Fossil fuel and LNG subsidies in B.C., and an alternate viewpoint on the issue

The International Institute for Sustainable Development (IISD) maintains an ongoing initiative, the Global Subsidies Initiative , to research fossil fuel subsidies worldwide.  Their most recent publication relating to Canada is  Locked In and Losing Out: British Columbia’s fossil fuel subsidies. The authors calculate that BC’s fossil fuel subsidies reached  $830 million Cdn.  in 2017–2018, with no end in sight. Despite B.C.’s clean energy image, the report documents the significant new support granted by the current B.C. government to encourage the liquefied natural gas (LNG) industry.  Locked In and Losing Out calls for the provincial government to create a plan to phase-out its own subsidies, and coordinate with the federal government in its current  G20 Peer Review of fossil fuel subsidies, launched in 2019 and administered by Environment and Climate Change Canada.   In August 2019, the IISD also released its Submission to Environment and Climate Change Canada’s Consultation on Non-Tax Fossil Fuel Subsidies calling for Canada to re-affirm its long-standing  G7 commitment to reform fossil fuel subsidies by 2025 and provide a detailed action plan to achieve the goal.  

new labor forumAn alternate view

Sean Sweeney of Trade Unions for Energy Democracy takes an alternate view on fossil fuel subsidies in “Weaponizing the numbers: The Hidden Agenda Behind Fossil-Fuel Subsidy Reform” appearing in the January 2020 issue of  New Labor Forum. As might be expected, Sweeney challenges the findings and assumptions of the International Monetary Fund (for example, in a 2019 working paper by David Coady ). He also takes issue with some progressive analysis – notably, he cites  Fossil Fuel to Clean Energy Subsidy Swaps: How to Pay for an Energy Revolution (2019) and Zombie Energy: Climate benefits of ending subsidies to fossil fuel production (2017)  – both published by the International Institute for Sustainable Development (IISD).  After a brief discussion of the main concepts, Sweeney concludes:

“For activists in the North, making fossil-fuel subsidies a key political target is a mistake. It buys into the IMF’s obsession with “getting energy prices right” which targets state ownership and regulation of prices. Such an approach may lead to a more judicious use of energy, but it would not address the mammoth challenges involved in transitioning away from fossil fuels, controlling and reducing unnecessary economic activity, or reducing emissions is expeditiously as possible.

The problem is fossil fuel dependency, not underpriced energy. Raising the price without alternative forms of low-carbon energy available for all will not produce the kind of emissions reductions the world needs. This does not mean that progressive unions and the left should support subsidies for fossil fuels—especially when the beneficiaries are large for-profit industrial users or billionaire Lamborghini owners cruising the strips in Riyadh or Shanghai. But there is a need to be aware of what the IMF and the subsidy reform organizations are proposing, and what these proposals might mean for workers and ordinary people, especially in the Global South.”

 

 

 

Amazon employees lay their jobs on the line to protest how Big tech enables Big oil

Amazon employees logoUpdated on February 18 re the announcement of the Bezos Earth Fund.

Amazon workers have risen up again, at the risk of their own jobs. “Defying Company Policy, Over 300 Amazon Employees Speak Out” in Wired (Jan.27) was one of many media articles about the most recent incident in the employees’ campaign for climate action.  A new protest stems from Amazon’s communication policy which threatened to fire employees who speak out to the public about climate change without company authorization. (A Washington Post article of January 2 summarizes all that).   In response, as detailed in Wired,  363 Amazon employees intentionally violated that company policy by signing their names to posts about their own opinions and experiences. The posts were compiled by Medium on January 26. The protest was organized by the activist group Amazon Employees for Climate Justice (AECJ)  which posted an explanation on their Facebook page, stating that employees feel a “moral responsibility to speak up”. It continues:

“The protest is the largest action by employees since Amazon began threatening to fire workers for speaking out about Amazon’s role in the climate crisis. It signals that employees are convinced that the only right thing to do at this time is to keep speaking up. AECJ has continued to call on Amazon to commit to zero emissions by 2030, stop developing AWS products and services to accelerate oil and gas extraction, and end funding of climate-denying politicians, lobbyists, and think tanks.”

