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The Right Carbon Tax for Canada

by John Brian Shannon

“Canadian business needs a fair, transparent, and proportional carbon tax to spur action towards a cleaner environment.”

Which is not the same statement asCanada must punish Canadian industry so the country can meet it’s COP21 emissions targets.”

See the difference?

Unfortunately, in the rush to meet Canada’s global air quality commitments (admirable) the federal government may have leaned more towards ‘action’ on the carbon file rather than ‘smooth implementation’ of the carbon file (forgivable) and now has at least two provincial premiers questioning the mechanics of the federal carbon tax plan.

In the end, both methods would result in Canada’s emissions targets being met, but one way is complimentary while the other is confrontational.

Which of the two ways exampled above would cause you to want to work with the federal government to reach Canada’s international emissions obligations?


No Need to Reinvent the Wheel – Just Fix the Broken Parts and Carry On

Federal Carbon Taxes: Small business always suffer in these scenarios, while large corporations already have multi-million dollar environmental + energy budgets — which means all that’s required for them to meet upgraded emissions targets is a shift in their budget allocations to meet Canada’s new emissions regulations.

Therefore, for polluters emitting less than one megatonne of CO2 annually, such companies shouldn’t pay any carbon tax until they surpass that limit and thenceforth begin to pay a $40. per tonne carbon tax (for example) on any emissions beyond the one megatonne threshold.

Likewise, large companies shouldn’t be required to pay carbon tax until the point in the year is reached where they surpass the one megatonne limit and only then begin to pay $40. per tonne of CO2 (or CO2 equivalent, because not all airborne emissions are of the CO2 variety) on each additional megatonne for the rest of the calendar year.

In this way, Canada’s carbon tax model would be a breeze to implement, a carbon tax that would be small business-friendly, and one that provides an incentive to bigger companies to work toward reducing their emissions over the longer term.


Carbon Taxes Administered by Provinces and Cities

Provincial carbon taxes: Provincial and city carbon taxes should be ‘flow-through’ carbon taxes where 100% of each dollar collected at the transactional level (a point-of-sale tax like a provincial sales tax) is spent on poverty alleviation, or on energy conservation + investment in green energy projects + green energy bonds. As is already done in some Canadian provinces.

Provinces and cities that face serious air quality problems would be thereby empowered by federal legislation to address their unique air pollution issues and be better positioned to help Canada meet its international emissions targets while lowering their healthcare and environmental spending associated with air pollution.


Annual Step-up Carbon Tax

Start with a low carbon tax: If the ‘year one’ federal carbon tax is set at $40. per tonne, the next year could be set at $50. per tonne, and ‘year three’ $60. per tonne, etc., it would allow Canada to continue to meet its emissions goals and to lower environmental and healthcare spending in Canada where a significant proportion of healthcare budgets are devoted to treat respiratory ailments brought-on or worsened by the poor air quality in Canadian cities (and some high land use agricultural areas) and could actually save provincial budgets millions of dollars per year.

If there’s one thing that markets and big business like, it’s a long lead time for new regulations and a ‘carbon-tax-free-zone’ that they can shoot for which will help them lower costs by increasing efficiency (which is closely tied to productivity, ask any economist) and a step-up carbon tax gives them the opportunity to adjust their operations several years ahead of the time when it could begin to get very costly for them.

Hitting Canadian companies with a $220. per tonne carbon tax (which is what Stanford University says is the true environmental and healthcare cost of each tonne of carbon) would prevent companies from attracting the funding required to lower their emissions.

In a perfect world, legislators would slap a $220. per tonne carbon tax on every level of government, each corporation and on citizens and all of them could afford to pay it. Sadly, that isn’t possible. But starting out at $40. per tonne allows companies to begin the process of lowering their emissions without stressing corporate finances.

If you doubt how costly pollution is to the economy, see the landmark study from Harvard Medicine which estimates coal-burning alone costs the U.S. economy between $330 billion and $500 billion per year.


The Need to Address Carbon Pollution

It’s indisputable to any educated person that Canada and every other country needs to address carbon pollution — but ultimately, carbon taxes must be designed to mesh with the overall economy — not entangle it.



Visit The Solutions Project to see how renewable energy can work in your jurisdiction to help citizens live healthier lives, care for the environment, boost the economy and help Canada meet its international air pollution targets.

