Canada's national climate change policy takes another hit...

Just over a week ago, the momentous climate change bill sitting in the United States Senate was dropped. As The Economist put it, "the idea of a cap on America's emissions died with barely the bathos of a wimper." The already diluted bill had been sitting in the Senate for a few months but wasn't getting all that far. And the Democrats, already looking to be thumped during this November's midterm elections, aren't willing to spend whatever political capital they have left on another controversial bill.

So for now the Americans wait. Again. Will a national climate plan, as envisioned by Barack Obama or otherwise, ever come to fruition?

Sadly, with the news from our neighbours to the south, Canadians are left to ask themselves the same question.

Canada's national climate change policy up to this point has largely -- though not formally -- been tied to the United States. Whatever they do, we'll follow suit. When cap-and-trade was in vogue, it was cool here, too. But since little ever formalized in the US, next to nothing has progressed in Canada.

At least some action is being taken by subnational governments. A few weeks ago three provinces -- Ontario, Quebec and British Columbia -- and seven states -- California, New Mexico, Arizona, Washington, Oregon, Utah and Montana -- released an international emissions trading plan set to begin in 2012. It is part of the Western Climate Initiative and although the plan is not outrageously ambitious -- 15% cut in emissions by 2020 at 2005 levels -- it is better than nothing. Other provinces and states are choosing to do their own thing and hopefully this will demonstrate that a coordinated, national effort is not necessary.

The Economist believes that there is some room for a carbon tax to join the fray in the US. The Environmental Protection Agency now has the authority to regulate carbon dioxide and other greenhouse gases, so it could, theoretically, impose a carbon tax, regardless of whether congress likes it or not. But that would be a bold move and one the Obama administration would have to tread carefully.

But say a national carbon tax is introduced in the United States. Would Canada follow in stride? If the current Conservative government is still in power, it is highly unlikely. After all, they defeated Stephane Dion's Liberals handily after lambasting the idea of a national carbon tax. With another government? Perhaps. Or maybe the federal government will be happy with the handful of provincial schemes.

In any case, the standstill in the United States won't help Canada battle climate change one bit. 

Local carbon offsets...

Let’s get one thing straight. I don’t like carbon offsets. I think that they overshadow the real problems we have to deal with by allowing us to buy our way out of it. Feel guilty about driving your Escalade? Just pay someone to plant some trees. Phew, that guilt was getting a little heavy.

But what I will concede is that they are better than nothing. If Johnny is going to drive his Escalade no matter what, it’s preferable that he does something to offset the drive as opposed to nothing at all. That being said, involuntary programs like a carbon tax or cap-and-trade system might hit Johnny closer to the source so he wouldn’t drive his Escalade as much.

Now, some carbon offset programs are better than others. I won’t go into detail about all the drawbacks and general silliness of the industry this time, but you can find my views on it here. Quite simply, I think that national and international carbon offset programs are fraught with dangers, most notably the arbitrary – and profit-raising – price-setting by offset companies and the occasional ineffectiveness of the actual offset project, disappointingly common with tree planting.

I am currently involved in a project exploring the feasibility of different carbon offset programs that would operate locally in Peterborough and the Kawarthas. Despite all I hold against offsets in general, local offset programs do have a certain appeal.

Instead of putting your money towards a project that could be on the other side of the world, you could instead put your money towards a project you could see every day, be run by people you know, or that even yourself are involved with. Your money could go towards a community-owned renewable energy project, the protection of natural land you think is important or even educational projects.

Such programs do face many barriers. There is only so much money that can come from a local market, especially in areas that are not densely populated. And the added costs of financing projects without high economies of scale – and in some cases, without profit in mind – might prevent financial viability. The impending arrival of international carbon trading markets might also prevent some programs from getting off the ground, as communities wait for regulations and standards to be set so their projects would comply. Local projects would share the arbitrary nature of price-to-carbon valuation, but people may be less concerned about precise pricing with local projects they have a direct connection with, especially those of the non-profit type.

Carbon offsets bother me, but they’re better than nothing. And certainly better than nothing when done on the local level with local interests and benefits to the community in mind.

Canada's government tries to green up its Olympic climate impact...

Stop the presses! Canada's Conservative federal government is taking moderate steps to do something about climate change. Ok, ok, I'll remove my tongue from my cheek.

According to the Globe and Mail, Canada's Environment Minister, Jim Prentice, announced that the federal government is looking to offset the carbon emissions of federal bureaucrats working on the Olympics. Using the same carbon footprint method utilized by the Vancouver Organizing Committee to measure its own footprint, the feds estimate that the bureaucrats will create a total of 7,600 tonnes, largely from air travel, accommodation and the 45,000 km Torch Relay.

The price? $150,000, which it hopes (through a competitive bidding process) to be put towards some form of renewable energy generation or building envelope conservation in Canada.

