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

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 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 PRESENTED TO 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 www.bcbc.com | @bizcouncilbc

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

3 CLIMATE CHANGE AND GREENHOUSE GAS EMISSIONS

GHG EMISSIONS BY COUNTRY/REGION 2018 4 28.5% Sum = 100% Canada = 1.6% 15.3% B.C. = 0.2% 11.1% 10.8% 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% Source: ?

GLOBAL GHG 5 EMISSIONS BY FUEL AND REGION Source: The Economist.

B.C. EMISSIONS PROFILE AND TARGETS 6 B.C. Megatonnes of actual CO2e and target years relative to 2007 base 70.0 64.9 64.6 64.5 63.7 56.2 60.0 50.0 38.8 40.0 25.9 30.0 20.0 13.0 10.0 0.0 1990 2007 2008 2016 2017 Emissions (kt Co2e) 40% < 2007 60% < 2007 80% < 2007

B.C. EMISSIONS PROFILE AND TARGETS 7 2040 2050 Year 1990 2007 2008 2015 2017 2018 2019 2030 Target Target Target B.C. B.C. Base 60% 80% Carbon 40% below 2007 Paris Kyoto GHG year below below (~ equal to Kyoto target Tax Agreement for targets of 30% < 1990) 2007 2007 (followed by a recession) B.C. Population 3,292 4,291 4,349 4,648 4,992 5,001 5,071 (000’s) B.C. Emissions 56,208 64,763 64,937 62,971 64,462 38,858 29,905 12,987 (kt Co2e) B.C. Emissions/ 17.1 15.1 14.9 13.7 12.9 6.83 4.15 1.85 person Source: ?

8 THE RELATIVISM OF ENVIRONMENTAL METRICS

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 10 - GEOGRAPHY ▪ The energy, time and cost of moving goods and people in Canada is higher than most other 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 11 - POPULATION ▪ Materials use, population growth and spatial distribution - where and how many, and GHGs - are highly correlated

ENVIRONMENTAL RELATIVISM MATTERS 12 - CLIMATE AND WEATHER

ENVIRONMENTAL RELATIVISM MATTERS 13 - INDUSTRIAL STRUCTURE ▪ 32% of GDP is from industrial Overview of Changes in activity compared to 22% for the Canada GDP for Manufacturing, EU 2005 to 2018 ▪ The resource and related downstream manufacturing manufacturing sectors are energy intensive - Non-durable industries mining, oil and gas, forestry, etc. manufacturing ▪ Important to look at details industries Durable -5% -7%

ENVIRONMENTAL RELATIVISM MATTERS 14 - TRANSPORTATION ▪ ~1/4 of global emissions and 2/3 of 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 only 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 Tessa Virtue & Scott Moir, 2010 and 2018 nuanced for an accurate picture – relativism Olympic Champions 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 on GHGs has done so in the electric sector by moving from coal to natural gas and (to a lesser Betroffenheit by Crystal Pite, World Renowned Canadian Choreographer extent) renewables ▪ Canada 80% clean electricity = marginal cost of 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

16 PRICING EXTERNALITIES

PRICING EXTERNALITIES 17 or or

PRICING EXTERNALITIES – 18 PROBLEMS WITH THE CURRENT APPROACH ▪ 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 – 19 B.C. CARBON TAX 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 – 20 COMPARISON OF SELECT 2019 ABSOLUTE CARBON PRICES Comparions of Carbon Prices, 2019 values, USD$/tonne $35.00 $30.60 $30.00 $27.57 $25.00 $20.62 $20.00 $16.84 $15.31 $15.00 $10.00 $5.61 $5.00 $- RGGI (electricity only) Canada Quebec/California South Korea EU ETS BC

PRICING EXTERNALITIES – 21 COMPARISON OF SELECT 2019 ABSOLUTE CARBON PRICES % Difference Difference Jurisdiction US$/tonne compared to B.C. from 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, o n 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.

22 ENERGY TRANSITION

ENERGY TRANSITIONS 23 ▪ ▪ 80% of world Renewables energy demand primarily an electricity met by fossil conversation fuels, fairly ▪ ~16% of global steady over primary energy time production, 2/3 comes from fossil sources ▪ Canada global producer rank: ▪ Oil: 4 th ▪ Coal (thermal): 0.82% ▪ Natural gas: 3rd biggest trader in what is a continental market until LNG markets mature ▪ Electricity: 6th

ENERGY TRANSITIONS – 24 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 only 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

27 THANK YOU! denise.mullen@bcbc.com