Canada: British Columbia's Climate Leadership Plan

On August 19, 2016, the BC government released its long-awaited Climate Leadership Plan (CLP). The CLP is a response to recommendations made by the province's Climate Leadership Team (CLT), and sets out 21 strategic actions to assist BC to reduce its greenhouse gas (GHG) emissions and promote the use of clean energy and technology. The CLP aims to reduce BC's GHG emissions by 25 megatonnes per year by specifically targeting key sectors that are expected to have a significant impact on climate change. It also proposes to create up to 66,000 jobs over the next ten years by promoting investments in the natural gas, clean technology, transportation and forestry sectors.

The CLP is meant to build on the ground-breaking Climate Action Plan (CAP) that former Premier Gordon Campbell introduced in 2008. Among other things, the CAP provided for a 33% reduction in GHG emissions from 2007 levels by 2020, and an 80% reduction of GHG emissions from 2007 levels by 2050. The CAP also introduced a broad-based, revenue-neutral carbon tax, which was designed to increase annually in order to drive incremental GHG reductions, and requirements for the public sector to become carbon neutral (both of which were firsts in North America).

BC got off to a strong start under the CAP, meeting its initial GHG reduction target of 6% below 2007 levels by 2012, but its progress toward its emissions targets stalled shortly thereafter and emissions levels began to rise again. Since that time, BC has been struggling to balance the objectives of making serious strides to reduce GHG emissions, ensuring the competitiveness of its economy, and promoting the development of a robust liquefied natural gas (LNG) industry (which could potentially be a significant source of future GHG emissions in itself). It is now clear that BC will not meet its emissions reduction target for 2020. Its 2050 target may still be achievable, but the BC government has been criticized as of late for not having a clear plan for how this will be accomplished.

Environment Minister Mary Polak has described the new CLP as the first step to "creating new innovative ways to reduce emissions while continuing to grow our economy".1 Given this, it is perhaps not surprising that some aspects of the plan are largely preliminary or aspirational in nature.

Highlights of the CLP

The CLP targets six key areas: (i) natural gas; (ii) transportation; (iii) forestry and agriculture; (iv) industry and utilities; (v) communities and built environment; and (vi) public sector leadership. The following are some of the key initiatives outlined in the CLP for each of these areas:

I. Natural Gas

  • Introducing a strategy to reduce upstream methane emissions by 45%. The strategy proposes to tackle methane emissions in three phases:

    1. Legacy Phase – Targets extraction and processing infrastructure built before 2015, and will include:

      • a 45% reduction of fugitive and vented emissions by 2025 (estimated at an annual reduction of 1 million tonnes for 2025); and
      • a midpoint check in fall 2020 to determine progress towards this target, establish what happens if the target is not met, and make adjustments if necessary.
    2. Transition Phase – Offers incentives to drive emissions reductions for applications built between 2015 and 2018. Incentives will include:

      • a Clean Infrastructure Royalty Credit Program to help stimulate investments in new technology to convert current infrastructure to less carbon intensive machinery; and
      • a new offset protocol to further encourage innovative projects that reduce methane emissions.
    3. Future Phase – Will establish standards to guide the development of projects after the Transition Phase. This will include:

      • developing and enforcing standards to reduce methane emissions for all applications; and
      • making leak detection and repair mandatory, with protocols to be developed and enforced in line with other jurisdictions.
  • Regulating Carbon Capture and Storage (CCS)

    • The Ministry of Natural Gas Development has developed a CCS regulatory policy framework to guide CCS development. It is now collaborating with the BC Oil and Gas Commission to complete the framework and develop the additional legislative changes needed to allow CCS projects to proceed.
  • Investing in infrastructure to power natural gas projects with clean electricity.

II. Transportation

  • Increasing the current Low Carbon Fuel Standard to reduce the carbon intensity of transportation fuels by 15% by 2030, relative to 2010.
  • Amending the Greenhouse Gas Reduction Regulation to provide incentives for commercial fleets to switch to renewable natural gas.
  • Expanding the Clean Energy Vehicle program to support new incentives for purchasing a clean energy vehicle.
  • Supporting the development of charging stations for zero emission vehicles.

III. Forestry and Agriculture

  • Introducing new Forest Carbon Initiative to rehabilitate up to 300,000 hectares of Mountain Pine Beetle and wildfire affected sites and enhance the carbon storage potential of BC's forests.
  • Implementing a nutrient management program to assist in reducing fertilizer use and greenhouse gas emissions.

