Category Archives: Economics

BC Hydro inflates demand to justify Site C Dam

BC Hydro inflates demand to justify Site C Dam

Economics, Hydropower, WATER
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BC Hydro inflates demand to justify Site C Dam

If you take BC Hydro’s recently released draft Integrated Resource Plan (IRP) at face value, you will conclude the following:

  1. BC faces a serious power shortage in the coming decades
  2. In order to meet this gap, we need a combination of conservation, plus the $8 Billion Site C Dam (sure to cost far more in reality)
  3. As a province, we currently need 57,000 gigawatt hours (GWhrs) of electricity per year
  4. BC Hydro should and can supply the massive, energy-intensive Liquefied Natural Gas (LNG) industry with public electricity

There’s only one problem: virtually none of this is true.

Hydro’s dismal track record

For starters, Hydro has a long history of seriously overestimating power demand. In the early 80s, when Site C Dam was first proposed for the Peace River, concerned citizens were told we desperately needed the power. Failure to build Site C would surely mean brown-outs across the province. Then the economy changed and the project was shelved. Guess what? No brown-outs.

Throughout the past several decades, Hydro has consistently been off by 10-20% (sometimes more) in its forecasting – which our resident economist Erik Andersen has detailed in these pages – and that proud tradition continues today.

Historical and future forecast supply and demand (BC Hydro draft IRP)
Historical and future forecast supply and demand (BC Hydro draft IRP)

This chronic overestimation of our power demand helped justify a massive investment in sweetheart private power contracts (IPPs) over the past decade, for which we are now paying 2-3 times the market rate. And, because it mainly comes at a time of year when we can’t use it (the Spring freshet period, when our needs are at their lowest and our big dams at their fullest), we are forced to dump much of it at a loss to our neighbours. In fact, we lost some $360 million last year on power sales, due to these IPPs.

That’s largely because we exported to neighbouring customers 7,400 GWhrs of electricity at an average contracted rate of $43 per megawatt hour, while we pay up to $90-120/MWhr for private power! Other power exports ranged in price – anywhere from one tenth to one half the cost of IPP power. According to Stats BC, last year we were a net exporter of over 5,800 GWhrs of power – more than 10% of our domestic demand.

Remember that 57,000 GWhrs we supposedly depend on each year now? Try closer to 50,000 – where our demand has been plateaued for the past several years, following a dip below that during the depths of the 2009 recession. Check out this neat accounting trick: Hydro includes as part of our domestic demand that 7,400 GWhrs of contracted sales to out-of-province customers – some of which we buy unnecessarily from private power operators, then resell at a loss! So, already, the baseline of this report is inflated by well over 10%.

The LNG wildcard

The reality is our conservation efforts are working nicely already and, despite rising population, our power needs have stabilized and show no real sign of increasing above the 50,000 GWhr region where they currently sit.

That is, unless we decide that our public electricity should power a stupidly energy-intensive LNG program. To put things in perspective, just one of the dozen or more LNG plants proposed for BC’s north coast over the past year – from Shell and its Asian partners’ – would eat up the entire output of the proposed 1,100 MW Site C Dam. That’s one plant. This is because it takes enormous amounts of energy to super-cool gas and turn it into liquid, before loading it onto tankers bound for new markets in Asia.

Hydro acknowledges this in its report, suggesting that “while most LNG producers will use direct-drive natural gas turbines to run the cooling process to convert natural gas to liquid form [read: burn some of their own gas to make electricity], many are expected to take electricity for ancillary requirements, such as lighting, control systems and office requirements. Others may choose electricity for all their energy needs. As the LNG industry develops, BC Hydro will continue to support the needs of this sector.” (emphasis added)

Hydro is proposing “to meet the initial 3,000 gigawatt hours of LNG load and will prepare to meet further LNG requirements as they emerge.”

Numbers for $8 Billion Site C Dam don't add up
Proposed Site C Dam – artist’s rendering

It is clear that if any of these plants are banking on using subsidized public electricity for their cooling processes, Hydro will be way out of its depth, even with Site C Dam. If, on the other hand, all they plan to do is power the lights and coffee machines at these plants, then do we really need to flood an 80 km stretch of the beautiful Peace Valley, impacting close to 60,000 acres of prime agricultural and forested lands? Do taxpayers really need to spend – let’s call it what it is – over $10 Billion on a dam we can’t afford, all to power just a fraction of the LNG industry?

The IRP’s LNG section reads like a fumbling, make-it-up-as-we-go reaction to a government program that suffers from a serious lack of clarity and reality. What does LNG really mean to our power demands? How specifically is Hydro planning on working with the industry? Should ratepayers and taxpayers bear the potentially enormous costs, environmental impacts and energy demands to help foster this industry?

LNG is a wildcard in our electricity planning that this report does nothing to resolve.

