Saturday, 10 October 2015

Canadian Climate Policy Report Card: 2015

Executive Summary
Over the past three decades, governments in developed countries have made many commitments to reduce a specific quantity or percentage of greenhouse gases by a specific date, but often they have failed to implement effective climate policies that would achieve their commitment. Fortunately, energy-economy analysts can determine well in advance of the target date if a government is keeping its promise. In this 2015 climate policy report card, I evaluate the Canadian government’s emission commitments and policy actions. I find that in the nine years since its promise to reduce Canadian emissions 20% by 2020 and 65% by 2050, the Canadian government has implemented virtually no polices that would materially reduce emissions. The 2020 target is now unachievable without great harm to the Canadian economy. And this may also be the case for the 2050 target, this latter requiring an almost complete transformation of the Canadian energy system in the remaining 35 years after almost a decade of inaction.

Canadian Climate Policy Report Card: 2015

A critical challenge to preventing the harms from human-produced greenhouse gas emissions, especially CO2 from burning fossil fuels, is that elected representatives face weak incentives to implement effective climate policies and strong incentives to implement no or ineffective policies. There are several reasons.page2image2912

First, significant CO2 emissions reductions require ‘compulsory policies’ – regulation of technologies and energy forms and/or pricing of CO2 emissions – and these are seen to cause immediate costs for some even though the long-term benefits for society exceed these costs. These immediate costs would begin during the mandate of current politicians, and have significant political risks, while the benefits of avoiding climate change will mostly occur after the career of current political leaders.

Second, the benefit from taking action to reduce emissions is uncertain because success against human-caused climate disruption requires that most other countries also reduce emissions. With the exception of the largest two emitters, China and the US, efforts by a single country would have a negligible effect in reducing future harms from rising CO2 concentrations. This argument provides an excuse for political leaders in a given jurisdiction to delay action until there is a near-universal global effort, conveniently ignoring the fact that this very requirement renders an effective global effort extremely unlikely.

Third, it is difficult for non-experts to know if a government’s climate policies are having an effect until much valuable time has been lost. If a person agrees with his or her doctor to lose 10 kilos over the next six months for health reasons, both know that this promise will not be kept if the doctor finds after four months that the person has actually gained weight. With national CO2 emission promises, however, there is no authoritative third party, like a personal doctor, to monitor the government’s progress and assess the likelihood of meeting its commitment. Without that check, governments may continue to claim they will meet their commitment even though it is obvious to experts they will not.

In producing this ‘report card’, I address this third problem by providing an evaluation of the Canadian government’s progress in fulfilling its emission reduction promises since its election in 2006. My assessment is primarily based on simulations using an energy-economy, micro- economic model called CIMS, with some of its results adjusted to reflect information from an energy-economy, macro-economic model called GEEM.1 Most of the analysis I rely on was conducted by researchers under my direction in the School of Resource and Environmental Management at Simon Fraser University. I have produced similar evaluations over the past two decades, some as a research fellow at the CD Howe Institute, some published in refereed academic journals, some as an advisor to the Canadian government, and some as an advisor to independent entities such as the National Roundtable on the Environment and the Economy.

Within a year of its 2006 election, the Harper government promised to reduce Canadian GHG emissions 20% by 2020 and 65-70% by 2050. It claimed, moreover, that it would achieve these commitments by regulating technologies, fuels and individual industrial sectors rather than by emissions pricing.2

Canada could have a near-zero-emission energy system with currently available technologies, but the rate of energy system transformation has a large effect on costs. In electricity generation, Ontario decreased its GHG emissions over 80% in one decade by closing or converting its coal- fired power plants – shifting toward nuclear, hydro, wood, wind, small hydro, solar and some natural gas. This was in part possible because coal had previously provided only 25% of Ontario’s electricity. Even so, Ontario had initially tried to close its coal plants in just four years, but this proved too costly so the target was delayed.

The more quickly society tries to reduce emissions, the greater the cost, since this is likely to require the premature replacement of still-useful plant and equipment. Energy system transformation that occurs at the natural rate of turnover of plant and equipment is much less costly. Electricity plants provide one example. Vehicles provide another. Near-zero-emission vehicle technologies and fuels are commercially available, including biodiesel, ethanol, plug-in hybrid electric, pure electric and soon hydrogen fuel cell. But vehicles last 14 years on average, and 2020 is just over four years away. 

An effort to significantly reduce transportation emissions would be expensive if an ambitious government regulatory effort only occurred four years before the deadline. In other sectors of the economy, like major energy-using industries and buildings, the turnover rate of much of plant and equipment is so slow that even a decade provides little opportunity for significant, low-cost reductions.

Soon after the Harper government made its 2020 promise, I and a research associate estimated the cost and effectiveness of the policies it proposed to achieve its target.3 The suggested policies were a mix of information programs, subsidies and proposed intensity-based emissions caps. Using the CIMS model, we estimated that these policies would not significantly reduce emissions. As it turned out, the government abandoned most of the policies anyway, but promised to soon replace them with sector-by-sector emissions regulations to meet its promise. However, it has still not done so, and as of 2015 virtually all GHG emissions in Canada have no regulatory constraints or emissions charges imposed by the federal government. Nine years have passed since regulations were first promised.