IV. Industry and Utilities

  • Working with BC Hydro to expand the mandate of its demand-side management (DSM) programs to include investments that increase efficiency and reduce greenhouse gas emissions.
  • BC Hydro will focus on acquiring firm electricity from clean sources.
  • Enabling further incentives to promote adoption of efficient gas equipment.
  • Facilitating projects that will help fuel marine vessels and commercial vehicles with cleaner burning liquefied natural gas.
  • Developing new energy efficiency standards for gas fired boilers.

V. Communities and Built Environment

  • Amending the Energy Efficiency Standards Regulation to include increased efficiency requirements for gas fireplaces and air source heat pumps and high-efficiency technology requirements for natural gas space and water heating equipment.
  • Implementing policies to encourage the development of net zero buildings.
  • Working with local governments to update and refresh the Climate Action Charter.
  • Creating a strategy to turn landfill waste into energy.

VI. Public Sector Leadership

  • Developing policies to promote the use of low carbon and renewable materials in public sector infrastructure.
  • Developing guidelines for public sector operations to reduce emissions and plan for climate change adaptation.
  • Mandating the creation of 10-year emissions reduction and adaptation plans for provincial public sector operations.

Reactions to the CLP

Reactions to the CLP from environmentalists, industry and other stakeholders have been mixed. Members of the CLT have expressed frustration over the fact that of the 32 recommendations they provided to the government, only 18 were addressed and none were accepted in full. Some of the most vocal critics have argued that the CLP demonstrates a lack of leadership on climate change, which will undermine the ambitious goals set out in the CAP. The BC government has explained that the CLP is "only a first step" to developing a more comprehensive climate action plan, and has acknowledged that there is a great deal of work left to do.2 According to the government, the CLP is meant to be a "living, dynamic document" that will be updated based on its progress as it unfolds, as well as climate action developments at the federal level.

One of the most contentious issues has been the BC government's decision not to increase the carbon tax by $10 per tonne per year beginning in 2018, as the CLT had recommended. In its recommendations, the CLT described the carbon tax as BC's "strongest tool to reduce emissions", and emphasized the importance of the annual increases in the tax rate as a means of gradually encouraging BC's transition to a low carbon economy.3 However, the BC government chose to hold the tax at $30 per tonne of carbon dioxide equivalent (CO2E) emissions, which has been the rate in place since 2012. In defending the government's decision not to raise the tax rate, Minister Polak has pointed out that BC was the first jurisdiction in North America to put a price on carbon, and that its current tax rate remains one of the highest and most comprehensive in the world.4 Citing concerns about the impacts that a higher carbon tax could have on BC's economy, the Province has stated that it intends to wait for other jurisdictions to catch up to BC's existing carbon pricing strategy before it considers increasing the tax burden on its own industries.5 In this regard, the government's message is clear: it is committed to pursuing a meaningful climate action strategy, but not at the expense of ensuring economic competitiveness, job creation or sustainable industrial development, and not while other jurisdictions continue to lag behind. Going forward, it is clear that any future developments in BC's climate action strategy will have to strike a balance between all of these objectives.

Another controversial aspect of the CLP is that it did not propose interim emissions reduction targets for 2030, which was also one of the key recommendations from the CLT. Instead, the CLP focuses on meeting the 2050 target set out in the CAP. Critics have observed that it is unclear how the government plans to achieve this target without introducing any interim benchmarks to track and incentivize its progress. In response to these concerns, Environment Minister Polak has reiterated that the CLP is only a starting point, and has stated that the Province could still introduce a 2030 target at some point in the future.6 For the time being, the Province has indicated that it intends to wait to see what the federal government and its provincial and territorial counterparts plan to do with respect to regulating emissions before implementing further reduction targets.7

Reactions to the CLP from BC's industrial sectors, a coalition of municipalities in northeast BC and a variety of trade-exposed businesses have generally been positive. Many of these stakeholders had urged the BC government to keep the carbon tax at its current rate, fearing that an increase in the tax rate could undermine their competitiveness relative to industries, municipalities and businesses in other jurisdictions with less restrictive greenhouse gas reduction standards, and threaten future investments in BC from developers in affected industries (such as LNG). The CLP's focus on incentivizing innovation and the use of clean energy and technology, as opposed to tightening up emissions reduction standards, is a welcome development for stakeholders in these areas.

