Sunday 26 January 2014

# 11 Carbon tax and oil export summary

Most people believe that greenhouse gases cause climate change. Those who doubt the science could take a “better safe than sorry” approach. A global carbon tax is the answer to curb greenhouse gas emissions. So far 20% of emissions are subject to carbon pricing but that is not enough. The global emissions still increase by 2.6 % per year. China’s emissions rise by almost 10 % per year. Only when everybody pays the same tax for carbon will it be possible to apply it to exports without unfair competition. It would also eliminate anticipated duty arrangements between countries.

To stop additional future oil flows we have to demand a universal carbon tax. Until a proper international agreement  has been reached, demand for oil will keep rising. It will make no difference in the global greenhouse gas emission whether Canada supplies that extra oil or we let other countries do it. When eventually our exports dwindle we won’t lose because by collecting the tax we will get more money for our oil, coal and natural gas.

Two oil companies, Shell and Statoil, are among 100 multinationals who are frustrated with the lack of political action in the UN climate talks. They want a firm carbon tax agreement so they can plan for the future. They signed an important carbon price communiqué. The CEO of ExxonMobil is in favour of a carbon tax. He stated that It would “achieve a uniform and predictable cost for carbon across the economy”. Study after study has shown that carbon pricing does not harm the economy and that a revenue neutral carbon tax, like we have in British Columbia is easy to implement and administer. It has reduced the use of petroleum products by 17% without loss of GDP. Opposition to carbon pricing is caused by insufficient reporting on how the money is paid back to businesses and individuals. People see it as a tax grab rather than a tax shift to make green energy more competitive. The public only sees the figures which each household pays directly and indirectly for carbon pricing. It is $1500 per year for one of the US bills and $ 779 per year for British Columbian  households.  After all the money is paid back through income tax reductions, special grants and other recycled benefits the amounts are $150 per year for the US and $ 0 per year for the average BC household. Since this is seldom discussed in the media, the public remains opposed to the carbon tax and neither the US nor the Canadian Government has been able to establish a national carbon tax.

No tax and high per capita emissions puts Canada in an awkward position. Environmentalists rank Canada as #58 and the US as #43 out of 61 countries based on 5 criteria. Denmark, Sweden and Portugal are #1,2 and 3  so it is no wonder the Europeans want to stop our pipeline expansion. In London the Canadian Prime Minister was met by 30 protest organisations from both sides of the Atlantic while 6 MPs tabled a motion to keep Canada’s  Alberta oil out of Europe.

Insufficient pipeline capacity means that we have to sell our oil at bargain prices, leading to at least $20 billion per year lost income in Alberta. This results in substantial lost tax revenue for Canada’s Federal Government. Since we don’t want to ship more oil by rail we have to look seriously at all pipeline proposals. There is a lot of technical information about pipelines and marine transport available on the internet. It is not published in newspapers but is essential information to form an opinion about the Northern Gateway project. Enbridge has a very poor operation and maintenance record but as a result of past disasters some rules have been changed. Enbridge’s proposal exceeds the requirements. If all the proposed design and operation procedures will be implemented and monitored it will likely be the safest pipeline on the continent.  Many aspects of pipelines and carbon tax can be found on neilwilhees.blogspot.ca  The observations are backed up by 2 documents containing some 135 pages of text and tables pasted from identified websites. Part of the information was used to urge the Federal Government and Enbridge to make far more details available about the carbon tax and pipeline problems. The material is discussed in 3 Emails to the government with copies to Enbridge. It was followed by 2 more E mail exchanges with Enbridge related to specific design aspects and earthquake considerations.   


Sunday 12 January 2014

# 10 Global carbon tax required to achieve acceptable export oil flow

 
Most people believe that greenhouse gases cause climate change. Those who doubt the science could take a “better safe than sorry” approach. A global carbon tax is the answer to curb greenhouse gas emissions. So far 20% of emissions are subject to carbon pricing (CT32) but that is not enough. The global emissions still increase by 2.6 % per year.(CT63). China’s emissions rise by almost 10 % per year.(CT64). Only when everybody pays the same tax for carbon will it be possible to apply it to exports without unfair competition. It would eliminate complicated duty arrangements presently discussed.(EP1 CT69-70). China considers a carbon tax.(CT32) 70% of China’s primary energy comes from coal.(CT58) With carbon capture and storage (CCS) the global warming potential (GWP) can be reduced from 4.44 to .25.(CT24). With the help of Europe and multinational companies China is further advanced in carbon capture and storage than any other country.(CT60). That will eventually allow fueling of electric cars and trains with much greener energy.
 With tax free oil from Canada China's development will slow down. To stop additional future oil flows we have to demand a universal carbon tax. Until a proper international agreement on carbon tax has been reached, demand for oil will keep rising. It will make no difference in the global greenhouse gas emission whether Canada supplies that extra oil or we let other countries do it. When eventually our exports dwindle we don’t lose because by collecting the tax we get more money for our oil, coal and natural gas.
Two oil companies, Shell and Statoil, one of the largest petrochemical companies, Brakem and a majer airline, Cathay Pacific are among 100 multinationals who are frustrated with the lack of political action in the UN climate talks. They want a firm carbon tax agreement so they can plan for the future. They signed an important carbon price communiqué.(EP17). The CEO of ExxonMobil is in favour of a carbon tax over cap and trade. It would “achieve a uniform and predictable cost for carbon across the economy”.(CT65). Study after study has shown that carbon pricing does not harm the economy (EP15 CT18 CT32 CT45 CT48) and that a revenue neutral carbon tax, like we have in BC is easy to implement and administer.(CT 31 CT50-52 CT66). In BC it has reduced the use of petroleum products by 17% without loss of GDP, while consumption rose by !% in the rest of the country.(CT48) 