Two initiatives of the federal government have sometimes been suggested as affecting GHG emissions in the 2020 timeframe, but this is not supported by evidence. In 2012, the government established regulations for new coal-fired power plants. Since no new coal plants are planned in the 2020 timeframe, these regulations make no contribution to achieving the government’s 2020 commitment, nor even in the 2020-2030 period. In contrast to the Canadian approach, the US government is in the process of finalizing significant emissions controls that will immediately constrain the current operations and force the early closure of existing coal-fired power plants.

The second initiative has been to harmonize Canadian vehicle efficiency regulations with regulations imposed by the US government. These would reduce fuel use somewhat after 2016 and, more significantly, after 2020. While improved efficiency potentially reduces fuel consumption and CO2 emissions (only if greater vehicle use does not offset the efficiency reduction), it does not have the CO2 effect of policies targeted directly at changing fuels and propulsion systems, such as California’s ‘low carbon fuel standard’ and ‘vehicle emissions standard’. Canada has not adopted these regulations, yet they are the only way in which its preferred regulatory approach could have achieved its promised reductions in a sector like transportation.

As noted, I conduct this evaluation to compensate for the lack of an external check on the GHG reduction promises of politicians. However, while the Commissioner on Environment and Sustainability under the Auditor General of Canada lacks the modeling capacity to fully evaluate the likelihood that the government is acting to meet its commitments, in 2012 it nonetheless produced an evaluation based on modeling by Environment Canada. It noted that because the government had done little, including still not implementing emissions regulations in the all- important oil and gas sector, “it is unlikely that enough time is left to develop and establish greenhouse gas regulations ... to meet the 2020 target.”4 That statement was made in 2012, with eight years remaining to the 2020 target. Today, in 2015, still no additional climate regulations have been passed at the federal level.

Even with no federal policies, it is conceivable that Canada’s emissions will fall somewhat for other reasons. The global recession of 2008-2009 caused a temporary reduction in Canadian emissions. Provincial climate policies may also play a role. Ontario’s closure of its coal plants was by far the single greatest cause of emission reductions in Canada in the past decade. And the BC government issued a near-zero-emission electricity requirement in 2007 which led to the cancellation of two proposed coal-fired power plants and a large natural gas-fired plant. National emissions would have climbed more rapidly were it not for these provincial policies.

In 2014, a research associate under my direction used the CIMS model to estimate the relative effects of the federal government’s policies (such as the coal plant regulations) and other developments (such as provincial climate policies) on Canadian emissions in the 2020 and 2050 timeframes to assess the likelihood that the federal government would keep its emission reduction promises.5 Even with the economic recession and the proposed climate policies of provincial governments, the study found that emissions in 2020 would be over 20% higher than the Canadian government’s promise (744 Mt CO2 instead of 612 Mt.). This is almost identical to an estimate made by Environment Canada with a similar model a year earlier.6 A key factor in both studies is the assumption that oil sands production would rise from 1.9 million barrels per day in 2012 to 3.4 in 2020. Even though oil sands expansion is one of the major reasons why the Canadian government would break its emissions promise, its promotion of this expansion is nonetheless one of its highest priorities.

Finally, because the federal government has done virtually nothing to reduce emissions, my research associate calculated that the government, at this late date, would need to apply a carbon tax of $50 in 2015 that rises in annual increments to over $150 by 2020 in order to keep its climate promise.7 Moreover, even the 2050 target is in jeopardy, unless government very soon implements a significant and rising price on carbon emissions or regulations of equivalent effect.

Report Card
In 2006 the Canadian government committed to reduce national GHG emissions 20% by 2020 and 65-70% by 2050. The government claimed, moreover, that it would use regulations (rather than emissions pricing) to force the shift toward low emission fuels and technologies throughout the Canadian economy.

Since 2006, the government has implemented no regulations that would materially reduce Canadian GHG emissions from what they otherwise would be in 2020. The two regulations it has implemented (coal plant emissions and vehicle efficiency) may slightly slow the growth of emissions after 2020, but they would contribute only marginally to the energy system transformation that must occur by 2050 for the government to keep its promise. Because of nine years of inaction, it may already be extremely costly to achieve the 2050 target.