Images below are courtesy of The Solutions Project

Our 100% Clean Energy Vision for Canada - The Solutions Project. Image 1.

Our 100% Clean Energy Vision for Canada – The Solutions Project. Image 1. Click on image to expand it via your browser tools.

Our 100% Clean Energy Vision for Canada - The Solutions Project. Image 2.

Our 100% Clean Energy Vision for Canada – The Solutions Project. Image 2. Click on image to expand it via your browser tools.

Our 100% Clean Energy Vision for Canada - The Solutions Project. Image 3.

Our 100% Clean Energy Vision for Canada – The Solutions Project. Image 3. Click on image to expand it via your browser tools.

Visit The Solutions Project main webpage here for more information.



Bonus Graphic courtesy of the Canadian Association of Petroleum Producers

 

While the federal government of Canada seeks to meet its international emissions targets, Canadian premiers press for a more business-friendly carbon tax regime.

While the federal government of Canada seeks to meet its international emissions targets, Canadian premiers press for a more business-friendly carbon tax regime. Image courtesy of the Canadian Association of Petroleum Producers. Click on image to expand it in your browser.

How Alberta Could Counter Low Oil Prices

by John Brian Shannon | December 28, 2015

Through no fault of their own, the Alberta government headed by Premier Rachel Notley is facing economic crisis due to the lowest global oil prices in years, and with lower prices ahead it goes without saying that Premier Notley and her new government need to either (a) cut spending or (b) boost government revenue.

If boosting government revenue is chosen, economists know there are only three ways for provincial governments to boost revenues;

  • Raise taxation revenue
  • Raise non-taxation revenue
  • Transfers from the federal government

Let’s forget about putting any more holes in the Alberta economy via increased taxation as the province’s economy is under enough stress since the oil price crash.

Let’s also rule out the return of higher oil prices as oil prices are settling in for a long term run in the $30.-50. per barrel range. Why rule that out?

Simple. Millions of barrels of formerly sanctioned Iranian oil are about to hit the market, hard

For nearly a decade, Iran was sanctioned by Western nations and able to sell only small amounts of oil in the global marketplace. But the sanctions didn’t stop Iran from continuing to develop its oil industry, nor did it stop Iran from buying every spare oil tanker and storing their crude at sea, and in thousands of oil storage tanks on land until sanctions ended.

All of which is about to hit the global oil market.

‘Ready to Ship’ is perhaps an understatement as the sanctions scored a direct hit on the Iranian economy, consequently the country is very motivated to resume normal trade.

And let’s not forget the ‘wellhead price’ of oil in all of this

At the Alberta oil sands, the average extraction price for a barrel of crude oil is $56.20. That’s the average price. At some locations the extraction price can surpass $90./bbl.

In Saudi Arabia, still the world’s largest single oil producer, the wellhead price ranges between $14./bbl and $24./bbl (for #3-4 crude) and they can stand $40./bbl oil prices indefinitely. The Saudi producers don’t care how much the oil speculators are making, as long as the price remains somewhat over $24./bbl, they’re seeing profit.

But in Iran… wait for it… the wellhead price ranges from $1./bbl to $21./bbl and they have the world’s fourth-largest proved oil reserves.

Cost of oil production

Cost of oil production (Due to sanctions at the time this chart was created Iran wasn’t included in the data) Image courtesy of Der Spiegel

Most Alberta oil may be best termed #4 (sour) on the pH scale, tar sands oil can only be called #4.5 or #4.75 and all Alberta crude oil is so sour that it must be blended with liberal amounts of Saudi #3 (sweet) or West Texas Intermediate before any refinery will accept it.

Much of Iran’s oil is of the #3 (sweet) variety, but unlike the situation in other oil-producing nations where most of the #2 (sweet) crude oil was extracted long ago, Iran ranks a close 2nd to Saudi Arabia in proved reserves of #2 crude oil — a perfect match to blend with Alberta’s sour crude.

Therefore, plenty of sweet and cheap-to-produce Iranian oil is about to arrive on the scene and I wouldn’t be surprised to see oil dipping to $28./bbl for a week or two once Iran’s oil exports begin impacting the market.