Site C unnecessary

Moreover, on the matter of Site C and its need, consider that: a) we’re already a net exporter of far more power than we can expect from Site C every year (which more than doubled from the previous year) – that doesn’t sound like a province short on power, and even if it were, Site C wouldn’t be the place to start; b) The BC Utilities’ Commission – the public’s energy watchdog – has been stripped of its oversight of Site C. This is the body whose mandate it is to review projects, above all, based on need. How can we judge BC Hydro’s report and trust its assertion of the need for Site C Dam when the regulator overseeing this very thing has been barred from overseeing it?

In some matters, Hydro is on the right track, such as promoting conservation to address future potential energy demand. Like I say, this is already well underway, thanks in part to the crown corporation’s own programs, and should be an area of serious focus going forward. The significant rate increases on the horizon for Hydro customers may do more to incentivize conservation than any other measure Hydro can come up with. How has this been factored into their model?

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Meanwhile, Hydro’s plans to increase flexibility and energy security within our power grid by adding turbines to existing dams and beefing up transmission capacity in certain corridors are logical (I’m not talking the convoluted, over-priced Northwest Transmission Line here).

Yet Hydro seems to pay only lip service to these sensible solutions, while it stands by its inflated projections, the need for Site C Dam, and committing our public utility to LNG.

There is one curious piece of the report, aimed at stick-handling the touchy topic of private power contracts. Two former Hydro CEOs have gone the way of the dodo for raising concerns about this program, which was, in fairness, foisted on our public utility by the BC Liberal Government.

Somewhat surprisingly, Hydro pussyfoots around the notion of cancelling some of the 47 unfinished projects for which there are 30 or 40-year contracts in place – necessary triage to slow the utility’s hemorrhaging – and coming up with cost savings from those in operation:

[quote]

As BC Hydro plans to meet the future needs of customers for decades to come, it also needs to stay focused on keeping electricity rates competitive with those charged by other public utilities in North America.

The IRP recommends managing the costs associated with BC Hydro’s current energy portfolio of [Energy Purchase Agreements] and selecting the most cost-effective plan to meet customers’ needs within the context of the Clean Energy Act. As part of this cost-management effort, the IRP recommends reviewing IPP projects not yet in commercial operation and renewing cost-effective EPAs that provide benefits such as enhanced system reliability and economic activity.

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Government rethinking IPPs?

NDP Energy Critic John Horgan also picked up on this nugget in the report. According to The Vancouver Sun: “Horgan said the review of independent power contracts — and possible termination of these contracts — is a significant departure for the Liberals, who have been supportive of independent power producers.” Horgan’s assumption is that the mere mention of this notion in Hydro’s report hints at a change in Liberal Government policy – which is reasonable, considering the tight control it has subjected Hydro to over the years. The crown corporation isn’t in the habit of going out on a limb with policy suggestions like this one without a mandate from its government masters.

Is it possible that the Liberals, now feeling the full weight of this IPP anchor around their ankles, faced with unavoidable, politically unpopular power bill hikes, are having second thoughts about their pals in the private power racket? Time will tell. The sooner and more of these contracts we can dump, the better for everyone concerned.

As for Site C, unless the people of BC want to subsidize the oil and gas industry with cheap public power and a $10 billion dam for LNG, we simply don’t need it. If we ever do need a little more power, we can get it from conservation, claiming an option we have for 1,200 MW (more than the total of Site C) of electricity under the Columbia River Treaty, and – heaven forbid! – buying a little power from our neighbours, as needed. If we were doing that today, we’d be paying half to a third the price for new power than what it would cost from Site C or IPPs. With our net exports trending dramatically upward, that shouldn’t be an issue for the foreseeable future.

Hydro is accepting public feedback on the draft report – with information on how to submit feedback promised this week – and will be conducting public consultations this Fall.

The environmental assessment for Site C Dam is also requesting feedback on how to structure its public hearings – submissions will be accepted up until September 16 and can be emailed to: SiteCReview@ceaa-acee.gc.ca

AUG 29 UPDATE: The BC Liberal Government announced today the cancellation or deferral of 4 IPP contracts. Minister Bill Bennett is saying the number could reach 20 by the time Hydro has completed its review, connected to the IRP process and belt-tightening mandated by the government.

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Canada’s Green Economy needs public investment

Canada, Climate Change, Economics, Energy and Resources, International, Politics, Renewables
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Both the Intergovernmental Panel and Climate Change and the International Energy Agency have concluded that public policies, rather than the availability of resources, are among the key determinants for a shift from fossil fuels to clean technology development and deployment.  Public banks are critical agents for change along these lines.

Public financial institutions and the green economy around the world

Starting with some of the largest public banks, in July 2013, both the World Bank and the European Investment Bank announced that they will limit to the bare minimum investments in fossil fuel projects, while shifting the lion’s share of their respective energy investments to renewables.