In climate policy, the Canadian government has done virtually nothing to keep its 2020 and 2050 emission reduction promises. A failing grade is the obvious result.
Brief descriptions of these two models are provided in Peters, J., Bataille, C., Rivers, N. and M. Jaccard, Taxing Emissions, Not Income, 2010, CD Howe Institute.
Government of Canada, 2007, Regulatory Framework for Air Emissions. Government of Canada, 2008, Turning the Corner. While the government later changed its 2020 target slightly, from 20% to 17% reduction, this has no significance for the analysis and evaluation reported here. To discourage mid-stream target changes, I focus here on the initial promise of the federal government in 2006.
Jaccard, M. and N. Rivers, 2007, Estimating the Effect of the Canadian Government’s 2006-2007 Greenhouse Gas Policies, CD Howe Institute.
Auditor General of Canada, Commissioner on Environment and Sustainability, 2012, Meeting Canada’s 2020 Climate Change Commitments.
5 Kniewasser, M., 2014, Achieving Canada’s Climate Targets and the Impacts on Alberta’s Oil Sands Industry, Master’s Project, School of Resource and Environmental Management, Simon Fraser University.
6 Environment Canada, 2013, Canada’s Emissions Trends 2013.
7 Kniewasser, M., 2014, Achieving Canada’s Climate Targets and the Impacts on Alberta’s Oil Sands Industry, Master’s Project, School of Resource and Environmental Management, Simon Fraser University

Friday, 29 May 2015

BC and LNG: Better Late or Never

By Mark Jaccard and Tom Gunton
Originally appeared in the Vancouver Sun October 14, 2014

Our LNG discussion has certainly changed from 2013, when Christy Clark’s “Debt-Free B.C.” slogan promised voters huge tax revenues from exporting the “world’s cleanest LNG.” Industry calls the shots today, threatening to invest elsewhere unless government quickly delivers on tax breaks, minimalist royalties, and environmental deregulation. It’s a sobering time.

Increasingly, one hears our government has moved too slowly, just as a prospector arriving too late to a gold rush. But this argument reflects a fundamental misunderstanding of today’s natural gas market. It can have potentially harmful repercussions for our economy and environment. Here is why.

Monday, 2 February 2015

Pipelines, Politics and Perjury

Here is the announcement for my my VPL talk to be held Thursday Feb. 5, 2015 at 7 pm at the Vancouver Public Library.  Click on it for a larger view.

Here is the VPL link.

Saturday, 31 January 2015

Understanding oil demand, oil prices and climate

It is amazingly difficult to get people to understand that if humanity acts seriously to reduce CO2 emissions, the price of oil would fall to very low levels - and stay there. In this op-ed in the Globe and Mail in December 2014, I explain the competitive drivers of oil prices, and why these prices have been really low for most of the past 100 years, even though human self-deception has most people thinking otherwise. In future op-eds and blogs I will present our research of the last two years on the path and level of the price of oil.

Oil Prices: A Lesson in Markets

Mark Jaccard
Globe and Mail, December 1, 2014

For 27 years in my graduate energy seminar, I’ve struggled to convince bright master’s and PhD students that oil prices might actually result from competition rather than a price-fixing conspiracy of oil companies and the Organization of Petroleum Exporting Countries cartel. But this year, my task was easier.

We start by reviewing several commodity prices – potash, lumber, copper, oil – which show that the oil market is not atypical. We see that all oil producers receive the same price, which is usually at or above the production costs of the most expensive suppliers, such as Alberta’s oil sands and North Dakota’s shale and tight oil. Low-cost producers, like Saudi Arabia, get more profit from each barrel.

Monday, 10 November 2014

Vancouver’s municipal election and pipelines

It seems ironic that people who argue vaguely that we should all do our part against accelerating carbon pollution will then react to specific efforts by saying “sorry, wrong jurisdiction.” The Canadian government cannot act because climate change is a global problem, so we must wait for all countries to act simultaneously. Nice. And even though we know that carbon pollution goes up as we expand fossil fuel infrastructure, like oil pipelines, the government of B.C. should not try to stop the Kinder Morgan oil pipeline because this is federal jurisdiction. Ditto municipal governments, like that of Vancouver and Burnaby.

We know where this leads. Everyone shirks their responsibility, and we stay on course for a catastrophe.

This is why the municipal elections in Vancouver and Burnaby are important. In both cities, we have municipal governments that understand their responsibility. In both cities, these governments are challenged by opponents who are saying “sorry, not our jurisdiction.”

If you want to stop oil pipeline expansion to metro Vancouver as part of the climate effort we must have, remember to blame yourself next Saturday if you waste your vote so that the pro-pipeline parties attain power.

Wednesday, 15 October 2014

My invited review of Naomi Klein’s book in Literary Review of Canada

My review of Naomi Klein’s book is now up on the website of the Literary Review of Canada, and will appear in the November 2014 print edition.  Please distribute by e-mail, twitter (@MarkJaccard) and Facebook to people who might be interested.

Below is my blog that provides some elaboration.

Notes to accompany Jaccard review of Klein book: This Changes Everything

October 14, 2014

What is Klein’s thesis? What is the contribution of her book? I think she would say that her book demonstrates that we must change capitalism if we are to succeed against the climate threat: “system change, not climate change.”

But to convince us of her thesis she needs to show: (A) why efforts that do not involve profoundly changing capitalism have not worked and will not work; and (B) why her proposals will work and why they “change everything about our economic system.”

Friday, 8 August 2014

Energy: Consider the global impacts of oil pipelines

Please follow the link to get free access to our Commentary in Nature calling for a moratorium on new oil-sands development and transportation projects until better policies and processes are in place.