UPDATE: 

On February 17, Jeff Bezos , billionaire owner of Amazon, announced the creation of the Bezos Earth Fund, which will provide $10 billion in grants to scientists and activists to fund their efforts to fight climate change.  The announcement was made on Instagram and reported by the Washington Post, which Bezos also owns. Amazon  Employees for Climate Justice reacted with this statement : Amazon employees tweet re billionsTheir statement shows that AECJ is not letting up on the link between Amazon and Big Oil, and also, not letting up. Follow them on Twitter at @AMZNforClimate.

“Why did Amazon threaten to fire employees who were sounding the alarm about Amazon’s role in the climate crisis and our oil and gas business? What this shows is that employees speaking out works–we need more of that right now.”

Big Tech and Big Oil?

Although a general perception might be that Amazon need only reduce packaging or improve logistics to reduce transportation-related emissions, there is another big climate-related issue raised by Amazon Employees for Climate Justice. As noted briefly in Vox  on January 3:   “Google and Amazon are now in the oil business” (Jan. 3)  explaining that “big tech companies are developing AI for oil companies, even as they publicly celebrate their sustainable initiatives.”  A much more detailed explanation appears in  “Amazon’s New Rationale For Working With Big Oil: Saving the Planet” in Motherboard (Jan. 10) .

This is all happening in plain sight.  Amazon itself  describes  its “Digital Oilfields”  on its own website,  and “Cenovus joins Big Oil’s push into Big Data with Amazon and IBM deals”  appeared  in the Financial Post in November 2019, giving insight into how data-driven oil and gas is growing in Canada.  And Suncor boasts in a November 2019 press release from Calgary, Suncor accelerates digital transformation journey through strategic alliance with Microsoft, quoting Microsoft’s president: “Suncor is embarking on a journey to transform the energy industry. They are creating new business value for their customers, empowering and upskilling their workforce, and innovating for a sustainable future”.

One more time: can Canada meet its GHG emissions targets if oil and gas continues to expand?

The Canadian government pledged to  exceed 2030 emissions reduction targets and reach net zero carbon emissions by 2050 at COP25 in December 2019, and on January 13, the Minister of Finance announced  pre-Budget consultations  that will include climate change as a “central focus”.    Encouraging as all this sounds, it contrasts with the government’s  2018 purchase of the  Trans Mountain Pipeline (recently critiqued by B.C. economist Robyn Allan, and pictured with new “pipe in the ground” in December), and its mixed signals over whether Cabinet will approve the enormous Teck Frontier oil sands project in February – explained in a Narwhal Backgrounder: “Why the proposed Frontier oilsands mine is a political hot potato”.  (Hint: because it has the potential to produce 260,000 barrels of bitumen every day until 2060).

Recent forecasts for expansion of  oil and gas industry production are also at odds with  Morneau’s “focus on climate change” :

Oil, Gas and the Climate: An Analysis of Oil and Gas Industry Plans for Expansion and Compatibility with Global Emission Limits , published by the Global Gas and Oil Network ( December 2019)  describes how “new oil and gas development in Canada between now and 2050 could unlock an additional 25 GtCO2 , more than doubling cumulative emissions from the sector.”  The report is summarized in a separate WCR post  here .

Canada’s Energy Future 2019: Energy Supply and Demand Projections to 2040 , released in December by Canada Energy Regulator (CER) (formerly the National Energy Board) states “Canada is making progress in transitioning to a low-carbon future” but :

“From 2018 to 2040, crude oil production grows by nearly 50%, to around seven million barrels per day.

Natural gas production increases by about 30%, to over 20 billion cubic feet per day over the next 20 years.

In 2005, wind and solar made up 0.2% of Canada’s total generation. Combined they now make up 5%, and that share grows to nearly 10% by 2040. Over the outlook period, installed capacity of wind nearly doubles, while solar more than doubles. This depends on many factors, including costs of wind and solar power continuing to fall. EF2019 assumes that the cost of wind power falls by 20% and solar by 40% from 2018 to 2040.”

canadas energy future 2019

The  Pembina Institute responded with “Why Canada’s Energy Future report leads us astray”  on January 9th, which states: “How does the government’s long-term decarbonization plan square with its projections for energy production? The simple answer is that it doesn’t. The report’s implication is that Canada will blow past our climate targets as our oil and gas sector effectively continues on a business-as-usual trajectory….The report has real implications for federal planning and decision-making and, perhaps most significantly, the overall vision of the energy sector in this country.”  Canada’s Energy Future 2019: Energy Supply and Demand Projections to 2040 is available in PDF format and in an interactive version .

