B.C. should use policy, not dollars, in carbon fight

In the late 1990s and early 2000s, natural gas prices were high and many major gas consumers worried that continued high prices posed serious risks to future profitability.

One of the more concerned sectors of British Columbia's economy was the commercial greenhouse industry, which uses lots of gas to heat the massive glass structures growing all those hothouse peppers and tomatoes we eat. Back then, some greenhouse operators began installing new woodfired boilers to avoid burning so much gas.

Today, many greenhouse operators have "fuelswitched" - a popular term in today's emerging carbon economy.

The switch to wood, which produces less carbon than gas, was a classic case of businesses responding to market signals, making new capital investments and improving their profitability. All of this happened well before the provincial government initiated policies that financially rewarded select companies for doing so.

Such rewards raise troubling questions about recent actions taken on the public's behalf by the Crown corporation Pacific Carbon Trust.

A brainchild of former premier Gordon Campbell, PCT was integral to the government's goal to become carbon neutral - a milestone that provincial Environment Minister Terry Lake questionably claimed earlier this year was achieved in 2010.

Without PCT purchasing nearly 730,000 tonnes of emissions offsets from companies allegedly involved in what it calls "innovative" efforts to reduce greenhouse gas emissions (greenhouse gases more generally, not just those produced by the greenhouse industry), B.C. couldn't claim to be home to the first carbon neutral government in North America.

Offsets are allegedly achieved when companies do something that results in additional reductions in greenhouse gas emissions.

The offsets can then be marketed to entities that emit carbon dioxide and other greenhouse gases, allowing them to erase, as it were, their own emissions.

The Campbell government anointed PCT as the buyer of such offsets on the public's behalf, and it then required that all public institutions, including school boards and health authorities, purchase offsets from PCT in order to meet the carbon-neutral goal.

Despite recent stories questioning some of the offset projects that PCT financially rewarded - for example, a project by natural gas industry giant Encana Corporation to reduce gas flaring at its wells, even though it produces some of the most greenhouse-gas-intensive natural gas on Earth - the public does not know how much money companies received from PCT for the offsets they sold.

What is known is what PCT's captive public sector "clients" paid - $25 per tonne or roughly $18.25 million in total - and that the likely markups on many of the offsets sold by PCT were up to five times higher than what they had purchased them for.

Which brings us back to greenhouses. According to PCT, 31,453 tonnes of offsets were purchased from Sun Select Farms in Delta and Katatheon Farms in Langley to help government reach its carbon neutral goal. In both cases, the companies installed wood-fired boilers in their greenhouses and in one case also added insulating curtains to better trap and hold heat.

The trouble is the industry needed no public money to do so. The first woodfired boiler was installed in a Fraser Valley greenhouse 25 years ago, while heattrapping curtains were in use on a trial basis in the United States in the 1970s.

It's hard to see, then, what public benefit PCT's purchases delivered. Certainly the rewarded greenhouse operators were not involved in any particularly innovative or risky project that required, as PCT suggests, financial "help." Yet they received who knows how much in taxpayer dollars to do what some of their competitors had done already, while financially struggling schools, hospitals and others shelled out more than $775,000 to PCT to assist the government in becoming "carbon neutral" - whatever that means.

As the government under Premier Christy Clark seeks to differentiate itself from the Campbell regime, it is possible that it may dismantle PCT.

Another possibility is that other climate policies enacted in the Campbell years may be jettisoned as well. And that's something that anyone who cares about climate change ought to be very worried about.

Spending public dollars on questionable projects is bad public policy. But throwing out the bad along with the good is even worse.

If there's one thing Clark and her colleagues can learn from this story it's that higher natural gas prices a decade ago spurred industry innovation. Government can easily encourage further innovations by signalling that the carbon tax is here to stay, that the price for fuel will steadily increase, and that the tax will not be revenue-neutral.

Do that, and industry will respond with innovations that benefit our climate and the bottom line. But do it in an equitable way, as the Canadian Centre for Policy Alternatives proposed in its February 2011 paper Fair and Equitable Carbon Pricing.

Ben Parfitt is a resource policy analyst with the B.C. office of the Canadian Centre for Policy Alternatives.