Coal double-standard costs British Columbia's citizens billions

Westshore Terminals, “the busiest single export coal terminal in all of North America” hides in plain sight right next to the Tsawwassen ferry terminal. Last year most of British Columbia’s 25 million tonnes of coal got shipped from the terminal. An average day sees over 700 train cars packed with coal arrive. The terminal can load four tonnes of coal per second into the biggest coal ships on the planet. Despite “easily surpassing the combined coal shipments of all other terminals in Canada,” it is planning to increase its capacity to 33 million tonnes by next year.

Most British Columbians support our B.C. Carbon Tax as an important tool to help reduce the dangerous emissions of CO2 into our climate system. What many don’t know, however, is that almost all BC coal is exempt from our carbon tax.

What’s going on?

We aren’t talking about a tiny exemption here.

We are talking about a lot of coal.

It is a story of a multi-billion dollar loophole larger than the carbon tax paid by all B.C. residents and businesses. It involves skyrocketing global commodity prices, the biggest climate polluting nation on earth, $1,500 a year per B.C. family, and the largest coal port in North America hiding right here in greenest Vancouver.

WE PAY...

Our government charges its own residents and businesses a carbon pollution fee -- the B.C. Carbon Tax -- of $36 to $42 per tonne whenever they buy B.C. coal.

This is the B.C. Carbon Tax table for coal. If you buy B.C. coal to use in B.C., you pay this carbon pollution fee.

...AND FOR GOOD REASONS

The B.C. Carbon Tax is a widely praised policy tool and the reasoning for levying it -- to help B.C. develop a low-carbon economy and reduce our dangerous pollution levels -- is economically sound.

Coal is a primary driver of climate destabilization which is already incurring costs on society. Scientists have warned for years that the amount of coal we are burning is dangerous and will lead to increasing extreme weather damages, ever rising seas, crippling ocean acidification, crop losses, regional conflicts and tipping points in the climate where humans lose control of the rate or magnitude of climate destabilization. The costs are adding up.

“Coal is the single greatest threat to civilization and all life on our planet. Our global climate is nearing tipping points. Changes are beginning to appear, and there is a potential for explosive changes with effects that would be irreversible — if we do not rapidly slow fossil fuel emissions over the next few decades.”

-- The Sword of Damocles by NASA climate scientist James Hansen

In fact, many groups locally and globally feel coal pollution is such a significant threat to our climate stability that they are working hard to shut down coal completely.

• In B.C., a new group called Stop Coal has emerged to focus just on shutting down coal production here.
• In the US, the Sierra Club’s Beyond Coal campaign has been successful in helping halt the growth in coal plants in recent years. As Deutsche Bank executive Kevin Parker recently said: “Coal is a dead man walkin’ … Banks won’t finance them. Insurance companies won’t insure them. The EPA is coming after them … And the economics to make it clean don’t work.”
• Worldwide Greenpeace’s Quit Coal campaigners have been ramping up actions from scaling smokestacks to blockading coal plants.

Nobel Peace Prize winner Al Gore said: “I can’t understand why there aren't rings of young people blocking bulldozers and preventing them from constructing coal-fired power plants.” Well, they are starting to.

Economists are united in the simple fact that if, at the very least, you don’t put a price on the carbon pollution from coal then the marketplace has no way to reduce the amount that is released.

Failing to put a price on climate pollution is what the UK government’s economic report by Lord Nicholas Stern famously called the "greatest failure of market capitalism ever".

The lack of a carbon price is fine with coal companies, and they lobby heavily to keep it that way. That corporations look out for their bottom line first and foremost shouldn’t surprise anyone. That is how the game is played.

But for everyone else in B.C., this huge coal exemption is a very bad deal.

First, it allows billions of tonnes of climate destabilizing pollution to be dumped into our atmosphere with no economic signal to cut back. And second, it foregoes billions of dollars in carbon tax payments to B.C. that could be used to help our families and businesses transition to low-carbon prosperity.

CHINA AND OTHERS DON’T PAY.

So B.C. got it right when it was an early adopter of a low, but constantly rising, price on the carbon pollution content of fossil fuels. But so far B.C. has got it wrong by exempting most of the coal dug up in B.C..

Instead people outside B.C. -- like residents and businesses in China -- get to buy our B.C. coal without paying the carbon price we do.

Is continuing this double-standard fair to B.C. residents and businesses?

Can it be reconciled with the science that shows the damage to B.C. climate, weather, economy and families will be the same regardless of where that B.C. coal carbon pollution is released?

If it is good policy to charge B.C. folks a carbon tax on the carbon pollution content of B.C. coal, isn’t it just as good a policy to charge people outside B.C. the same carbon tax for the same coal?

BILLIONS IN LOST REVENUE

Consider this comparison.

All the CO2 emitted by the burning of all fossil fuels by all B.C. businesses and residents -- for all cars, trucks, natural gas, coal, power plants, ships, industry and every building and factory and everything else in B.C. -- adds up to 47 million tonnes of carbon pollution last year. Every tonne of that was carbon taxed at $20 a tonne by our B.C. government. B.C. businesses and residents paid close to a billion dollars in carbon pollution taxes.

In comparison, residents and businesses in China and other regions bought B.C. coal containing 50 million tonnes of carbon pollution. And every one of those tonnes of carbon pollution in B.C. coal was fully exempted from our carbon tax. These buyers paid zero dollars in B.C. Carbon Tax.