With the foregoing in mind, let’s look at three ways to boost the Alberta economy:

1. Alberta can still retain its ranking as an energy superpower in the coming decade of depressed oil prices by adding hundreds of wind turbines to the many wind corridors in the province

The  Highway 2 corridor starting at the U.S. border heading north to Edmonton (and perhaps as far north as Athabasca) consists of rolling farmland with excellent wind potential. Any Albertan can tell you about the year-round winds native to that corridor, although they may not refer to it as a ‘wind opportunity’ in the same glowing terms as a wind turbine salesperson might…

Wind Farm Installation in Germany

Typical Wind Farm Installation in Germany. Image courtesy of Phillip May.

Farmers can benefit by allowing wind turbines to be installed on their land.

Each wind turbine requires one acre of land (including service road) which makes that land unavailable for crops, therefore, utilities typically lease the land at $4000. per year/per unit.

Some farmers may allow five, ten, or any number of wind turbines on their property.

And good for them! They lose the ability to grow crops or graze their livestock on a fraction of their land, but unlike cash crop income, the wind tower lease payments are guaranteed regardless of the drought or flood situation.

And that non-weather-dependent annual revenue helps to stabilize farm income.

GE Space Frame Tower

GE Space Frame Tower is a complex metal frame covered by fibreglass fabric. Image courtesy of GE.

The typical wind turbine produces 1 MegaWatt(MW) of clean electricity and cost about $1 million apiece, although the newer (and more costly) wind turbines produce 2 MW.

Day or night, wind turbines produce reliable, clean electricity especially when situated in wind corridors and installed atop 100-200 metre towers. (Taller towers get better wind)

By selling GigaWatts(GW) of clean electricity to residents, businesses, industry, and via electricity exports to British Columbia, Saskatchewan, and to the northern United States, Alberta would retain its place as an energy superpower — regardless of the global oil price.

And we must always heed the words of Saudi Oil Minister, Ali Al-Naimi, “The Stone Age didn’t end on account of a lack of stones, nor will the Oil Age end on account of a lack of oil.”

The end of oil is coming. We need to begin planning for it. An energy grid that meets demand with 50% natural gas and 50% renewable energy and is strongly geared towards electricity exports is in our best economic and employment interests. The sooner we begin to walk that path, the farther ahead of other regional economies we’ll be.

Or, Alberta could drop the ball completely and become an energy importer from places like British Columbia, Saskatchewan, and the northern U.S. states. That might be a little too ironic for some Albertans.

Jobs created per energy type. Image courtesy of IRENA.

Power plant jobs created per energy type. Image courtesy of IRENA

A great way to create thousands of good-paying jobs in Alberta, not only installer jobs but wind turbine and tower manufacturing jobs, is by negotiating with wind turbine manufacturers, and separately, wind tower manufacturers, to build assembly plants in Alberta.

If all the stars aligned, the province could become the defacto capital of Canada for wind turbine and wind tower manufacturing.

And the province has the potential to become an important centre for wind power technologies, by providing the proper funding to the Northern Alberta Institute of Technology (NAIT) and the Southern Alberta Institute of Technology (SAIT).

There isn’t a reason good enough to prevent Alberta from installing 1000 wind turbines per year within its provincial boundaries AND selling another 1000 wind turbines and towers per year to other jurisdictions in Canada. That’s just the Canadian market, and quite separate from the true north strong and free there’s a big windy world out there.

More jobs, guaranteed income for farmers, cleaner air via clean electricity generation, a better economy due to massive electricity exports and higher tax revenues… what’s not to like about wind power in Alberta?

2. Natural Gas as a baseload energy fuel

Due to historical factors, such as the historically low cost and low technology required to produce heat and electricity from coal, (and also due to the low price of massively-subsidized nuclear power) natural gas became a sort of ’boutique’ fuel used to produce power at so-called ‘peaking’ power plants.

Henry Hub gas price to January 2016.

Henry Hub gas price to December 2015. Prices are projected to continue dropping. (At less than $2.00 natural gas becomes competitive with coal-fired power generation) Image courtesy of Plattts

Whenever the coal or nuclear power plants couldn’t meet peak demand, say during summer afternoons when every air conditioning unit was working at maximum capacity, peaking power plants could quickly ramp-up to meet peak demand.

Natural gas power plants can ramp-up or down in minutes, as opposed to coal-fired power generation or to nuclear powered generation, which can take hours or days to ramp-up or down.