The World Bank’s Jim Yong Kim – the first scientist to head the institution – said it is impossible to tackle poverty without dealing with the effects of a warmer world.  “We need affordable energy to help end poverty and to build shared prosperity. We will also scale-up efforts to increase renewable energy and improve energy efficiency – according to countries’ needs and opportunities.”

Based on perspectives not very different from that of the World Bank, in July 2013, The European Investment Bank (EIB), in line with the current European Union climate policy, announced it will implement new lending criteria that skew heavily towards renewables and screen out nearly all coal and lignite plants.

The significance of the EIB shift is illustrated by the fact that the EIB invests, lends and leverages $13.2B/year for energy initiatives.  The leveraging of EIB investments in turn fosters private financing, especially important for the capital-intensive offshore wind sector.  Many offshore wind projects have benefited from the low cost EIB loans in recent years.

In the UK, the Green Investment Bank, headquartered in Glasgow, was created in 2012 with $3.6B (£3B) in initial capital to carry it through until 2015.  Its mission is to respond to the specific financing challenges of commercial green infrastructure projects by tackling the finance gaps which remain despite the advent of new government policies.  Like the EIB, this mission includes leveraging its investments to bring in other lenders and investors.

To raise additional capital, GIB’s capital base is, and will be, regularly reinforced with pollution permit proceeds and the newly announced carbon tax revenues.  Beginning in the 2014-2015 period, bonds will be issued to raise additional capital.

In Germany, the state bank, kfw, is backing offshore wind development to the tune of $7.2B (5B€).

Meanwhile, the Chinese Development Bank (CDB) has been a key player in making China the world’s largest clean tech player.  In 2012, total investments in renewables was $67.7B, compared to its closest rival, the US, with $56B in investments in that same year.

The CDB is a formidable player, especially because it appears to have no limits on the billions of dollars with which to work.  About 2 years ago, the CDB committed a whopping $45B over 5 years to smart grid development and deployment.  Smart grid platforms are the key to the massive integration of intermittent renewable energy production, such as energy from wind and solar sources, by storing surplus energy for redeployment as required.

More recently, the CDB provided Goldwind, a state-owned wind turbine manufacturer, with $6B to finance international business development.  Similarly, Ming Yang, a smaller Chinese turbine manufacturer, acquired $5B from the CDB for loans and credit facilities between 2011 and 2015 to prepare for its entry into international markets.

This significant CDB support for China’s clean tech sectors has contributed to accusations of global clean tech dumping – specifically from the US and the European Union.  Both the US and the EU have responded to the alleged dumping by imposing steep tariffs on imports of clean tech products from China.

By contrast, Canada has taken an opposite course by being oblivious to the problem of dumping of clean techs by China.  To this effect, the proposed Canada-China trade deal stipulates that there will be no commercial barriers applied to environmental technologies.  Evidently, the Harper regime is prepared to give China what it wants, in order for Canada to sell tar sands oil them.  Either the Harper administration is unaware of the significance of China’s request, it simply does not care, or a combination of both!

Yet another innovative model for public financial institutions to support domestic clean tech manufacturing is that of Brazil’s Banco Nacional de Desenvolvimento Economico e Social.  As of January, 2013, Banco Nacional requires that wind turbine manufacturers source 60% of components in Brazil and produce or assemble in Brazil at least 3 of the 4 main wind technology components – towers, blades, nacelles and hubs – between now and 2016.  Under the Banco Nacional model, turbine makers have to meet the staggered manufacturing phases established by the bank, which will be stepped up every six months, until 2016.

Turning to the US, there the US Export-Import Bank, which represents 7 US government agencies, was created to finance renewable energy projects in emerging markets and, most important, to support the US clean tech industry with its requirement for 30% US content.  India, one of the bank’s 9 key markets, accounted for approximately $7B of the its worldwide credit exposure as of the end of fiscal 2011.  Another example of Ex-Im Bank loans was the $1B credit package to fund wind power development in the Mekong Delta, Vietnam, in collaboration with the Vietnam Development Bank.

Lastly, there is the pension fund green investment model, such as that established by Denmark’s Dong Energy. Dong is 75% owned by the Government of Denmark and is involved in 30% of all offshore wind projects in the world.  Currently, Dong uses Danish pension funds for its financial activity in offshore wind projects in Denmark and partners with the Japanese trading firm Marubeni for equity financing for projects outside Denmark.

These government and pension fund connections have translated into Dong being a very special kind of energy investor in that 85% of its current portfolio is associated with fossil fuels and 15% renewables – but its mission is to reverse this ratio by 2040.