Amid the distraction of the Christmas season,  the government of Canada released Canada’s GHG Emissions Projections to 2030 , as required by the United Nations Framework Convention on Climate Change (UNFCC) and as part of Canada’s 4th Biennial Report to the UNFCC.  The December 20 press release from the Minister of Environment and Climate Change claims that Canada will achieve an “historic level of emissions reductions” … projected to be 227 million tonnes (Mt) below what was projected in 2015 [italics by WCR]. ” The summary provides details of anticipated reductions by sector in 3 scenarios: 2019 Reference Case (policies currently in place); a 2019 Additional Measures Case, which considers the Reference Case and those that have been announced but not yet fully implemented as of September 2019 (for example, the Clean Fuel Standard); and a Technology Case, an “exploratory scenario that includes more optimistic assumptions about clean technology adoption in a number of sectors.” A summary of the Emissions Projections document is here ; the full details are in the 4th Biennial Report to the UNFCC, in English here   and here in French .

And for an example of how Industry is framing their emissions vs. growth dilemma:

Cenovus Energy issued a press release on January 9 announcing “Bold Sustainability Targets”  which “position us to thrive in the transition to a lower-carbon future”. The company states: ” Cenovus is targeting to reduce its per-barrel GHG emissions by 30% by the end of 2030, using a 2019 baseline, and hold its absolute emissions flat by the end of 2030″, with a “long-term ambition is to reach net zero emissions by 2050.”  This, despite a separate investor release which promises: “Total production increase of 7% compared with 2019 guidance, as Cenovus’s crude-by-rail program, coupled with the Government of Alberta’s Special Production Allowances, positions the company to move to unconstrained production levels.”

 

Answering Mark Carney: What are the climate plans for Canada’s banks and pension funds?

On December 18, the Bank of England was widely reported  to have unveiled a new “stress test” for the financial risks of climate change. That stress test is a proposal contained in an official BoE Discussion Paper,  2021 biennial exploratory scenario (BES) on the financial risks from climate change , open for stakeholder comments until March 2020.  Mark Carney, outgoing Governor of the Bank of England, has led the BoE to a leadership position on this issue in the financial community and will continue  in his new role as United Nations special envoy on climate action and climate finance in 2020.  In a December BBC interview reviewing his legacy, he warned the world yet again about stranded assets and asked: “A question for every company, every financial institution, every asset manager, pension fund or insurer: what’s your plan?”

What are the climate plans for Canada’s pension funds ?

shift action pension report 2019In their June 2019 report, Canada’s Pension Funds and Climate Risk: A Baseline For Engagement  , ShiftAction concludes: “Canadian pension funds are already investing in climate solutions, but at levels that are far too low relative to the potential for profitable growth, consistent with levels required to solve this challenge.” The report provides an overview, and importantly, offers tips on how to engage with and influence pension fund managers.

Since then…..

The sustainability performance of  the  Canada Pension Plan Investment Board (CPPIB) continues to be unimpressive, as documented in  Fossil Futures: The Canada Pension Plan’s failure to respect the 1.5-degree Celsius limitreleased in November ccpaFossilfuture2019 by the Canadian Centre for Policy Analysis-B.C. (CCPA-BC).  According to the CPPIB Annual Report for 2019, (June 2019) the CPPIB is aiming for full adoption of the Task Force on Climate-related Financial Disclosures recommendations by the end of fiscal 2021 (page 28).

Canada’s second largest pension fund, the Caisse de dépôt et placement du Québec (CDPQ), announced in November that CEO Michael Sabia will retire in February 2020 and move to the University of Toronto Munk School of Global Affairs and Public Policy. The press release credits Sabia with leading the Caisse to a position of global leadership on climate change, beginning in 2017 with the launch of an investment strategy which aims to increase low-carbon assets and reduce the carbon intensity of investment holdings by 25%. In 2019, the Caisse announced that its portfolio would be carbon-neutral by 2050.   Ivanhoé Cambridge ,the real estate subsidiary of the Caisse de dépôt, has a stated goal to increase low-carbon investments by 50% by the year 2020 and to reduce greenhouse gas emissions by 25% by the year 2025. In December 2019, Ivanhoé Cambridge announced that it had issued a $300 million  unsecured green bond to finance green initiatives – the first real estate corporation in Canada to do so. Shawn McCarthy reviewed Sabia’s legacy in “Canada’s second largest pension fund gets deadly serious about climate crisis”, in Corporate Knights in December.