That’s a billion dollar tax loophole last year -- and it was available only to people outside B.C.. Next year as B.C.’s carbon tax rises to $30 and as coal production increases again, this B.C. coal exemption could cost B.C. nearly $2 billion a year in lost carbon tax revenues.

At that point, the average family of four in B.C. will lose out on $1,500 each year in government revenue that could be used to help them transition to low-carbon prosperity. By 2020, this coal double-standard will cost B.C. $20 billion or more at current trends.

B.C.’s 2020 TARGET AND FUNDING SHORTFALL 

The year 2020 is also when B.C. citizens and businesses collectively are legally obligated to have reduced our CO2 emissions by 33 per cent from 2007 levels. We are a long way away from that target and badly hurting for funds to help get us there.

One reason for the lack of funds is that while the B.C. government has collected close to a billion dollars in carbon pollution tax from B.C. citizens and businesses, it has kept nothing. All -- and more -- has been returned in tax cuts, which were written into B.C. law years ago. The decision to make the carbon tax “revenue neutral” has kept the carbon tax from being viewed as a tax grab and has boosted its popularity with many people. It was a political master stroke.

But it has also meant that B.C. can’t use it as a source of funds to help in the low-carbon transition.

B.C. needs to find a different source of funds to make public infrastructure changes like expanded public transit, energy retrofits for schools, hospitals and government buildings and increased public clean energy sources. B.C. is also short on funds to help less-wealthy citizens and families prepare themselves for a low-carbon future by retrofitting their homes, businesses and vehicles.

We could fund all this by raising taxes on ourselves. Or we could apply our carbon pricing to the carbon content of all B.C. coal regardless of who buys it.

Got a preference?

REVENUE NEUTRAL FUNDING

Ending this multi-billion dollar exemption for out-of-province buyers can create just such a revenue stream.

Because this part of the carbon tax would be paid by buyers outside B.C., it is “revenue neutral” for B.C. residents. It is available to fund the essential economic transition in a way the domestic carbon tax payments can’t.

CAN B.C. COAL AFFORD TO PAY ITS FAIR SHARE OF CARBON TAX?

B.C. coal companies might respond by saying they can’t afford to have buyers outside B.C. pay the same price as buyers inside B.C.. Let’s look at government and industry stats to find out.

Most of B.C. coal production is a kind of high grade metallurgical coal that global customers are currently willing to pay a hefty premium for. And that is an understatement.

The selling price of B.C. coal has increased $140 per tonne in the last six years. That’s a 350 per cent increase in price in just six years. The latest figures show the price jumped another $20 -- to over $200 per tonne -- in the first quarter of 2011.  Boom time.

In comparison, the B.C. Carbon Tax on coal climate pollution currently runs around $40 per tonne.

So applying this carbon price to all B.C. coal would still leave B.C. coal prices, post-carbon-tax, at triple what they were in 2004. In following years, the B.C. carbon tax on coal is set to increase around $10 a year. The price of B.C. coal has been rising twice that fast. 

B.C. Ministry of Energy and Mines shows B.C. coal prices almost tripling from 2004 to 2008 (base chart). I’ve added the 2009 and 2010 prices to the chart based on a Price Waterhouse Cooper report. This industry report shows average B.C. coal prices at $181/tonne in 2010 … and then jumping again to over $200 in the first quarter of 2011.  

This industry report also says revenues and net earnings “have been at historic highs for the last few years.” Uh, yeah. In fact, coal has become so valuable that it now accounts for 51 per cent of all mining revenues in B.C..  Prices rose 15 per cent last year alone and production increased 32 per cent.

At the same time taxes collected by B.C. on mining appear to be at the lowest level in many years as this chart shows:

This chart from the Price Waterhouse Cooper report shows income and taxes paid by mining companies in B.C. If you are like me, you might need your reading glasses to see the B.C. tax in recent years.  

Even the introduction of the HST cut taxes for B.C. mining companies:“The overall impact to the mining industry was favourable, producing anticipated cost savings in key areas such as capital expenditures.” 

B.C. coal companies employed 3,800 people in B.C. in 2010. That is close to their 30-year employment average. The carbon tax exemption works out to $250,000 in foregone revenue per coal job last year.

ALL THE STARS ARE ALIGNING

“All the stars are aligning for significant industry growth -- commodity prices are high and demand is strong...it’s time to seize the day.”

-- The Mining Industry in B.C. 2010 report

Maybe it is also time to collect the carbon tax on all B.C. coal.

WHAT WILL PREMIER CLARK CHOOSE?

Gordon Campbell took the first bold step to set B.C. on the path to low-carbon prosperity with our carbon tax.

Will Premier Christy Clark have the same courage and foresight to take the next logical step? Will she now make everyone pay the same carbon pollution fee on our B.C. resources regardless of where they live?

The carbon pollution from B.C. coal is dangerous to us. If we aren’t going to shut it down, at the very least we need to make sure we put a carbon price on all of it.

B.C. also needs to spend billions more to ensure economic prosperity for all in the coming low carbon future.

Premier Clark can help to do both by ending the multi-billion B.C. coal carbon tax exemption. Or she can raise our taxes instead.

Which would you vote for?