With much lower natural gas prices (below $2.00 on the Henry Hub index as of 12/28/15) a huge window of opportunity exists for non-centralized natural gas-fired power generation to enter the energy market as an equal player instead of as a pinch-hitter.

Due to ever-stricter clean air standards and the concerns surrounding global warming, and the obscene water usage of coal-fired and nuclear power plants, natural gas looks to replace coal and nuclear saving billions of subsidy dollars in the process.

Water usage by type of power plant.

Water usage by type of power plant.

Use a cleaner fuel for a cleaner burn

Modern natural gas-fired power generation releases less than half the amount of CO2 as compared to coal-fired power generation.

And that’s just the story on Carbon Dioxide emissions.

It’s the other emissions that are the real problem with coal-fired power generation; It’s things like airborne mercury and heavy metal vapours, sulfur dioxide, oxides of nitrogen and particulate (smoke, ash, and soot) that are the real nasties.

Then there are the thousands of tons (Alberta only) or millions of tons (globally) of fly ash that must be transported and safely buried annually, far from aquifers.

The good news is that natural gas burns up to 1,000,000 times cleaner than brown coal (lignite) and up to 10,000 times cleaner than the cleanest-burning grade of coal (anthracite).

“Each stage in the life cycle of coal—extraction, transport, processing, and combustion—generates a waste stream and carries multiple hazards for health and the environment.

These costs are external to the coal industry and are thus often considered “externalities.”

We estimate that the life cycle effects of coal and the waste stream generated are costing the U.S. public a third to one-half of a trillion dollars annually.

Many of these so-called externalities are, moreover, cumulative.

Accounting for the damages conservatively doubles to triples the price of electricity from coal per kWh generated, making wind, solar, and other forms of nonfossil fuel power generation, along with investments in efficiency and electricity conservation methods, economically competitive.” — Harvard Medicine | Full Lifecycle of coal

As for matching up with wind power, there isn’t a better partner than natural gas-fired power generation. In perfect harmony, natural gas can ramp-up and ramp-down on a minute-by-minute basis to meet Alberta’s electricity demand and can add capacity to electricity exports.

3. Promote Alberta Tourism in a Massive Way

Until now, provinces like British Columbia, Ontario, and Quebec have dominated the Canadian tourism market. And millions of tourists visit British Columbia without ever knowing about the jewel of a province next-door. That must change in 2016.

BC and Alberta must become partners in attracting tourists by launching complementary tourism campaigns in foreign countries — making it seem to prospective tourists that there are so many reasons to visit Western Canada that they decide to visit both provinces and forego travelling anywhere else.

In what other country can you take a cruise ship to a major cosmopolitan city like Vancouver, golf in the morning, ski in the afternoon, enjoy fine dining at night, then hop onboard a scenic VIA RAIL train to Banff, Alberta?

There you can enjoy ice-skating, snowboarding and cross-country skiing or nature hikes, and of course, more fine dining.

Fly-fishing in Alberta.

Fly-fishing in Alberta. Image courtesy of TheRealBanff.com

Don’t forget fly-fishing on the Bow River. Or golfing in Kananaskis Country? Maybe dig up some dinosaur bones near Drumheller.

How about taking in some of the many festivals in Edmonton or Calgary?

Or stay at a working ‘Dude Ranch’ in Bragg Creek rounding-up cattle and wearing your best cowboy hat.

Horseback riding in Alberta

Horseback riding in the Alberta Rockies.

Each $1.00 spent to boost tourism typically returns a minimum of $6.00 making investments in tourism de rigueur for governments wanting to provide jobs and increase government revenues.

Compared to energy megaprojects which take years to ‘break-even’ investment returns from tourism typically happen within 24 months.

Banff, Alberta in Winter

Banff, Alberta in Winter

Of the easiest and surefire ways to stimulate the Alberta economy, this is likely it.

Tourism requires a relatively small annual investment, a medium-sized commitment from the government, and features a 6-to-1 payback within two years. Not bad.

Although not as large as other segments of the Alberta economy, tourism pays back quickly and requires only moderate effort on the part of the government.

Snowboarding Alberta.

Image courtesy of Travel Alberta

I hope Premier Notley makes tourism one of the first priorities of her government in 2016 — even as she works out longer-term and higher reward arrangements to secure a better energy future for Alberta.


