Deconstructing BC’s carbon neutral government

Besides the carbon tax, one of the most important BC government climate action initiatives has been the adoption of Carbon Neutral Government. That is, count emissions from public buildings and travel, reduce them as much as possible and pay for carbon offsets to negate the rest. As of the 2010 calendar year, the BC government announced mission accomplished, at the end of June.

Personally, I frown on offsets most of the time. Some colleagues have tried to make the best of them to use for forest conservation or to fund fuel switching and other desirable practices that move us toward a no carbon economy. I like all of these things but have concerns about how offsets work in the real world, and whether they make sense at all when we need to be at 350 parts per million when we are currently at 390. I can live with some limited and shrinking amount of offsets in the medium-term, but by 2020 or so they should be phased out completely in favour of real reductions in emissions from polluters.

In the case of carbon neutral government, there has been an additional concern cited about public dollars, at $25 a tonne of CO2, being diverted to the Pacific Carbon Trust, a Crown corp created to invest in private sector offset projects, typically by contracting out to private firms like Offsetters. The public sector in BC also pays the carbon tax, recently increased to (also) $25 a tonne as of July 1. (Aside: Happy Belated third birthday carbon tax; you’re getting so big and strong, you worry us that you will inadvertently crush the poor; we’ll have to fix that before we let you get any bigger.)

Offsets are really just another way of pricing carbon emissions, so mandatory offsets in the public sector mean government bodies are currently facing a carbon price of $50 per tonne, or double that of the private sector (school boards get a rebate for carbon tax paid but are still on the hook for PCT contributions). The rub is that PCT only funds projects in the private sector. The Sun reports:

Among the private corporations that benefited from such offset expenditures: Lafarge cement; forest companies Canfor, Interfor and TimberWest; natural gas company Encana; and Kruger Products, a manufacturer of toilet paper and related products. They earned the right to sell offsets to the public sector based on energy-saving initiatives.

Bob Simpson also writes about a particularly perverse case:

In May, the PCT purchased, for an undisclosed amount, 84,000 tonnes of carbon emissions from EnCana, a highly profitable company and one of British Columbia’s largest emitters. EnCana’s greenhouse gas reduction was reportedly obtained between 2008 and 2011 from a technological improvement in its extraction operations.

However, in the same region of the province that this reduction was supposedly achieved, the Horn River basin, EnCana is building its Cabin Gas processing plant without using carbon sequestration as originally promised. At full production, this one plant alone will add 2.2 million tonnes per year of new carbon emissions to the province’s total emissions. This is more than double the greenhouse gas emissions produced by the entire public sector on an annual basis, and represents 6.5 per cent of the emissions reductions needed to meet B.C.’s legislated targets by 2020.

This seems typical of BC’s typical flow of perverse subsidies to businesses – super-cheap green electricity for new coal mines and shale gas fracking; high prices paid to other private companies to generate that electricity; P3 projects for transportation and hospitals. Crony capitalism with a Lotusland twist.

The total bill for carbon neutrality was announced at $18.2 million. Some of the bigger chunks include $1.1 million for Vancouver Coastal Health, $664,000 for BC Housing, $406,ooo for the Vancouver School Board, $1.5 million for UBC, $444,000 for SFU, and $389,000 for UVic. Local governments are not technically part of carbon neutral government, but most have signed on to be so as of 2012 in exchange for rebates on their carbon tax (if they had been part in 2010, they would have kicked in roughly $4 billion extra to PCT).

Given the size of these institutions and a BC public sector of $40 Billion per year, none of these are huge amounts. Relatively clean electricity powers much of the public sector, and over time we need to cut out the gas. And the high carbon price has led to real projects that are reducing emissions. Perhaps the biggest concern to me is for schools, where the overall budget has basically been frozen for years, forcing real cuts in services due to inflation. It would be easy enough to cut school boards a cheque as they do for carbon taxes paid, but this has not been the case.

To be fair, there another side to the story and that is the BC government’s own investments in retrofitting buildings and its efforts to reduce emissions through videoconferencing and reduced travel. These are good things, and $75 million has been spent on such projects over the past three years through the Public Sector Energy Conservation Agreement. The problem is that the program is unfunded as of April 1, and the original one was over-subscribed. So there are projects that could be done if funds were made available, but they are not so the public sector must pay into the PCT, which does not fund projects in the public sector.

There seems to be an increasing recognition that this state of affairs does not make sense. Upon release of the carbon neutral government report, the Sun story adds:

Environment Minister Terry Lake said talks are underway with the Pacific Carbon Trust on how offset funds might be returned to public institutions such as schools. While “people don’t like the thought of public money going to help big organizations,” Lake noted that companies such as Encana also generate revenue for the province that goes back into funding health and education. Non-profits such as the Nature Conservancy of B.C. have also benefited from selling carbon offsets as a result of carbon sequestered in a Kootenay property that was not clearcut.

So we’ll wait and see. I’d much rather see a higher carbon tax applied to both public and private sectors on equal terms – and use some of the proceeds of the tax to fund mitigation projects through the PCT or otherwise. Another possibility is that the public-private carbon price gap be eliminated over a few years – the idea of government taking initiative and leadership on climate action is a good one to preserve. In the meantime, compensation should go to public bodies to ensure services are not adversely affected, and retrofit dollars should flow to create a asset base of low-carbon public buildings. And let’s see some real climate action from big industrial polluters, too, which the government’s right hand seems to be encouraging, just as its left hand is pointing out climate achievements.

[Note: This post builds on analysis on carbon pricing for the Climate Justice Project. See Fair and Effective Carbon Pricing: Lessons from BC.]

Topics: Climate change & energy policy, Privatization, P3s & public services, Provincial budget & finance