29 JANUARY 2020 C L I M AT E C H A N G E , T H E R E L AT I V I S - - PowerPoint PPT Presentation

www.bcbc.com | @bizcouncilbc

C L I M AT E C H A N G E , T H E R E L AT I V I S M O F E N V I R O N M E N TA L I N D I C AT O R S , A N D E N E R G Y T R A N S I T I O N S

29 JANUARY 2020

AS S O C I AT I O N O F P R O F E S S I O N AL E C O N O M I S T S O F B . C . VAN C O U V E R , B . C .

Denise Mullen Director, Environment and Sustainability PRESENTED TO

KEY MESSAGES

2

▪

Canada is 1.6% of global GHG, a rounding error in reducing the planet’s total emissions to mitigate climate change; B.C. is even less at 0.2% of global emissions

▪

Most country metrics used completely ignore geography, climate/weather, population growth & density, and energy physics – density matters

▪

Environmental performance depends on the relative attributes of the metrics and is not discussed or considered in policy making - recognition of nuances/shortfalls in metrics would allow better policy-making

▪

There are 3 main approaches to reducing negative externalities – taxes, trading schemes, and regulations, all with pros and cons

▪

Energy transitions: energy is a universal currency and the oxygen of economies, 80% of the global energy system is fossil fuel based and holding steady, with electrification seen as the solution to rising GHG emissions

▪

Canada and B.C both have enormous potential to help meet growing global materials demand in a sustainable and relatively climate-friendly manner and help the planet meet its goal of reducing total GHG

CLIMATE CHANGE AND GREENHOUSE GAS EMISSIONS

3

4

GHG EMISSIONS BY COUNTRY/REGION 2018

Source: ?

28.5% 15.3% 7.5% 4.8% 3.3% 2.2% 2.0% 1.9% 1.8% 1.7% 1.6% 1.4% 1.3% 1.3% 1.2% 1.2% 1.1% 11.1% 10.8%

Sum = 100% Canada = 1.6% B.C. = 0.2%

5

GLOBAL GHG EMISSIONS BY FUEL AND REGION

Source: The Economist.

6

B.C. EMISSIONS PROFILE AND TARGETS

56.2 64.6 64.9 63.7 64.5 38.8 25.9 13.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 1990 2007 2008 2016 2017

B.C. Megatonnes of actual CO2e and target years relative to 2007 base

Emissions (kt Co2e) 40% < 2007 60% < 2007 80% < 2007

7

B.C. EMISSIONS PROFILE AND TARGETS

Source: ?

Year 1990 2007 2008 2015 2017 2018 2019 2030 Target 2040 Target 2050 Target

Kyoto B.C. Base GHG year for targets B.C. Carbon Tax

(followed by a recession)

Paris Agreement 40% below 2007

(~ equal to Kyoto target

• f 30% < 1990)

60% below 2007 80% below 2007 B.C. Population (000’s) 3,292 4,291 4,349 4,648 4,992 5,001 5,071 B.C. Emissions (kt Co2e) 56,208 64,763 64,937 62,971 64,462 38,858 29,905 12,987 B.C. Emissions/ person 17.1 15.1 14.9 13.7 12.9 6.83 4.15 1.85

THE RELATIVISM OF ENVIRONMENTAL METRICS

8

ENVIRONMENTAL RELATIVISM MATTERS

9

▪

All countries are not the same

▪

Weather/climate, population growth and density, geography, trade comparative advantages (industrial composition) all affect energy needs

▪

Energy density matters

▪

Energy laws cannot be broken

ENVIRONMENTAL RELATIVISM MATTERS

• GEOGRAPHY

10

▪

The energy, time and cost of moving goods and people in Canada is higher than most

• ther places in the world

▪

No distance between any point- to-point in Europe can match the ~8,100 km between St John NFLD and Winter Harbour, B.C.

ENVIRONMENTAL RELATIVISM MATTERS

• POPULATION

11

▪

Materials use, population growth and spatial distribution - where and how many, and GHGs - are highly correlated

ENVIRONMENTAL RELATIVISM MATTERS

• CLIMATE AND WEATHER

12

ENVIRONMENTAL RELATIVISM MATTERS

• INDUSTRIAL STRUCTURE

13

▪

32% of GDP is from industrial activity compared to 22% for the EU

▪

The resource and related downstream manufacturing sectors are energy intensive - mining, oil and gas, forestry, etc.

▪

Important to look at details

• 5%
• 7%

Overview of Changes in Canada GDP for Manufacturing, 2005 to 2018

Non-durable manufacturing industries Durable manufacturing industries

ENVIRONMENTAL RELATIVISM MATTERS

• TRANSPORTATION

14

▪

~1/4 of global emissions and 2/3

• f global fossil fuel use

▪

All countries rely on a complex fossil fuel-based transportation system for trade and there are few alternatives to the ubiquitous internal combustion engine (yet)

▪

Canada linear distance from coast to coast and north-south is huge – plane or car/truck access

• nly unless you want to walk

▪

No country has tackled this challenge (yet) and it keeps getting bigger because …….

