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Originally published October 3, 2014 at 9:27 PM | Page modified October 7, 2014 at 11:00 AM

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An occasional series examining the climate-change challenges facing the evolving energy industry

Gas exports may foil B.C. carbon goals

British Columbia has launched an ambitious effort to reduce its carbon emissions by one-third, with a tax on gas, coal and oil use as its centerpiece. But that goal could be subverted by the province’s desire to become a major natural-gas exporter.


Seattle Times staff reporter

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Support for this project

This series was supported by a Perry and Alicia O’Brien Fellowship at Marquette University in Milwaukee, Wis. The fellowship enabled Seattle Times reporter Hal Bernton to spend the academic year at Marquette reporting on this project and working with students from the Diederich College of Communications.

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Vancouver, B.C. — Each time motorists in this province fill up their tanks, they pay a carbon tax of about 25 cents per gallon.

The tax — which hits most of the oil, coal and gas consumed in British Columbia — is a key component in one of the world’s most ambitious efforts to slow climate change by cutting back on carbon emissions.

The taxes are coupled with other measures, including tough regulations that have scuttled plans for new power plants that use fossil fuels.

British Columbia’s audacious goal: Reduce the province’s annual release of greenhouse gas emissions by one-third in a 13-year period that ends in 2020.

While the goal is legally binding, reaching it is no sure thing.

Provincial officials also want to turn B.C. into a major exporter of natural gas. While that may generate tens of billions of dollars in new tax revenue, it could also subvert the province’s carbon-reduction goals.

B.C. hopes to have three major natural-gas export terminals in operation by 2020. The production, piping and liquefaction of this gas for shipment to Asia releases large amounts of greenhouse gases, and development of the terminals could nearly double the province’s current carbon emissions, according to an analysis by the Pembina Institute.

The big push to develop natural-gas exports underscores the challenges of trying to reduce carbon emissions at a time when technological innovations — such as fracking — are opening up massive new storehouses of fossil-fuel energy.

Climate scientists say all those sources can’t be tapped without pushing global temperatures to an extreme range.

Governments that seek to reduce fossil-fuel use can do so through regulations, carbon taxes, or plans that cap emissions and then allow trading for permits that grant the right to pollute.

But without strong political leadership, even the best-designed policies will falter. Some say that is likely to happen in British Columbia under Premier Christy Clark, who already has granted the export terminals a key exemption from the province’s carbon regulations.

“We had political leaders who all agreed that we should act on the climate, and that put us on a very dramatic path,” said Mark Jaccard, a Simon Fraser University economist who served as a consultant in the development of the carbon tax. “But don’t for any second pretend that we are still on a dramatic path in British Columbia.”

Provincial government leaders dispute that critique.

They say that some of the natural gas will replace higher-carbon coal now burned in Asia, and they will do everything possible to reduce the greenhouse-gas footprint of these new export plants. They maintain that British Columbia will have the cleanest liquefied natural gas terminals in the world and can still hope to meet the 2020 target for reductions in carbon emissions.

But they also say they must look at how green policies affect the economy and they don’t want to forgo gas development that would be a major financial boost to the province.

“You have to be constantly balancing the need to protect our environment with the desire to grow our economy and support social programs,” said Mary Polak, B.C.’s environment minister.

Political initiative

In British Columbia, former Premier Gordon Campbell provided the early political will to push ahead with carbon reductions.

Campbell initially appeared to be an unlikely champion of carbon reduction. He spent his first five years in office largely focused on the economy.

His eventual plunge into climate activism resulted, in part, from a trip to China that left him contemplating — as a new grandfather — the effects of runaway economic growth on the planet, according to Jaccard.

As his attention turned to climate change, Campbell, leader of the province’s Liberal Party, was at the peak of his political power. His new agenda benefited from ample support in a province where many prided themselves on environmental activism.

By 2009, Campbell’s government had passed a suite of measures that included increasing energy efficiency, new regulations to green government agencies, and strict clean-energy standards requiring that 93 percent of all new electrical power plants produce no carbon emissions.