AIMCo, the Alberta Investment Management Corporation is a Crown Corporation of the Government of Alberta, with management responsibility for the public sector pensions funds in Alberta, along with other investments. In November 2019, the Alberta government passed Bill 22, which unilaterally transfers pension assets from provincial worker plans to the control of AIMCo (see a CBC summary here ). The Alberta Federation of Labour and the province’s large unions protested in a joint statement, “Union leaders tell UCP: ‘The money saved by Albertans for retirement belongs to them, not to you!’” (Nov. 20) . The unions state: “we’re worried that what you’re attempting to do is use other people’s money to create a huge slush fund to finance an agenda that has not yet been articulated to the public – and which most people would not feel comfortable using their life savings to support.” And in December 2019, those worries seem to come true as AIMCo announced  its participation in a consortium to buy a 65% equity interest in the controversial LNG Coastal GasLink Pipeline Project from TC Energy Corporation. Rabble.ca reported on the demonstrations at AIMCo’s Toronto offices regarding the Coastal Gas project in January .

On January 8, the Toronto Star published  “Toronto asks pension provider: How green are our investments?” – revealing that the city has asked for more details from the Ontario Municipal Employees Retirement fund (OMERS). OMERS, with assets of over $100 billion, manages the pension savings of a variety of Ontario public employees, including City of Toronto and Toronto Police, Fire, and Paramedics. On January 8, OMERS announced the latest consolidation of Toronto pension plans with its consolidation of the Metropolitan Toronto Pension. Its Sustainable Investment Policy statement is here .

What are the climate plans for Canada’s private Banks?  

The 10th annual edition of Banking on Climate Change: the Fossil Fuel Finance Report Card was released in October 2019 by Banktrac, Rainforest Alliance Network and others . It states that $1.9 trillion has been invested in fossil fuels by the world’s private banks since the Paris Agreement, led by JPMorgan Chase, Wells Fargo, Citi and Bank of America. Canadian banks also rank high in the world: RBC (5th), TD (8th), Scotiabank ( 9th), and Bank of Montreal (15th).  Also in October, the World Resources Institute green-targets2published Unpacking Green Targets: A Framework for Interpreting Private Sector Banks’ Sustainable Finance Commitments , which includes Canadian banks in its global analysis and provides guidance on how to understand banks’ public documents.  “How Are Banks Doing on Sustainable Finance Commitments? Not Good Enough”  is the WRI blog which summarizes the findings.

Since then….

On September 14, the Canadian Imperial Bank of Commerce announced the release of their first climate-related disclosure report aligned with the Task Force on Climate-Related Financial Disclosures. Building a Sustainable Future highlights the CIBC’s governance, strategy, and risk management approach to climate related issues. It provides specific metrics and targets, especially for its own operational footprint, but also a commitment: “to a $150 billion environmental and sustainable finance goal over 10 years (2018-2027).”

Scotiabank also announced climate-related changes in November, including “that it would “mobilize $100 billion by 2025 to support the transition to a lower-carbon and more resilient economy”; ensure robust climate-related governance and reporting; enhance integration of climate risk assessments in lending, financing and investing activities; deploy innovative solutions to decarbonize operations; and establish a Climate Change Centre of Excellence “to provide our employees with the tools and knowledge to empower them to act in support of our climate commitments. This includes training and education, promoting internal collaboration, and knowledge and information sharing.”  Their 4-page statement on climate commitment  is here. Their  2018 Sustainable Business Report (latest available) includes detailed metrics and description of the bank’s own operations, including that they use an Internal Carbon Price of CAD$15/tonne CO2, to be reviewed every two years.

RBC, ranked Canada’s worst fossil-fueling bank in the 2019 edition of Banking on Climate Change , released a 1-page statement of their Commitment to Sustainable Finance (April 2019)  and an undated Climate Blueprint  with a target of $100 billion in sustainable financing by 2025.  However, in their new research report,  Navigating the 2020’s: How Canada can thrive in a decade of change , the bank characterizes the coming decade as “Greener, Greyer, Smarter, Slower”, but offers little hope of a change in direction. For example, the report states “ Canada’s natural gas exports can also play a role in reducing emissions intensity abroad. LNG shipments to emerging economies in Asia, where energy demand is growing much faster than in Canada, can help replace coal in electricity production, just as natural gas is doing here in Canada. …As climate concerns mount, Canada’s challenge will be to better sell ourselves as a responsible, cleaner energy producer.”

