By Matt Horne
Published: Nov. 1, 2014
The B.C. Legislature is currently debating Bill 2 that is intended to limit carbon pollution from liquefied natural gas (LNG) terminals. The basic approach of the bill is to set a carbon pollution limit (expressed in tonnes of carbon pollution per tonne of LNG produced) for LNG terminals. Project operators could either meet that target by reducing their anticipated carbon footprint, or they could choose to invest in offsets or a technology fund instead. The strength of the bill is that it’s designed to build on the province’s carbon tax. If the technology fund price is high enough and the offsets are high quality, this new system will result in less carbon pollution from LNG development.
However, the bill also has significant flaws that will limit this potential benefit and could even weaken B.C.’s climate policies in a worst-case scenario. Below, I’ve highlighted three of the most important weaknesses and offered some ideas on how to address them.
Eliminate the potential for carbon tax exemptions
As drafted, the bill would give Cabinet the ability to exempt LNG terminals from the carbon tax. If this exemption were activated through regulation, the net result would be weaker climate policy. That’s because the incentive to reduce carbon pollution from the new bill will be the $25 per tonne technology fund price (or less if offsets are cheaper), which is lower than the $30 per tonne incentive provided by the carbon tax.
But, if the new bill and the carbon tax work together, the incentive to reduce carbon pollution would be as high as $55 per tonne.
The potential exemption isn’t needed. In her defense of the bill, Environment Minister Polak spoke clearly about the importance of B.C.’s carbon tax and the government’s commitment to the policy. The government is also counting on carbon tax revenue from LNG terminals, according to the supporting materials for its LNG tax legislation (see slide 12 here).
This weakness could easily be fixed by removing the potential exemption, introduced in Section 56.
Regulate carbon pollution from shale gas and LNG pipelines
A prominent point of criticism of Bill 2 has been that the carbon pollution from upstream sources such as shale gas development and LNG pipelines are not included in its scope. Based on our analysis, these upstream sources could account for about 70 per cent of wellhead-to-waterline carbon pollution from LNG.
The NDP and Green Party consistently criticized the government for this policy gap. To her credit, the Environment Minister agreed and spoke of the need to do more:
“We know the real challenge is with emissions that are coming from the upstream. Huge challenges, but also huge opportunities.”
Part of that challenge will be implementing policies that lead to changes like reduced methane leaks, more renewable energy and more energy efficient processes.
One option is that Bill 2 could be modified to include specific upstream sources. For example, pipeline compressors and gas processing plants are large point sources of carbon pollution that could also be regulated by the bill. Work would need to be done to figure out appropriate limits, but there’s no reason why it couldn’t be accomplished quickly. Other options include strengthening the carbon tax or improving Oil and Gas Commission regulations.
Design LNG policies so that carbon pollution levels drop over time
In its current form Bill 2 will not require carbon pollution levels from LNG terminals (or the accompanying upstream development) to drop over time. This is a problem. As confirmed by the province’s 2014 climate progress report, policies must get stronger over time if targets are going to be met. The province has achieved some good success since it initiated its Climate Action Plan in 2007, but that success will only be sustained if policies continue to improve.
As with efforts to address upstream carbon pollution, the government has lots of policy options at its disposal to require ongoing improvements in performance. A simple option would be to continue increasing the carbon tax. Bill 2 could also be used if carbon pollution limits and technology fund prices were both strengthened over time.
For the carbon pollution limits, a schedule of increasing stringency could be accommodated within the existing legislation and could even be aligned with the province’s 2020 and 2050 climate targets. For proposed LNG terminals, this would encourage proponents to look at a full range of design options, including those that exceed the current target.
With a commitment in place, proponents will know that the performance bar is going to keep raising between now and 2050. As with upstream carbon pollution, government could accomplish this using Bill 2, the carbon tax or other tools.
Matt Horne is the Pembina Institute’s associate regional director for British Columbia.
MattB says
Thanks Matt! Very interesting information and this debate is just beginning.
I had an interesting conversation yesterday with Gord Addison, a consultant who works for WLNG and expressed my concern over study data showing that upstream fugitive methane rates from natural gas well sites that were much higher than the US EPA rate of 1.2% and the official rates promoted by the BC Ministry of Natural Gas (Rich Coleman) who has said they are either zero or between 0.3 and 0.5%. Gord said that one study that has been cited by the green contingent but which had been widely disputed was the Howarth 2011 study. This more recent study (to which Howarth contributed) that measured methane leakage rates above shale gas wells also found leakage rates that are significantly higher than official estimates and ranged from 2.8% to 17%…..
Toward a better understanding and quantification of methane emissions from shale gas development.
“Using our top-down flux measurements, the assumed range of methane from natural gas contribution (22–62%), and industry reported production rates, we estimate a possible range for the fugitive methane emission rate of 2.8–17.3% of production in this region, which applies only to these two specific study dates.”
(This is important because it has been estimated that at fugitive methane rates above 3.2%, natural gas becomes a dirtier fuel from a GHG perspective than coal.)
http://www.pnas.org/content/111/17/6237.full
And here some other studies with similar findings.
http://onlinelibrary.wiley.com/doi/10.1002/2014EF000265/full
http://cires.colorado.edu/news/press/2013/methaneleaks.html
For those interested, I also found a rebuttal by Howarth et al to his critics confirming his 2011 findings…
“We believe the preponderance of evidence indicates shale gas has a larger GHG footprint than conventional gas, considered over any time scale. The GHG footprint of shale gas also exceeds that of oil or coal when considered at decadal time scales, no matter how the gas is used. We stand by the conclusion of Howarth et al. (2011): “The large GHG footprint of shale gas undercuts the logic of its use as a bridging fuel over coming decades, if the goal is to reduce global warming.”
http://paperity.org/p/15359102/venting-and-leaking-of-methane-from-shale-gas-development-response-to-cathles-et-al
Gord has promised to share some of his data that he says confirms that fugitive methane rates are in line with official low estimates as well as studies showing that contrary to my current understanding, the millions of gallons of water and chemicals used in hydraulic fracturing in BC are being re-used and recycled. That will be interesting to see! I expect that this debate will ultimately become a debate between the pro-fossil fuel camp which has consistently denied the anthropogenic CO2 effects on the environment, the published rates of CO2 concentrations that surpassed 400ppm last year and even global warming altogether. Its pretty hard to have an intelligent debate when one side chooses to ignore the evidence from 97% of climate scientists including the National Oceanographic and Atmospheric Administration and the United Nations IPCC report!