The clean-energy standard forced the state-run B.C. Hydro to abandon plans to contract for coal and natural-gas generation within the province. By 2020, the tougher standards are expected to head off four to six times more carbon emissions than the carbon tax, according to Jaccard.

But the carbon tax is the highest-profile climate measure enacted by Campbell.

The tax was introduced at $10 per ton of carbon, and gradually escalated to $30 a ton by 2012. During that time, greenhouse gas emissions declined by 6 percent.

The tax was accompanied by cuts in corporate and income taxes, and subsidies to the poor, so that the B.C. government ended up with no net increase in revenue.

Movement setbacks

When the carbon-cutting measures first took effect, provincial politicians thought they were part of a powerful global movement to combat climate change.

Since then, there have been plenty of setbacks.

In the European Union, a poorly designed cap-and-trade system has not worked as well as hoped. In Australia, a new prime minister successfully pushed this year to repeal the nation’s carbon tax.

In North America, some of the most ambitious efforts are at the regional level. California is moving ahead with a cap-and-trade system and will require that renewables provide 33 percent of utilities’ electricity by 2020. In Washington, Gov. Jay Inslee is expected to propose a plan that will likely include a cap-and-trade system.

But on the national level in the United States and Canada, efforts to put a price on carbon emissions have made little headway.

That’s left British Columbia’s current premier, Clark, wary of pushing the province — which generates just a sliver of North America’s total carbon emissions — too far ahead.

Clark has imposed a freeze that prevents any escalation in the current carbon tax through 2017.

Still, polling in British Columbia indicates the tax has strong public support.Even the opposition party no longer calls for its repeal.

But some British Columbia companies that rely heavily on fossil fuels, such as a Chevron refinery in Burnaby, still bridle at the tax. They say it makes it hard to match the prices of competitors in other parts of Canada.

“There really is an issue of a level playing field ... It puts us at a huge disadvantage,’’ said Steve Parker, general manager of the Chevron refinery.

So far, Chevron officials say the tax is an unwelcome cost of doing business. But it didn’t spur them to develop significant new ways to cut emissions. That’s because some conservation measures were already in place before the new measure, and they say larger steps still are not worth doing at the current level of the tax.

Gas-industry exemption

For British Columbia, the expansion of the natural-gas industry represents the biggest hurdle to cutting carbon emissions.

If the export terminals are built, the industries that produce, pipe and process natural gas for overseas shipment are likely to be, by far, the province’s largest source of carbon and other greenhouse-gas emissions.

British Columbia is competing with other gas-rich regions for a share of the Asia market, and politicians have been wary of piling on too many costs that might stifle a potential economic bonanza.

So the provincial government has extended a partial exemption from the carbon tax for the gas industry. Carbon dioxide typically is present in natural gas as it comes out of the ground. The exemption allows the industry to remove this gas and release it into the air without paying a carbon tax.

Without a tax, there is no incentive to bear the added expenses of injecting the carbon dioxide underground so it won’t contribute to climate change.

“You’re looking at about $500 million to permanently capture and store the CO2, and the question then becomes how does this become an economic investment, and who’s going to pay for that?” said Gary Weilinger, a vice president of Spectra Energy, which processes gas produced in eastern British Columbia.

The natural-gas industry also benefits from an exemption from the Clean Energy Act that frees up the export terminals to use natural gas — rather than zero-carbon hydropower — to generate electricity that provides part of the energy used at the facilities.

Canadian environmentalists have been campaigning for a major redesign of the terminals so hydroelectricity could be the primary source of power.

But gas exporters say this approach could jeopardize profitability.

Even if natural gas is used to power the terminals, provincial government officials say, they will still take steps to make these projects greener. If pollution levels rise too high, one option may be to require terminal developers to invest in other projects that reduce carbon emissions.

“We will see what we end up with,” said Polak, the environmental minister. “But suffice it to say, there are many, many opportunities, and we have to be constantly aware of our place in the world.”

GRAPHIC BY GARLAND POTTS / THE SEATTLE TIMES

Hal Bernton: 206-464-2581 or hbernton@seattletimes.com

Marquette University student Alex Krouse assisted in research for this story.



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