Recommendations to change the U.S. Social Cost of Carbon, and possible impact for Canada

The U.S. National Academies of Science Press released an important report in January 2017, suggesting changes to the methodology of the Social Cost of Carbon (SCC), an economic metric used to measure the net costs and benefits associated with the effects of climate change- including changes in agricultural productivity, risks to human health, and damage from extreme weather events.  U.S. government  agencies such as the Environmental Protection Agency  are required by law  to estimate SCC when  proposing regulations such for vehicle emission standards or energy efficiency standards for appliances.  One of the most recent, thorough, and important applications of the U.S. Social Cost of Carbon appears in the 2015  Regulatory Impact Analysis Report for the Clean Power Plan Final Rule.    The U.S. updated the SCC to $37 U.S. per tonne of carbon dioxide in September 2015, a value often criticized as too  low, and economists continue to differ about the methodology.  A study by researchers at Stanford University, published in Nature Climate Change  (2015) estimated a more accurate  SCC of $220 per tonne – six times higher.

The January  report from the National Academy of Science, Valuing Climate Damages: Updating Estimation of the Social Cost of Carbon Dioxide  , suggests restructuring the Integrated Assessment Models framework used to ensure greater transparency, and  recognizes new research  which should be incorporated into the  models (e.g. the effect of heat waves on mortality) . It also recommends a regular 5-year updating schedule,  “to ensure that the SC- CO2 estimates reflect the best available science.”  For a summary of proposed changes and the political context, see “Scientists have a new way to calculate what global warming costs. Trump’s team isn’t going to like it” in the Washington Post  . Noting that the new report has no legal force, The Post article quotes expert reviewer Richard Revesz, Dean emeritus of the New York University School of Law: “If the metric is revised, then the incoming administration would have an obligation to explain why it’s departing from the current approach… Any changes made without adequate scientific justification would likely be struck down in court.”   But see also “How Climate Rules might Fade away”     in Bloomberg Business Week.

What are the implications for Canada?  Canada, like the U.K., Germany, France, and other countries, already uses its own Social Cost of Carbon, pegged at a $28 per tonne in 2012, according to  Canada’s  Regulatory Impact Analysis Statement issued with the vehicle emissions regulations for passenger cars and light trucks.  The Leaders Statement from the North American Leadership Summit in Summer 2016 ,  ties Canada more closely to U.S. and Mexico, when it pledges to “ … align analytical methods for assessing and communicating the impact of direct and indirect greenhouse gas emission of major projects. Building on existing efforts, align approaches, reflecting the best available science for accounting for the broad costs to society of greenhouse gas emissions, including using similar methodologies to estimate the social cost of carbon and other greenhouse gases for assessing the benefits of policy measures that reduce those emissions.”

Canada- U.S. Climate Agreement to regulate Methane Emissions

trudeau obama announcementOn March 10, 2016,  following star-powered meetings between President Obama and Prime Minister Trudeau in Washington, the   U.S.-Canada Joint Statement on Climate, Energy, and Arctic Leadership   (in French here ) was released.  Again, there were optimistic and positive reactions,  mainly centred on the provisions to work collaboratively on federal measures to reduce methane emissions.  Environment and Climate Change Canada has pledged “to publish an initial phase of proposed regulations by early 2017.”   Summaries of the agreement appear in “Trudeau vows to Clamp Down on Methane Emissions”   in the Globe and Mail (March 10) and “Obama and Canada’s Justin Trudeau Promote Ties and Climate Plan” in New York Times (March 10).  For reaction, read “How big a deal is Trudeau and Obama’s methane pact?” from the UVic PICS Newsletter ; “Why Closer Canadian-American collaboration on clean energy is a good thing”  at the Institute for Research in Public Policy ; and “Celebrating Crucial climate progress in Canada’s oil and gas sector”    , from the Pembina Institute. For a U.S. point of view, read “Sea Change: U.S. and Canada Announce Common Goals on Climate, Energy and the Arctic” from Inside Climate News, which summarizes the recent activity of the EPA regarding methane emissions.    The Natural  Resources Defense Council  calls for a commitment to end fossil fuel subsidies in From Dialogue to Results: Blueprint for Joint Climate Action and Clean Energy Deployment between Canada and the United States  , which the joint agreement did not do.

Obama Administration Issues New Methane Emissions Standards for the U.S.

A White House Fact Sheet, released on January 14, announces a new goal to cut methane emissions from the oil and gas sector by 40 – 45% from 2012 levels by 2025. In general, reaction from environmental groups has been tepid, citing the need to address existing operations, and to rely more on regulation and less on voluntary industry action. Read “Climate Hawks aren’t impressed with Obama’s Methane Plan” in Mother Jones (Jan. 20) for a summary of reactions.