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COP21 – Viable Deal or Low Ambition?

by John Brian Shannon

“We must take action. We have spoken a long time, at least 20 years, more than 20 years, and the science has made it plainly clear. The leaders must show their leadership. They have been elected, they have been mandated by the people.” — UN Secretary General Ban Ki Moon

COP21 - the 21st session of the Conference of the Parties - will see more than 190 nations gather in Paris to discuss a possible new global agreement on climate change, aimed at reducing greenhouse gas emissions to avoid the threat of dangerous warming due to human activities.

COP21 – the 21st session of the Conference of the Parties – invites more than 190 nations to Paris to discuss a new global agreement on climate change aimed at reducing greenhouse gas emissions.

The educated citizens of this planet know we need a strong COP 21 agreement, the politicians know they need some sort of agreement to appease their constituents, and although the other species on the planet are unaware of it, they need this agreement too.

Only continued strong global support will make a viable COP 21 deal happen, and let’s remember, it was powerful support from the public that started the environmental movement in the first place.

Without sustained high levels of public support for a viable COP 21 agreement, we ourselves will become the ‘Enablers of Low Climate Ambition’ for today’s politicians.

Climate Default Mode

Because in their heart of hearts, politicians don’t want a strong COP 21 agreement, and won’t sign on to any of it unless it is absolutely forced on them by unprecedented public pressure. (To be fair, there are a few notable exceptions)

Of course, the COP 21 confab will be a nice place for politicians to visit, and will provide a forum for 30-second sound bytes carefully crafted by their staff that politicians don’t see until a few seconds before airtime. Looking smart while standing beside visual cues and spouting high-sounding rhetoric — that’s the life!

Recently, a few articles have appeared in the media casting doubt on the chances for success at COP 21 — which I’ve criticized those media outlets for doing, simply because the last thing that we want to do is ‘give the politicians a way out’ by helping them ‘to go where they want to go anyway’ to their ‘default mode’ which is best termed; ‘Low Ambition’.

I can say this because, so far, whenever anything important comes up politicians look impotent — unless of course, an opportunity appears to bomb brown-skinned people somewhere in the world — then they’re all over it.

Doubt me?

EXHIBIT A: Since 2000, some 135 million people have died from starvation and a lack of clean drinking water.

Another 2 million have died in war, or the after-effects of war, mainly in the Middle East/Levant and Afghanistan. And what did they all have in common besides the colour of their skin? Except for the fact that they’re now dead, nothing else in common.

For those of you counting at home, that’s 137 million deaths since the year 2000.

EXHIBIT B: How many viable climate agreements have we signed since 2000? None.

So far, nothing but rhetoric and platitudes

Since 2000, 137 million deaths due to starvation and war AND no climate agreement. By any standard whatsoever, that has to count as a gross failure of our politicians.

On those two counts, the ‘world leaders’ deserve an F grade. Utter failure. A dismal performance by any standard. Whatsoever.

Hardly a word about either in the world media

I’ll bet you didn’t know that 9 million people per year die of starvation and a lack of clean drinking water, and is a constant number that has been with us for decades with no end in sight. Why don’t you know this? Because it doesn’t ever make the last page of any newspaper.

Imagine if 25,000 white people were dying of starvation and war every day (totalling 9 million per year, or 135 million over 15 years) it would immediately be termed ‘terrorism’ and there would be a war-to-end-all-wars to put a stop to it! No amount of spending would be considered too high to solve such a crisis.

In every seven-year period since the year 2000, more people die of starvation and a lack of clean drinking water than the sum total of all deaths in WWII.

Talking themselves into irrelevancy

Maybe such low ambition is a part of a wider plan to make politicians even more irrelevant than they are now, so that corporations (the only entities that seem capable of making decisions these days) can complete their relatively silent takeover of the world, and then we can all work for corporate America, corporate Europe, and so on…

For peanuts, of course

That way, corporate profits should remain high and corporations can sell their wares to other corporations (because, after a while, nobody will have any disposable income) and it will all be self-financed by a high tariff (import and export taxation) economy.

People will no longer matter. Consumers will no longer matter. Corporations and taxation will rule the world. And no more pesky climate agreements. Won’t that be nice?