A New Climate Leadership Plan

On August 19, 2016, the British Columbia government released its much anticipated Climate Leadership Plan (the New Plan). The New Plan aims to build on the original Climate Action Plan to bring the province closer to its long-term greenhouse gas (GHG) emissions reduction goals.

In 2008, the Government launched its original Climate Action Plan (the Original Plan) to reach its GHG emission reduction targets, which included a 33 per cent reduction in GHG emissions from 2007 levels by 2020, and an 80 per cent reduction of GHG emissions from 2007 levels by 2050. It became the first jurisdiction in North America to introduce a broad-based carbon tax and commit to carbon neutrality in its public sector operations. BC achieved significant initial progress under the Original Plan, but progress plateaued in 2012. GHGs in BC have begun to rise again and are projected to continue increasing. Consequently, BC will not be able to reach its 2020 goal. Experts argue that the 2050 goal may still be attainable.

What Does the Plan Do?

The New Plan comprises the following major elements:

  1. The New Plan will not increase the carbon tax rate, leaving the tax rate at $30 per tonne of CO2 equivalent emissions. $30 per tonne has been the tax rate since 2012. This rate was part of the Original Plan and is consistent with BC’s earlier promise to keep the rate at $30 per tonne until 2018. In November 2015, the Climate Leadership Team had recommended increasing the carbon tax at a rate of $10 per year commencing in 2018. However, this recommendation was not accepted.
  2. The New Plan affects electricity and gas utilities. In the future, any electricity acquired by BC Hydro that is not from a clean or renewable energy source must be approved by the government through an Integrated Resource Plan, where it will be aligned with specific reliability or cost concerns. BC Hydro will also be expanding demand-side management programs (DSMs), thereby enlarging the role that such DSMs play in helping customers reduce energy bills. The New Plan will also implement a new regulation by 2020 to set energy efficiency requirements for gas fired boilers.
  3. The New Plan aims to reduce emissions from the transportation sector. Currently the transportation sector accounts for 37 per cent of GHG emissions from BC. The New Plan renews the Clean Energy Vehicle program which incentivizes the purchase of clean energy vehicles and scrapping of older, less energy-efficient vehicles. It also incentivizes the conversion of commercial vehicle fleets to renewable natural gas, and will increase the Low Carbon Fuel Standard to 15 per cent by 2020.
  4. The New Plan also targets methane emissions in the liquefied natural gas (LNG) sector, including from non-combustible sources such as venting and fugitive emissions. The New Plan establishes a methane emissions reduction strategy to reduce fugitive and vented emissions by 45 per cent from current levels by 2025.

How The New Plan Stacks Up Against Other Jurisdictions

In March 2016, Canada’s federal government, along with all of the Canadian provinces, set out a goal of a 30 per cent reduction in GHG emissions from 2005 levels by 2030. To that end, the federal government is expected to introduce legislation setting out a national carbon levy later this year.
In November 2015, Alberta released its Climate Leadership Plan, which included a 100 megatonne annual limit on GHG emissions from the oil sands, and a goal of reducing methane gas emissions by 45 per cent from current levels by 2025.

In line with its Climate Leadership Plan, Alberta passed the Climate Change and Emissions Management Act in June 2016, which will come into force on January 1, 2017. This regime includes an Alberta economy-wide carbon levy at a rate of $20 per tonne starting in 2017, and $30 per tonne starting in 2018.

The Alberta levy is lower than BC’s carbon tax which is already set at $30 per tonne. The introduction of the Alberta levy, however, may allow BC industry to remain more competitive as other jurisdictions begin to implement similar regimes.

In May 2016, the Ontario government passed the Climate Change Mitigation and Low-carbon Economy Act. The Ontario government intends to join with Quebec and California as part of the Western Climate Initiative’s cap-and-trade regime. GHG emitting entities located in Ontario who trigger a compliance threshold (currently set at 25,000 tonnes of CO2 equivalent/year) must aggregate a combination of allowances (either issued free or purchased by auction), offset credits and early action credits equal to their allowable emissions. The first Ontario allowances auction is scheduled for September 2016, at which point more will be known about carbon pricing in Ontario.

In 2013, Quebec established a provincial cap-and-trade carbon market which is now integrated with other US markets participating in the Western Climate Initiative.

What this Means for Industry: Opportunities and Risks

The BC government’s aim is to maintain its leadership in climate change while maintaining a strong economy. To accomplish this overall goal, the New Plan incentivizes innovation in the clean technology sector, low- or zero-emission transportation, and high-efficiency building materials, to name a few.

The focus on transportation and methane emissions under the New Plan means that related industries will have a period of adjustment, and will likely experience some growing pains. Energy intensive, trade-oriented industries will continue to face challenges when trying to compete with jurisdictions with weaker climate policies. This is especially the case for the LNG sector.