B.C. LNG Setor: New Legislation and a New Report

In the week of October 20, British Columbia introduced the Greenhouse Gas Industrial Reporting and Control Act and the Liquefied Natural Gas Income Tax Act. The former requires liquefied natural gas plants to purchase carbon offsets and punishes those who fail to limit their carbon emissions to 0.16 tonnes per tonne of LNG – the strictest standards in the world, according to B.C. Environment Minister Mary Polak.

However, Merran Smith of Clean Energy Canada criticized the Act for focussing exclusively on port facilities, at the end of the supply chain. Matt Horne of the Pembina Institute asserted that 70% of the industry’s emissions would be released before reaching the ports. See “B.C.’s New LNG Emissions Regulations A Good Start, But Not Enough” from Desmog Canada at: http://www.desmog.ca/2014/10/22/bc-new-lng-emissions-regulations-good-start-but-not-enough, and Pembina’s comments at: http://www.pembina.org/media-release/pembina-reacts-to-tabling-of-bc-lng-carbon-pollution-legislation.

The new tax legislation imposes a 3.5% rate on operating income, half the amount B.C. had initially planned. Read the government press release at: http://www.newsroom.gov.bc.ca/2014/10/bc-to-have-worlds-cleanest-lng-facilities.html, and for details on the Act, see the government’s website at: http://www2.gov.bc.ca/gov/topic.page?id=75BD4BF2B6B5493FB8A36DB05EBA764D. Jack Mintz, from the University of Calgary, states: “the B.C. shale gas royalty is one of the most distortionary systems developed in industrialized countries”.

For his financial and policy critique, see “Jack M. Mintz: Why B.C.’s LNG tax policy sets a bad precedent” in the Financial Post at: http://business.financialpost.com/2014/10/22/jack-m-mintz-why-b-c-s-lng-tax-policy-helps-neither-the-province-nor-the-industry/. For a broader view, see Marc Lee’s reaction in “A B.C. Framework for LNG, part 2: The LNG income tax” at Rabble.ca at: http://rabble.ca/blogs/bloggers/policynote/2014/10/bc-framework-lng-part-2-lng-income-tax.

And the last word: Pembina will release a new report on October 27th, LNG and Climate Change: The Global Context.

Cities Making Progress in the Fight against Climate Change

A new global network, The Compact of Mayors, was announced at the New York Climate Summit in September, to expand city-level GHG reduction strategies; make existing targets and plans public; and make annual progress reports using a newly-standardized measurement system that is compatible with international practices. The new Compact will work with existing organizations and global networks of cities (C40, Cities Climate Leadership Group, ICLEI – Local Governments for Sustainability, and United Cities and Local Governments (UCLG). See a summary at: http://www.iclei.org/details/article/global-mayors-compact-shows-unity-and-ambition-to-tackle-climate-change-1.html, read The Compact document at: http://www.iclei.org/fileadmin/user_upload/ICLEI_WS/Documents/advocacy/Climate_Summit_2014/Compact_of_Mayors_Doc.pdf, or see the World Resources Institute blog at: http://www.wri.org/blog/2014/09/compact-mayors-cities-lead-tackling-climate-change-un-summit/.

At their annual meeting on September 23, the B.C. Mayors Climate Leadership Council reviewed their accomplishments since the group was founded 5 years ago. Climate Action Plans have been established in 50% of municipalities in British Columbia, covering 75% of B.C.’s population. 31 local governments achieved carbon neutrality for their operations in 2012. See the press release at: http://www.toolkit.bc.ca/News/BC-Municipalities-Marching-Ahead-Climate-Action. For more information about action in cities across Canada, see the Federation of Canadian Municipalities Partners for Climate Protection latest National Measures Report at: http://www.fcm.ca/Documents/reports/PCP/2014/PCP_National_Measures_Report_2013_EN.pdf (the PCP is part of the global ICLEI – Local Governments for Sustainability). See also Best Practices in Climate Resilience from Six North American Cities (from City of Toronto, June 2014) at: http://www1.toronto.ca/City%20Of%20Toronto/Environment%20and%20Energy/Programs%20for%20Businesses/Images/16-06-2014%20Best%20Practices%20in%20Climate%20Resilience.pdf.

The Carbon Disclosure Project surveyed 207 cities worldwide in its new report, Protecting Our Capital: How Climate Adaptation In Cities Creates a Resilient Place for Business. The survey included the following Canadian cities: Vancouver, Victoria, Calgary, Edmonton, Saskatoon, Brandon, Winnipeg, Burlington, Hamilton, London, Toronto, and Montreal. The report attempts to identify the alignment of how companies and the cities in which they operate perceive climate-related risks. It finds most commonality in recognizing risks from increased temperatures and heatwaves, which have immediate impacts across the public and private sectors. It is assumed that cities that develop reasonable risk assessment and reduction strategies will be better positioned to attract and retain business. See https://www.cdp.net/CDPResults/CDP-global-cities-report-2014.pdf.