I find several things very interesting with this move by the feds. First, I suppose some (but not too much) praise should be given to the federal government. After all, no one is forcing them to do this and it is certainly better than nothing. But let's not go too far. As I have said before and will say again -- to some dismay from a certain unprofessional representative of a company with a vested interest in it -- carbon offsets are stupid. They allow people to continue to engage in climate changing activities and simply buy their way out. Moreover, its voluntary, so you don't actually have to do it. But this is old news and I suggest reading the above hyperlink if you want a more detailed assessment of carbon offsets.

The two other things I notice are a little more political. Considering it is going to be delivered under a "competitive bidding process", expect to hear very little about it actually being completed any time soon. These processes can be exceptionally lengthy, especially with a government that is far from quick to move with its climate policies. What is important for them is that they can say that they have committed to it, which is a particularly valuable political tool.

The second political implication of such a move may not be as useful for the Conservatives. Let's do some quick math. $150,000 will buy 7,600 tonnes of carbon. That suggests a carbon price of $19.74/tonne. Not even the Liberals thought that price was politically acceptable when they introduced their Green Shift carbon tax platform. Now, a one time, $150,000 carbon offset is a little different than a national tax, but if I were any of the opposition parties, I would hold the Conservatives to that price anytime they talk about any carbon pricing policies in the future.

A cap-and-trade system -- likely coming within the next few years -- will limit the government's control over carbon pricing, but setting the cap level and issuing permits gives the government some influence.

The Conservatives will likely not associate this carbon offset manoeuvre with any broader climate policies, but they could be held accountable by opposition parties and political onlookers.

Lastly, 7600 tonnes?!?! As one commentator on the Globe and Mail put it, that's a lot of hot air. That's equivalent to the emissions generated from the total electricity used by 1000 homes in the US for one year, according to the EPA. I wonder how far the government explored reducing its initial carbon footprint, rather than simply buying its way out later (with taxpayers dollars, nonetheless).      

Carbon pricing vs. feed-in-tariffs: How should we really be spurring development of renewables in Canada?

Much praise has been given for Ontario’s Feed-in-Tariff program and its potential to develop renewable power generation to levels comparable in countries like Germany and Denmark, where FITs have also been used. But some have commented that a carbon pricing system (either through a carbon tax or cap-and-trade system) would be far more effective. They are only half right.

They are right because a FIT is very expensive. Indeed, Ontario’s Green Energy Act has allocated $5B over the next five years, much of which will be put towards its FIT program. A carbon pricing system, on the other hand, is relatively cheap to maintain and (if done properly) a revenue generator. These people are also right because it effects traditional energy production, specifically fossil fuel generation like gas, oil and coal. The price of generation of these technologies increases and makes renewables more economically attractive. Moreover, for those with a particular appetite for freedom of choice, it doesn’t let governments pick and choose the technologies it wants. Indeed, the market decides.

In his book, Heat, George Monbiot struggles to find out how renewables alone could supply our current demand for energy. In short, they can’t. A carbon-pricing scheme would make energy conservation more attractive because we’d have to pay extra for wasting energy. Furthermore, even if we can’t get to the energy demand levels required for purely renewable power generation, a carbon-pricing system could make carbon capture and storage technologies economically viable without massive public subsidies.

But they are wrong because a carbon-pricing scheme alone won’t solve the problem of developing renewables. First, if the market has its way, only the cheapest renewables would get built, most likely hydro and on-shore wind power. But several other technologies would get left out in the dust. Solar PV, wave, tidal, offshore wind and even some biofuels wouldn’t be able to compete. This is not to say these technologies are not beneficial, but rather that they are immature. Considering that many in the renewable energy field believe we need a diverse mix of all technologies to properly reap the rewards of renewable energy, a carbon-pricing scheme might leave us with only a few options.

This would be fine if there were moving water and windy areas everywhere. But some places are very sunny and dry, some have massive tidal flows and other places really, really hate wind turbines. Specific technologies need to be brought up to par and sometimes a direct and exclusive financial incentive (ex. A technology-specific FIT) is necessary. And if you’re smart about it, like Ontario is trying to be, you can invest in the technology now and export it to the rest of the world for a nice chunk of change. Look at Vestas in Denmark, for example.

Now, it wouldn’t really matter what technology you picked if the carbon price was high enough. As long as a technology can make some money, it will be put into use. The problem is that we would need some very high carbon prices.

According to a New Energy Finance study mentioned in The Economist, onshore wind requires a carbon price of US$38/tonne to become economically viable without subsidy. This is not an outlandish price. Carbon taxes in some European countries are over US$100/tonne, so it isn’t politically impossible. But before you get too excited, let’s remember that Stephane Dion’s Green Shift platform ran alongside a $10/tonne tax on carbon and it was demolished. Even the relative success story of British Columbia’s carbon tax is fraught with political opposition, and it’s only hovering around the $15/tonne mark these days. The only large-scale attempt at setting a carbon price is the European Union’s Emissions-Trading-Scheme, which has the price set at US$22/tonne. These prices might eventually get around the $40/tonne mark, but that won’t do it for the more expensive technologies. Offshore wind requires a price of US$136/tonne and solar PV US$196/tonne. You want to set a carbon price to make that economically viable? Good luck.

