armed with all of the data in the world necessary to show the public that the project is not necessary to meet anticipated needs. But, the environmental assessments have been bought and paid for, stretches of the highway are already complete, workers are depending on construction jobs. And the public expects the project to go forward.

Here in Sudbury, the rising price of gas has been a big issue lately. There have been calls for governments to intervene, to figure out a way to make gasoline more affordable. While I empathise with those who are concerned about price gouging on the part of gasoline companies, I’ve long believed that a better approach would have been to insulate ourselves from rising prices by investing in infrastructure which would lead our community to become less dependent on cars. But since we’ve continued to sink public investments into roads, parking lots and four-laning highways, we can continue to expect public policy which makes it easier for us to drive, despite the realities of rising energy prices which we can’t do anything about.

As an aside, the very worst thing that the provincial government could do now would be to try to regulate the price of gasoline, which is what the Ontario NDP has promised to do should they ever form government. Artificially low gasoline prices which enable people to continue to be profligate with scarce natural resources mean that we are less likely to make investments in the things which we need. With white elephants, it’s easy to pile them on top of one another, rather than looking for solutions which are truly sustainable and affordable.

OK, so what does any of this have to do with CCS? Well, CCS, which forms the backbone of the Conservative's coal-fired generating plant regulations, and which is expected to be an integral component in oil and gas sector regulations, is one of those white elephants which may lead to the imposition of even more bad public policies at significant expense to taxpayers and industries. All without any certainty that greenhouse gas emissions will actually be reduced.

As long as the Conservatives want to work with industries to develop CCS as a means of reducing emissions, taking real action on actually reducing emissions is going to be increasingly jeopardized, in spite of mounting evidence which shows CCS simply won’t work. It’s the same with Highway 69: CCS projects undoubtedly will make great photo-ops, but they will prove to be costly white elephants which do limited good.

And all of the money which our government and which private enterprise is pouring into CCS could have been more wisely and easily invested in other projects which have a proven record of actually reducing emissions.

Intensity Targets for the Tar Sands: A Potential Trap for the Mining Sector

The other problem for the mining sector is that since Big Oil appears to be calling the shots in Ottawa, and since the Conservatives have pretty much declared war on anyone and anything which might stand in the way of pedal-to-the-metal tar sands development, if CCS proves to be a flop, that means other industrial sectors are going to have to pick up the emissions reduction slack. Already Big Oil is trying to make the case that they should be exempt from all but the smallest “intensity” reductions (which aren’t actually reductions at all, just the scaling back of the rate of emissions).

Intensity reductions aren’t going to get us to the 17% below 2005 by 2020 target set by the Conservative government, because they’re not actually reductions. Yet that appears to be where Stephen Harper is taking the tar sands. Therefore, other energy-intensive industrial sectors, like the mining sector and the manufacturing sector, might actually have to contribute more than their fair share in an effort to meet reductions targets.

That may not sound like much in a loosey-goosey regulatory environment, but keep in mind that regulations can provide an industrial sector with exemptions. And if the Conservatives decide to pursue intensity reduction targets for the tar sands through regulations, it will be pitting one natural resource sector against all others. The mining industry should be looking over its shoulder right now, making sure that they’re not going to be hit with a disproportional reduction target.

Public Buy-In: Getting the Right Policy

Reducing emissions is important, and that’s why we’ve got to get the policy right. What the Conservatives are promoting in terms of wasting public money on untried technology which can’t be useful on the scale necessary to actually make a dent in emissions is problematic in the extreme. Wasteful policies, or those implemented in ways which aren’t transparent, tend to lack public buy-in, even when they do some good. The debate raging in Australia over the past few years over that government’s carbon tax is illustrative.

In Australia, Julia Gillard’s Labor Party campaigned on a platform not to introduce a carbon tax, something her Labor Party predecessor Kevin Rudd wanted to do, which led to his ousting by Gillard. After the election, it turned out that Labor didn’t have enough seats to form government without turning to a couple of independent legislators and a member of the Greens. The price for their co-operation: a revenue-neutral carbon tax. Since then, industry has been up in arms, and Labor’s support in the polls has fallen. People don’t like to feel that they’ve been tricked, and I can understand that. That’s why it’s important that there be transparency, even when the public policy is a good one, such as the imposition of a carbon tax.

For an Ontario example, look no further to how EcoFees were handled. Again, good policy, incredibly poor implementation, with the result being that the policy was scrapped. The same might happen soon to Ontario’s Green Energy and Economy Act, over the way in which the ability for the public to provide input into renewable energy infrastructure projects has largely been scrapped.

Looking Towards Canada's Future

Right now, with regards to CCS, if we continue to follow along the path which the Conservatives have set us on for too much longer, we risk running into a point of no return, where so much money has been sunk into a project that public expectations for its success will require that we continue heading down the road, despite the overwhelming warnings to turn back. While we continue to invest in bad technology, other industrial sectors such as the mining sector, will be called upon to do more than their fair share. They won’t be happy, and rightly so.

The rising level of greenhouse gases in our atmosphere which threaten the globe have been the result of decades of industrialization which have brought prosperity to us and our economy, and which have given us our quality of life. They’ve also shaped our expectations that our energy-intensive lifestyle is somehow normal, which has led to a certain inertia of public opinion on taking action to reduce emissions. Yet we are all culpable as participants in this western society, albeit to varying degrees.

When public opinion catches up to scientific validation, and it becomes apparent that action is necessary, we may be in a position of having to ask those of us who are least responsible for the problem to take the biggest hits, so that the biggest producers can continue to go about their business as usual.

A better approach, in my opinion, would be the application of an equitable and sustainable price on carbon emissions. One which treats all emitters fairly, based on their outputs. Currently, there are two mechanisms for carbon pricing which are often discussed (and which I’m not going to explain to any great degree here, as there are really good explanations available elsewhere on the internet): a Cap and Trade emissions reduction scheme, and a carbon tax. One of these carbon pricing mechanisms is easy to implement and will lead to the reduction of emissions. The other may end up reducing emissions, but more than likely will prove to be a massive white elephant boondoggle. Of course, the NDP is currently the champion of the boondoggle Cap and Trade policy option.

(opinions expressed in this blog are my own, and should not be interpreted as being consistent with the views of the Green Party of Canada)

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