Phase-out, not expansion of fossil fuels – some recommendations for Canada

Oil, Gas and the Climate: An Analysis of Oil and Gas Industry Plans for Expansion and Compatibility with Global Emission Limits was published by the Global Gas and OilGas-ReportCoverOil Network (GGON) in December 2019.  The report analyzes the expansion plans of the oil and gas industry in relation to the global Paris climate goal of a 1.5C warming limit, and concludes that “if the world uses all the oil and gas from the fields and mines already in production, it will push us beyond 1.5°C of warming. This is true even if global coal use were phased out overnight, and if cement emissions were drastically reduced.” This report is the latest to sound this alarm: for example, Oil Change International, part of the GGON , began to publish such warnings in 2016 with The Sky’s Limit: Why the Paris Climate Goals Require a Managed Decline of Fossil Fuel Production , followed by Drilling towards Disaster in 2019.

Oil, Gas and the Climate states that from now until 2024, oil and gas companies are set to invest a further $1.4 trillion U.S.  in new oil and gas extraction projects – with 85% of that expansion in North America, and with the impact of the U.S. alone putting a 2 degree warming target out of reach.  Further, it states that over 90% of U.S. expansion would be shale production dependent on fracking.  It highlights that the Permian Basin (west Texas and southeastern New Mexico) would account for 39% of new U.S. oil and gas production by 2050. “It holds the greatest risk for new oil and gas development in the United States and in the world.”

Projected Canadian investment is a distant second to that of the U.S., but even so, the report states that “new oil and gas development in Canada between now and 2050 could unlock an additional 25 GtCO2 , more than doubling cumulative emissions from the sector.” The report highlights the approved Exxon Aspen Oil Sands project and the pending Teck Frontier Mine, but warns  “…Shale gas extraction, particularly the Montney Shale Basin in British Columbia, is a major focus of the industry…From 2020 to 2050, new gas projects could be responsible for as much CO2 as new oil projects.” (For a recent overview of the extent of Canada’s LNG infrastructure, see The New Gas Boom, published by Global Energy Monitor in June 2019).

“A better future is possible”, and here’s how to get there:

Despite the grim projections, Oil, Gas and the Climate  argues that “a better future is possible” and calls for “the launch of a well-planned phase-out of oil and gas production that addresses the needs of workers and communities impacted by fossil fuel developments. ” The report recognizes the impact of recent civil society actions such as Fridays for Future and Extinction Rebellion, and calls on governments and investors to catch up with such leadership.

Based on the findings of the report, Environmental Defence makes the following recommendations to support Canada’s phase-out:

Clear new federal rules under our environmental assessment law that review possible expansions of oil and gas projects against our commitment to climate goals. If we cannot credibly demonstrate how investing in a fossil fuel project is consistent with a 1.5C warmed world then the project should not be permitted to go ahead.

Institutional investors should apply a similar screen that will guide their decisions regarding whether to provide financing for new projects.

The federal government must invest in research and development of new energy technologies like geothermal electricity that have huge employment and energy production opportunities in places like Alberta and northern British Columbia. At a minimum, the government should make available an amount equivalent to the billions in subsidies that have been given to the fossil fuel industry through tax breaks or direct investment in pipeline infrastructure (e.g. Trans-Mountain) – subsidies that should be phased out rapidly. Success will create skills-linked jobs and massive supply of electrical energy for export to a North America that must replace the energy of fossil fuels.

Domestic demand for fossil fuels must be rapidly driven down through improved efficiency (e.g. buildings, appliances, manufacturing), electrifying transportation and home heating and increased renewables generation and storage.

The Oil, Gas and the Climate report is a project of the Global Gas and Oil Network , supported by Oil Change International; 350.org; Center for Biological Diversity; Center for International Environmental Law; CAN-Rac Canada; Earthworks; Environmental Defence Canada; Fundacin Ambiente y Recursos Naturales:FARN; Global Witness; Greenpeace; Friends of the Earth Netherlands (Milieudefensie); Naturvernforbundet; Observatorio Petrolero Sur; Overseas Development Institute; Platform; Sierra Club; Stand.Earth.