But this entire post has offered us a false choice. What we really need is both a carbon price and subsidy programs. A price on carbon is absolutely necessary, even if it is as small as $10/tonne. It will at least give some indication to industry and consumers so they can include the carbon costs in their accounts. And any revenues taken from it can go towards subsidies. What’s really needed is the political will and more importantly, public recognition and understanding of why a price on carbon is needed and the necessity of renewable energy technologies.

Finally, I’ll end with a piece of advice frequently used by George Monbiot. No matter what we do to help out renewables or fight climate change, it’s all worthless if we keep feeding the fossil fuel industry with tax breaks and subsidies. Monbiot equates it to filling yourself up on fatty, unhealthy foods, but adding a salad and not expecting to gain any weight. But right now, we’re getting pretty fat.

Stupid Green Ideas: Climate Change Chocolate...

Several weeks ago while attending a conference and trade show in Toronto, I stopped by the booth for a small but prestigious downtown Toronto law firm. After chatting with the young articling student tasked with the poor duty of standing around all day, she handed me a chocolate bar.

I'm used to getting free stuff at these things, but never an entire chocolate bar. Moreover, this was no ordinary chocolate bar. It was a Climate Change Chocolate Bar.

For each chocolate bar produced, a carbon offset group known as TerraPass will offset 133 pounds of carbon dioxide production in one of their projects somewhere in the world. The 133 pounds is not meant to offset the environmental impact of the chocolate bar itself, but rather the average daily carbon impact of an American person, although I'm not sure how verifiable that figure is.

So basically, when you bite down into the chocolate -- which wasn't half bad -- you can happily pat yourself on the back knowing that any carbon emissions you produce that day will be taken care of by someone else.

Wow! This is fantastic. All of these 'green' folks keep telling me all the things I need to do to reduce my personal carbon emissions. You know, turn off my lights, ride a bike, put solar panels on my roof and other things that will inconvenience my life. Screw 'em! I don't need to change anything. I'll just jump back in my Escalade, eat my chocolate bars and let someone else take care of it. Plus, the labels contain different environmentally-friendly things people can do, just in case you don't feel the chocolate is enough.

Apart from the fact that carbon offset groups aren't seriously regulated, their offset projects don't always work and the actual offset calculations are often arbitrary, I don't see anything else wrong with this.

I may have produced a pound or two of carbon while writing this. Good thing I have this chocolate bar...

 

Carbon credits & Ontario's FIT...

Ontario's uber-progressive Feed-in-Tariff program is wonderful for someone wanting to produce renewable energy. Solar PV producers can get as much as $0.802 per kWh produced, which is almost twenty times greater than the market rate for electricity in Ontario.

At the same time, much talk is happening provincially, nationally and globally about a possible cap-and-trade system: Ontario has mumbled about a potential interprovincial program with Quebec; Stephen Harper's government is bound to join up with any system that comes out of the American government (which I assure you, will be a cap-and-trade system); and the climate change summit in Copenhagen in just a few days will have a large cap-and-trade facet to it. For renewable energy project developers, this could mean cashing in on the carbon credits they'd receive for their "emissions-free" projects. They could sell their credits to the less-green folks out there.

Renewable energy developers should be licking their chops. Serious money could be made from two different angles.

But hold your horses. Ontario's independent energy manager, the Ontario Power Authority (OPA & delivery agent of the Feed-in-Tariff) has a nice little clause written into the FIT contract. Under section 2.10 of the contract it reads that "the supplier hereby transfers and assigns to...the OPA who thereafter shall...retain all rights, title, and interest in all Environmental Attributes associated with the Contract Facility during the Term of this Agreement."

In layman's terms, the OPA keeps everything that might contribute to potential carbon credits, which in its terms is an "Environmental Attribute".

You could easily criticize the OPA for doing this, especially for no direct cost in exchange. But the OPA claims that no price can be put on it at this time because their is such uncertainty in what the carbon credits could be worth.

But really, who can fault them? The government is providing huge swaths of money for these projects, so any chance of reclaiming some of that without really harming anyone isn't really out of the question. Furthermore, it could inevitably end up making the FIT program considerably cheaper, if, say in a few years, the government decides to sell its carbon credits on a carbon market to recoup some of its costs.  

This is not a new policy from the OPA. Some of its conservation-demand management programs -- like the Power Savings Blitz program where $1000 worth of lights are given to businesses for free -- have the same "Environmental Attribute" clause written into them.

For now it is not a problem, mostly because a significant carbon market does not exist and nobody really knows about the OPA contract clause. But give it a few years and you can be sure that some people might be a little up in arms when they decide to sell their carbon credits only to find out they don't own them.