By Gordon Hamilton, Vancouver Sun April 19, 2011 6:36 AM
British Columbia has a bank of carbon credits already approved for sale that adds up to over $1 billion once a promised cap-and-trade system is established by the Western Climate Initiative, says the Sauder School of Business ISIS research centre.
The $1 billion credit has essentially created a new export industry for the province, ISIS executive director James Tansey said in an interview Monday.
ISIS came up with its billion-dollar figure by tracking the total value of carbon offsets in six proposals that have already been validated by the Pacific Carbon Trust, the Crown corporation set up to deliver greenhouse gas offsets once a trading system is in place.
“These are the ones at the end of the pipeline,” Tansey said of the six B.C. projects. “There are others in the pipeline. They go through three or four stages of approval before they become public.”
The stages involve an audit-like process to ensure a real reduction in greenhouse gas emissions has taken place that can me measured, registered and tracked by an independent auditor and finally, would be above and beyond a business-as-usual scenario.
Most of the B.C. projects identified by ISIS are forestry-related. ISIS conducts research around sustainability themes such as a low-carbon economy. The projects are:
•A Great Bear Rainforest project that sequesters a million tonnes of carbon a year by reducing timber harvesting levels.
•A TimberWest Forest project that generates up to 200,000 tonnes of carbon reductions a year.
•A Truck Loggers Association and Central Interior Logging Association project to create energy efficiency by retrofitting vehicles that could save 100,000 tonnes of carbon emissions a year.
•A conservation project on private land in Eastern B.C. that has yet to be publicly announced. It will generate from 200,000 to 300,000 tonnes a year of carbon reductions.
•A LaFarge Cement project to use biomass, rather than fossil fuel, to generate energy, which would generate 100,000 tonnes of carbon reductions a year.
•An energy company offset project that improves conservation of natural gas at drilling sites, cutting annual carbon emissions by 30,000 tonnes.
The total carbon credits for the six projects adds up to 1.65 million to 1.75 million tonnes of carbon a year that will not be emitted into the atmosphere, measured over a 10-year period for technology-driven projects and a 30-year period for forest lands projects. ISIS used those time frames and two different values for carbon credits — $15 a tonne for the 10-year projects and $33 a tonne for the 30-year projects — to come up with a $1 billion benefit, Tansey said.
Pacific Carbon Trust president Scott MacDonald would not verify the ISIS numbers, but he said the Crown corporation expects to have 30 projects approved by the end of June totalling one million tonnes of carbon this year.
“We will buy up to one million tonnes of carbon offsets from within British Columbia this year. That will be completed by June 30,” he said.
The Pacific Carbon Trust does not disclose the price it buys credits for as it is negotiated. It sells those credits for $25 a tonne, either to government agencies to meet the B.C. government goal of reducing emissions — about one million tonnes this year — or to companies participating in the market on a voluntary basis.
California, the lead state in the Western Climate Initiative, has pledged to be ready to trade carbon by Jan. 1, 2012. It has already set a floor price for carbon credits at $10 a tonne and WCI estimates they will be valued at $33 a tonne by 2020.
Seven U.S. states and four Canadian provinces are members of the initiative.
However, only California and Quebec are committed to the 2012 deadline. There is uncertainty over the depth of British Columbia’s commitment under Premier Christy Clark. Environment Minister Terry Lake said recently that cabinet wants to review options and has yet to decide whether or not to participate in Jan. 1 deadline. B.C.’s reluctance prompted the ISIS study.
“When that was clear a few weeks ago, that’s when we pulled together some numbers and did a survey of some of the projects in the pipeline,” Tansey said.
He said the debate in B.C. appears to be framed by the regulatory burden to companies rather than the economic opportunity in California.
“It had been described as simply new regulation. What we want to say is that regulation creates a clear line of sight to very strong economic opportunities for B.C.”
Cap-and-trade is being promoted as a system aimed reducing total greenhouse gas emissions in member provinces and states by first capping carbon emissions to meet air-quality goals and then creating carbon credits from sources like the Great Bear Rainforest project that could be traded to polluters as one alternative to cutting back on production. In B.C. the goal is to reduce emissions below the 2007 level by at least 33 per cent by 2020 and 80 per cent by 2050.
Under cap-and-trade, any business emitting more than 25,000 tonnes of carbon a year will be hit by the carbon cap. In B.C., there are 75 such businesses, mostly oil and gas, pulp and paper, mining, cement and chemical companies.
Business is leery of the plan to buy and sell credits in a carbon-restrained world, saying not all the implications have been sorted out.
“The challenge with climate policy is that it is many different things. There is no question that there is an opportunity for businesses, particularly in the forest products industry here in B.C. to develop some new lines of business that will come from the sale of offsets,” said Jock Finlayson, of the B.C. Business Council.
“But for a lot of industries it is going to be difficult to reduce emissions in a cost-effective way and most of the jurisdictions we compete with, like Alberta, are not going to be part of it,” Finlayson said. “We do need to be careful — and we are certainly urging the government — to analyze B.C.’s role potentially in the WCI framework through an economic lens. Let’s make sure we understand the economic upsides and downsides and the risks and unknowns.”
Finlayson said not only is there is uncertainty whether cap-and-trade will be implemented by California on Jan. 1, but there are too many questions about it that remain unanswered. The province has not yet done it’s homework on the implications of a cap-and-trade regime, he said.
In B.C., the biggest buyer of carbon offsets right now is the Pacific Carbon Trust, which is mandated to meet the B.C. government’s carbon neutrality target of one million tonnes of offsets a year. Carbon offset regulations come under the Climate Action Secretariat within the environment ministry. Each member of the Western Climate Initiate has its own climate action secretariat.
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