Carbon trust faces tonnes of work

By Scott Simpson,
Vancouver Sun
October 24, 2009

B.C. could be paying $25 million a year to compensate for its carbon emissions

Calculating the difference between a $25 carbon credit purchased in British Columbia and a 14-cent credit purchased in daily trading on the Chicago Climate Exchange is apparently not a matter for simple arithmetic.

The $25 credit is what you, as taxpayers, are forking out to support the B.C. government's ambitious, precedent-setting plan to make itself carbon-neutral before 2011.

B.C. anticipates that core government agencies and offshoots, including schools and health districts, will be annually responsible by the end of 2010 for about one million more tonnes of carbon dioxide emissions than their conservation efforts can reasonably prevent.

That's where you come in.

The government's ambition, announced by Premier Gordon Campbell in 2007, is to compensate for every one of those million tonnes by purchasing carbon credits from businesses and industries that reduced their reliance on fossil fuels such as oil, natural gas, or coal -- and had their efforts certified by independent, third-party auditors.

PACIFIC CARBON TRUST

The credits are collected by Pacific Carbon Trust, a new Crown corporation that pays emitters an unspecified amount for each tonne of CO2 emissions they cut through innovative conservation efforts, and resells them to government at $25 a tonne.

Assuming the scheme can be carried out in the time frame established by the premier, the province will be paying $25 million a year to compensate for its carbon emissions.

There are entire B.C. government ministries such as energy, finance, and environment, whose annual capital expenditures are less than $25 million, according to the government's 2010 fiscal year estimates.

Cheaper credits are available.

You can buy a tonne of carbon credit, or offset, for 14 cents on the spot market of the Chicago Climate Exchange, although critics suggest your money would be safer in a penny mining stock from a Howe Street promoter circa 1975.

You could buy one from the European Climate Exchange, which is pricing a tonne of carbon at about the same level as B.C. That would mean shipping tax dollars to foreign jurisdictions with no commensurate economic stimulus to justify the effort.

The good news here, if you're in favour of the B.C. government's effort, is that this province has established a market and a trading system that appear to be working as hoped -- as the first North American jurisdiction with mandatory carbon emission reduction targets.

(Credits available in Chicago are from voluntary emission cutbacks whose pedigrees, as the price of carbon on that market suggests, are suspect.)

Christine Schuh, environmental practice leader for PricewaterhouseCoopers, said in an interview that comparing B.C.'s pricing system to Chicago's is like comparing apples to oranges. The system in this province is regulated, while Chicago's is not.

But she added that it's also difficult to compare B.C. to the European exchange, because the systems themselves are "not equal yet."

Based in Calgary, Schuh serves on the Independent Organization for Standardization (ISO) committee that developed globally recognized standards for measuring and validating greenhouse gas emissions.

If there is a weakness in the B.C. system, she said, it's that it may not yet be aggressive enough to attract large-scale efforts by industry.

MOTIVATING CHANGE

"To motivate behavioural change in a population, you need prices for carbon credits in the $5-to-$60 price range per tonne. If you want to make technology like carbon capture and storage economically feasible, the price of those credits needs to be $80-plus per tonne.

"Keeping that as a reference point, the $25 per tonne is probably a good starting point, but it's not going to be the end point."

The CEO of Pacific Carbon Trust, Scott McDonald, believes they are off to a good start. Since April, the trust has contracted 66,000 tonnes per year of carbon offsets on the province's behalf.

Earlier this month, it announced an open call for credits with no quota or time limit.

"We are not sitting here waiting," McDonald said. "Our pitch to the large emitters is that there is a price signal around carbon. So if you are doing your [economic] models around new investments, include a price for carbon in that price model. ... It becomes very attractive to do these kinds of projects.

"We want to make that opportunity available and make them aware of that."

Pacific Carbon Trust and private-sector "aggregators" such as Sempa Power Systems and Offsetters Clean Technology are unearthing businesses that have made legitimate efforts to lower their carbon emissions.

There are vacation resorts, hotels, and greenhouses on the list. And no doubt to the government's great relief, a big fish: One of the largest greenhouse gas emitters in the province.

LAFARGE GETS ON BOARD

It is Lafarge Cement, the multinational whose Richmond cement plant is regularly listed by Environment Canada as one of British Columbia's top 10 emitters of carbon dioxide and related gases believed to contribute to global warming through combustion of fossil fuel.

Lafarge burns coal to make cement. Coal burns with a high intensity that is fundamental to the manufacture of their product. But the cement process can tolerate supplementary amounts of biomass, Lafarge director of business development Randy Gue noted.

"We are a public company, we are profit-driven, we looked at the incentives that are there," Gue said in an interview.

"The sale of the carbon offsets helps basically fund the cost of doing the project and the risks that are involved in [introducing] different fuels.
That's really the purpose of carbon offsets, to incent companies to shift away from traditional methods and incent projects that wouldn't normally happen in an unregulated carbon market."

There is a further bonus, he noted: Reducing the use of fossil fuel in the manufacturing process also reduces the amount of carbon tax Lafarge will have to pay the province.

OFFSETTERS AIDS COMPANY

Vancouver-based Offsetters Clean Technology, a pioneer in the aggregation and sale of offsets, approached Lafarge with the opportunity after hearing about the company's struggles to source a consistent and reliable, cost-effective supply of waste wood for its burners.

Aggregators are pivotal to the success of the trust, tracking potential bidders, measuring greenhouse gas emissions, calculating potential savings and contracting third-party validators to pore over the data and confirm the extent of emission savings.

"We knew that Lafarge was looking for wood and that they were hesitant about the cost of the wood, so we went to them and said 'Look, we can help subsidize the cost of fuel-switching for you,'" Offsetters president and co-founder James Tansey said.

"It would have been very challenging for Lafarge to do this on their own, secure the documentation, secure the prices, and negotiate on their behalf. That's our role as a business."

Tansey describes B.C.'s time frame for reaching one million tonnes of offsets as "challenging."

Pacific Carbon Trust's Scott McDonald said the Crown corporation is "actively engaged" with virtually all of the province's large emitters, including Spectra Energy, Teck Cominco, Rio Tinto Alcan, Lehigh Cement and Chevron.

Spectra, which operates natural gas processing plants in the northeast B.C. gas patch, is already working to achieve what it calls "near-term emissions reductions across our B.C. natural-gas-gathering, processing and transportation system."

Those activities, which include an ambitious carbon capture and storage project at Fort Nelson gas plant, are happening irrespective of the activities of the trust.

ssimpson@vancouversun.com

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