British Columbia's much-criticized climate plan is putting additional pressure on Prime Minister Justin Trudeau's government as it nears a decision on whether to approve the proposed Pacific NorthWest LNG project that would be a major emitter of greenhouse gases.
The federal cabinet has a deadline of early October to decide on the liquefied natural gas project, even as the major proponent, Malaysia's state-owned Petronas, said this week that it will revisit Pacific NorthWest's costs and the global market conditions before conferring with its partners on a final investment decision.
Mr. Trudeau and Environment Minister Catherine McKenna have promised an ambitious national climate policy that – even if they are willing to approve the project – could add costs to an industry that is already facing fierce global competition and depressed prices.
Ottawa is negotiating with the provinces and territories with the aim of concluding a national climate strategy this fall that would put the country on the path of meeting its commitment to reduce greenhouse gas (GHG) emissions by 30 per cent from 2005 levels by 2030.
Last week, British Columbia Premier Christy Clark unveiled her own updated climate strategy – one that leaves the province's existing $30-a-tonne carbon tax at current levels pending the outcome of federal-provincial talks, and would see emissions essentially flat-line between now and 2030 given expectations for at least two major LNG projects getting built.
Critics in B.C. – including some members of a government-appointed advisory committee – complain that the provincial plan is woefully inadequate. As a result, Ottawa should turn down the Pacific NorthWest project because B.C.'s carbon policy covering the LNG and natural gas sector is inconsistent with Canada's climate goal, Josha McNab, a director with environmental organization Pembina Institute, said Tuesday.
"Until B.C. can demonstrate how it plans to proceed with this project and still meet its emission reduction targets, we believe this project isn't in the best interest of British Columbians and Canadians as we are trying to hit our 2050 and 2030 targets," she said.
The provincial government and the industry argue that Ottawa needs to take a more global perspective, that LNG exports from British Columbia would reduce coal use in Asia and therefore cut GHG emissions globally.
"Our analysis indicates that B.C.'s liquefied natural gas could lower China's coal-fuelled power emissions by as much as 20 per cent," Minister of Natural Gas Development Rich Coleman said in an e-mailed statement. "Large-scale use of B.C. LNG could help China avoid emissions greater than B.C.'s current annual GHG emissions."
However, a new report from the C.D. Howe Institute challenges that conclusion. If all exports went to coal-dependent countries in Asia – and were used to supplant coal as an energy source – there would be a global reduction in GHGs. But there are other potential markets where an increased reliance on Canadian LNG would actually cause an increase in emissions, said the C.D. Howe paper released Wednesday.
"At this point, it's looking like the most likely markets are actually going to be in Asia but it's very difficult to say," Sarah Jordaan, co-author of the report and an assistant professor of energy, resources and environment at Johns Hopkins University. "The challenge is, even when we know what the downstream market is going to look like, exactly what is going to be displaced is a challenge to determine."
Prof. Jordaan and her colleague, University of Calgary's James Coleman, argue that Canadian governments should focus regulatory attention on the domestic emissions they can control, and work through international efforts to encourage the customers of its LNG exports to reduce their GHGs.
The B.C. plan does promise improvements in the upstream natural gas sector that would provide the feedstock for Pacific NorthWest and other LNG plants that have been proposed. It proposes to build – with federal financial help – transmission lines to provide electricity to the natural gas extraction and processing operations that now run on gas; it also pledges to reduce methane emissions in the upstream by 40 per cent below 2014 levels by 2030.
The province also requires proposed LNG plants to meet an emission intensity standard, a regulation that would result in Pacific NorthWest purchasing offset credits or contributing to a technology fund. Any additional costs or regulatory delays could undermine the global interest in investing in Canada's fledgling LNG sector, said David Keane, executive director at BC LNG Alliance, an industry umbrella group.