ENVIRONMENTAL PERFORMANCE

15

▪

Measuring performance on environment must be nuanced for an accurate picture – relativism matters!

▪

Global GHG measurement system is production not consumption oriented = significant bias

▪

Achievements ignore baseline energy systems and the fact that EVERY nation making progress

• n GHGs has done so in the electric sector by

moving from coal to natural gas and (to a lesser extent) renewables ▪ Canada 80% clean electricity = marginal cost

• f the next 20% is significant and even harder

for B.C. at 98% clean along with very little effect ▪ Substitution in other sectors is difficult in part because of energy density

Tessa Virtue & Scott Moir, 2010 and 2018 Olympic Champions

Betroffenheit by Crystal Pite, World Renowned Canadian Choreographer

PRICING EXTERNALITIES

16

PRICING EXTERNALITIES

17

• r
• r

18

▪

Competitiveness

▪

Carbon leakage

▪

Trade protectionism

▪

Not a substitute for regulation but additive in Canada

▪

System gaming and wealth transfer

▪

Limited behavioural response because of demand inelasticity

▪

Eventually it is just another tax

PRICING EXTERNALITIES – PROBLEMS WITH THE CURRENT APPROACH

19

To our knowledge, British Columbia is the only place in the world with an aggressive carbon pricing program that provides essentially no support to its traded-goods industries

PRICING EXTERNALITIES – B.C. CARBON TAX

PRICING EXTERNALITIES – COMPARISON OF SELECT 2019 ABSOLUTE CARBON PRICES

20

$5.61 $15.31 $16.84 $20.62 $27.57 $30.60 $- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 RGGI (electricity only) Canada Quebec/California South Korea EU ETS BC

Comparions of Carbon Prices, 2019 values, USD$/tonne

21

PRICING EXTERNALITIES – COMPARISON OF SELECT 2019 ABSOLUTE CARBON PRICES Jurisdiction US$/tonne Difference from B.C. % Difference compared to B.C.

(see Note)

RGGI (electricity only) $5.61 $24.99 445% Canada $15.31 $15.29 100% Quebec/California $16.84 $13.77 84% South Korea $20.62 $9.98 48% EU ETS $27.57 $3.03 11% B.C. $30.00

NOTE: All ETS systems protect energy intensive trade exposed industries by offering free allowances. Therefore the price difference is much larger since this table shows the “what if all emissions were covered”, which they are not. For example, on average 80% of emissions are exempt from taxation in EITI sectors with the exception of cement and lime where 95% of emissions are exempt. In the EU and California the up-to amounts exempt vary by industry and are established by regulation.

ENERGY TRANSITION

22

23

▪

80% of world energy demand met by fossil fuels, fairly steady over time

ENERGY TRANSITIONS

▪

Renewables primarily an electricity conversation

▪

~16% of global primary energy production, 2/3 comes from fossil sources

▪

Canada global producer rank: ▪ Oil: 4th ▪ Coal (thermal): 0.82% ▪ Natural gas: 3rd biggest trader in what is a continental market until LNG markets mature ▪ Electricity: 6th

24

ENERGY TRANSITIONS – WHAT DOES IT MEAN FOR B.C.?

CONCLUSIONS AND KEY MESSAGES

25

▪

Canada is 1.6% of global GHGs, a rounding error in reducing the planet’s total emissions to mitigate climate change; B.C. is even less at 0.2% of global emissions … does not mean we don’t need to do our part but …

▪

Most country metrics used completely ignore geography, climate/weather, population growth & density, and energy physics – density matters

▪

Environmental performance depends on the relative attributes of the metrics and is not discussed or considered in policy making - recognition of nuances/shortfalls in metrics would allow better policy-making

CONCLUSIONS AND KEY MESSAGES

26

▪

There are 3 main approaches to reducing negative externalities – taxes, trading schemes, and regulations, all with pros and cons – choosing the right one or combination is critical to avoid marginal abatement costs that make us uncompetitive and undermine performance (not just economic)

▪

Energy transitions: energy is a universal currency and the oxygen of economies, 80% of the global energy system is fossil fuel based and its proportion is holding steady with electrification is seen as the solution to rising GHG emissions ….. but

• nly as good as the fuel source

▪

Canada and B.C both have enormous potential to help meet growing global materials demand in a sustainable and relatively climate-friendly manner and help the planet meet its goal of reducing total GHG

THANK YOU!

denise.mullen@bcbc.com

27