Opponents of the carbon tax don’t realize that businesses and individuals get most of the direct and indirect carbon tax money back through reduced taxes and special credits. In BC the government must show how all of the carbon tax revenue flows back to individuals and businesses as tax reductions. To ensure this occurs, by law the government must table in the Legislature an annual plan that clearly outlines how every cent of carbon tax revenue will be returned to taxpayers in tax reductions. That plan shows 16 specific tax reductions and credits for 2012, 2013 and the projection for 2014.  The largest refunds in order of size are: (CT73-74)


                                                                                                                                   2012  2013  2014  
Carbon tax revenue                                                                                                   1,241 1,172 1,261  Reduction of 5% in the first two personal income tax rates                                           (228) (244) (255)
 Small business corporate income tax rate, 4.5%, reduced to 2.5%                               (205) (206) (210)
 General corporate income tax rate  reduced from 12% to !0% but now back at 11%    (374) (316) (209)
 Low income climate action tax credit of $115.50 per adult $34.50 per child                 (190) (190) (190)
 Northern and Rural Homeowner benefit of up to $200                                                    (77) (79) (81)
 Industrial Property Tax Credit of 60% of school property tax                                          (71) (73) (76)

 When such details are not widely published people look at carbon pricing as a tax grab rather than a tax shift to make green energy more competitive. As long as there are so many opponents to carbon pricing, governments will not change their stand. It is up to the environmentalists, companies such as the 100 multinationals mentioned above, the US carbon tax center, other organisations and individuals to force more publication of the details and demand better international negotiations. The present stumbling blocks in the negotiations are the tax level,(CT 45 CT51) the distribution of the proceeds to help poorer nations (EP1 EP17 CT72) and punishment for countries who break their commitment.(CT37)

In the US and in Canada many people are influenced by the figures they see what the average household will pay for carbon pricing rather than the actual loss of income. In the US that actual loss would be $ 150 per household. in BC it averages at $ 0 per household. (CT 15-!7 CT29-30). That confusion has created further resistance to a carbon tax. So far the Canadian government has refused to expand the BC tax to the rest of the country. In the US four bills for national carbon pricing have been defeated (CT16) while they have successful carbon pricing in 10 States.(CT18) This puts us in an awkward position. Environmentalists rank Canada as # 58 and the US as #43 out of 61 countries based on 5 criteria. Denmark, Sweden and Portugal are #1,2 and 3 (EP2) so it is no wonder the Europeans want to stop our pipeline expansion. In London Mr Harper was met by 30 protest organisations from both sides of the Atlantic while 6 MPs tabled a motion to keep Alberta oil out of Europe.(CT37).

Insufficient pipeline capacity means that we have to sell our oil at bargain prices, leading to at least $20 billion dollars per year lost income in Alberta.(EP1), This results in substantial lost tax revenue for Ottawa. Since we don’t want to ship more oil by rail we have to look seriously at all pipeline proposals. There is a lot of technical information about pipelines and marine transport available on the internet. It is not published in newspapers but is essential information to form an opinion about the Northern Gateway project. Enbridge has a very poor operation and maintenance record (EP2-3 EP6 EP19-20) but as a result of past disasters some rules have been changed (EP32) and their proposal exceeds minimum requirements. The pipeline will have thicker walls than required, 50% extra isolation valves and round the clock personnel in all pump stations.(EP8-9) An Alaska pipeline was designed with lots of flexibility and withstood a 7.9 magnitude earthquake.(EP37) Enbridge describes their earthquake and tsunami approach in one of their blogs which is worth looking at it.(EP50-51)  A main problem is the customary leak detection system used by pipeline companies. It relies on internal sensors which can’t detect leaks smaller than 1 ½ % of the flow. There are so many false alarms that signals for leaks are often misinterpreted.(EP11) This led to the 17 hour delay of shut off in the Kalamazoo spill. It also explains why between 2002 and 2012 in the US only 5% of the spills were detected by instruments.(EP9) Any new pipeline should be equipped with external sensors which can detect smaller leaks and have been tested and will be tested regularly for proper operation.  Also it should be assured that new pipelines use the proper crack detection tools and that the new rules for crack repair are strictly followed.

It appears that for the Kinder Morgan project a lot more information will have to be released before the public can accept that project. It should be of the same quality as Enbridge’s proposal summarized above.  Many of the affected residents are against the project. Unless there will be a guarantee that far more personnel will be made available to oversee all aspects of the construction and operation of the pipeline, history will repeat itself. That could be pipeline spills, loading problems and possibly tanker accidents. Note that some aspects of tanker traffic are covered in post 4 and point 14h in the second article of post 1. Fortunately there is a website www.http://nsnope.org/ which keeps the public well informed about the dangers, the reservations of local politicians and many other aspects of the project. This should help to get the media more involved in all the details about pipelines and tanker transportation.


The EP and CT references are page numbers of the supporting documents for 3 E mail exchanges with the Federal Government and Enbridge, followed by 2 further exchanges with Enbridge. Afterwards some more pages were added starting at EP57 and CT63. I can’t download them to the blog but if you want to see them, please leave a comment on the blog and I will email them and the correspondence with the government and Enbridge.