Some aspects of the CLP will undoubtedly require a period of adjustment for affected industries and businesses. In particular, the action items relating to reducing upstream methane emissions and reducing the carbon intensity associated with transportation will present some challenges for businesses in emissions-intensive sectors. That said, none of these developments should come as a surprise, as the recommendations from the CLT were well publicized and many of BC's major industries were active participants in the consultation process from the beginning.

BC Climate Policy Going Forward

On October 3, 2016, the Prime Minister announced that the federal government would be implementing a new national carbon pricing plan to assist Canada in meeting its commitment under the Paris Agreement to reduce its GHG emissions by 30% below 2005 levels by 2030.8 Under the new plan, all provinces and territories must adopt a carbon pricing scheme by 2018, or the federal government will impose one for them. Each of the provinces and territories can select either a cap-and-trade system or a carbon tax, but whichever approach they choose, they must set a minimum price on CO2E emissions of $10 per tonne beginning in 2018, and the price must increase incrementally by $10 per year until it reaches $50 per tonne in 2022, at which time future carbon pricing increases will be determined. According to the Prime Minister, the plan will be revenue neutral, with any revenues generated by the pricing scheme being returned to the provinces or territories that generated them. The specific details of the plan and how it will work in practice have yet to be announced, but further details are expected to emerge as the federal, provincial and territorial environment ministers continue to work together to implement the plan.

BC is one of four provinces – together with Alberta, Ontario and Quebec – that has already adopted its own carbon pricing plan, and is thus ahead of the curve with respect to compliance with the new federal plan. The BC government has stated that it will increase its carbon tax rate once the rest of the provinces and territories catch up to its current rate of $30 per tonne. Under the new federal plan, provincial and territorial pricing schemes will not have to reach $30 per tonne until 2020, so it is likely safe to assume that any potential increases to BC's current carbon tax rate are a long way off. The BC government has also stated that it wants to see some form of independent vetting mechanism introduced to ensure fairness and consistency among the various provincial and territorial carbon pricing schemes.9 Establishing such a mechanism would not be an easy task, considering the complexities of reconciling relatively straightforward carbon tax regimes (like those in place in BC and Alberta) with more complicated cap-and-trade systems (like those in place in Ontario and Quebec). If BC insists on establishing a vetting mechanism before it will commit to increasing its own carbon tax rate, this could become a significant source of friction in the implementation of the federal plan. It will be very interesting to see how the federal government proposes to deal with this issue going forward.

Footnotes

1 Mary Polak, Minister of Environment for British Columbia, "B.C.'s climate plan reduces emissions and grows the economy", The Province, (August 21, 2016), online: http://theprovince.com/opinion/columnists/mary-polak-b-c-s-climate-plan-reduces-emissions-and-grows-the-economy

2 CBC News, "B.C. Environment Minister Mary Polak defends provincial climate change plan", (August 22, 2016) online: http://www.cbc.ca/news/canada/british-columbia/environment-minister-climate-plan-1.3731243

3 Climate Leadership Team, Recommendations to Government (October 31, 2015), pg. 9, online: http://engage.gov.bc.ca/climateleadership/files/2015/11/CLT-recommendations-to-government_Final.pdf

4 Supra, note 1.

5 Lien Yeung, Jason Proctor, "B.C. Premier Christy Clark's climate change plan does not raise carbon tax", CBC News (August 19, 2016), online: http://www.cbc.ca/news/canada/british-columbia/b-c-premier-christy-clark-s-climate-change-plan-does-not-raise-carbon-tax-1.3728317

6 Ibid.

7 Gordon Hoekstra, "B.C. government between rock and a hard plan on new climate plan", Vancouver Sun (June 24, 2016), online: http://vancouversun.com/business/energy/b-c-government-between-rock-and-a-hard-place-on-new-climate-plan

8 Canada's INDC Submission to the UNFCCC, online: http://www4.unfccc.int/ndcregistry/PublishedDocuments/Canada%20First/INDC%20-%20Canada%20-%20English.pdf

9 Vaughn Palmer, "B.C. wants 'carbon copy' from other provinces before tax hike", Vancouver Sun (October 3, 2016), online: http://vancouversun.com/opinion/columnists/vaughn-palmer-b-c-wants-carbon-copy-from-other-provinces-before-tax-hike

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