Canada falling behind

With the examples of the World Bank, the European Investment Bank China, the UK Green Investment Bank, Germany’s kfw, the Chinese Development Bank, the US’ Ex-Im Bank and Brazil’s Banco nacional, showing the way to the effect that publicly funded investment institutions can play critical roles in assuring a migration to renewables and clean techs, the question to raise in Canada is as follows:  Why can’t Canada do similar things via the Business Development Bank of Canada (BDC) and Export Development Canada?

Indeed these Canadian investment vehicles offer excellent options for the financing the development of Canada’s clean tech sectors.  The BDC, like the other institutions mentioned in this article, could leverage its venture capital funds to attract additional support from Canada’s private banks and financial cooperatives.  What an excellent way to take on the challenge of reaching US equivalency with regard to 20% of venture capital activity in 2011 and 2012 going to clean tech sectors.

As well, the BDC could take a page from Brazil’s Banco Nacional de Desenvolvimento Economico e Social and include Canadian content requirements, thus assuring optimal benefits for Canadian economic development and job creation.  It is  conceivable that BDC-supported local economic development along these lines could fly under the radar of free trade agreements.

As for an approach for supporting Canadian exports of clean technologies, the models described like those of the Chinese Development Bank and the US Export-Import Bank, may be tough acts to follow, since these institutions have billions of dollars to work with. Nevertheless, the fact that the US Ex-Im Bank brings together 7 US national government organizations, suggests this US model could provide some insights for a made-in-Canada model.  For example, if the Canadian International Development Agency would partner with Export Development Canada, the Government of Canada would be able to support the setting up of clean energy micro-grids in isolated communities without necessitating the prohibitively expensive land infrastructure connections to distant, centralized electricity generation plants.

Canada’s pension funds could also have a role to play, along the lines of Denmark’s partially pension-funded Dong Energy. There are Canadian precedents for major investments of pension funds in clean tech sectors.  For instance, in February, 2013, the Caisse de dépôt et placement du Québec – the financial arm for Quebec’s pension fund – invested $757M to purchase half of Dong Energy’s 50% share in the world’s largest offshore wind energy project, the UK’s 850 MW London Array.  Just prior to that, in January, the Caisse purchased $500M in shares of 11 Invenergy wind farms in the US and Canada, representing 1500 MW and including 2 wind projects in Canada, one of which is in Quebec.

This raises a second question: why can’t the Canada Pension Plan Investment Board (CPPIB) create a clean tech portfolio to optimize Canadian participation in one of the world’s fastest growing industries for job creation, the clean tech sector?

From my previous dealings with the CPPIB, I know that their answer is that their job is to get the maximum return for pensioners and, consequently, no particular preference is given for Canadian investments. This is faulty logic for 2 reasons.

First, it is not unusual for investment vehicles to be associated with more than one objective.  Second, and most importantly, investments in growth sectors in Canada that offer high-paying jobs would bring additional revenues for the CPPIB in the form of greater contributions from both employers and employees – in addition to the traditional form of returns on investments.   Indeed, from time-to-time, the Caisse has adopted priorities for investments in Quebec with similar motivations.

It can be done

In conclusion: 1) innovative clean technology roles for the BDC and EDC to support and leverage venture capital and finance exports and 2) the creation of a clean tech portfolio for the CPPIB, could both significantly help Canada catch up to its competitors in the global migration to the high-growth and high-job creation green economy, all while making good money in the process.  Earnings from completed projects would in turn finance more projects.  These are opportunities that make good sense for Canada to embrace.

As Jack Layton used to say, “Don’t let them tell you it can’t be done.”

Will Dubitsky worked for the Government of Canada on sustainable development policies, legislation, programs and clean tech innovation projects/consortia. He lives in Quebec.

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11 Reasons to Divest from Fossil Fuels

11 reasons to divest from fossil fuels

Economics, Energy and Resources, Oil&Gas
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11 Reasons to Divest from Fossil Fuels

by Chuck Collins

There is a robust debate happening in university halls, around religious congregations, and at individual kitchen tables nationwide. The driving question: Should we divest from the fossil fuel industry?

Whether you are a college student, a trustee of a religious or educational institution, or an individual with a retirement fund, this is a relevant question for you.

Earlier this year, several community organizations in Boston, including the Institute for Policy Studies’ Jamaica Plain Forum, held a community forum in Boston to discuss the moral and practical issues of divesting from fossil fuel companies as a strategy to combat climate change.

The forum, viewable here, brought together those with expertise in finance, community organizing, social justice, and policy to address questions surrounding the basic nature of fossil fuel divestment as well as its implications for our investments and our world.  Some of the questions we debated were: Is divestment meaningful?  Can we exert leverage over energy companies by retaining the leverage of ownership? Would divestment reduce the investment returns required to sustain our institutions and income needs?

Our view is that our current economy, based on insatiable extraction and consumption, is simply unsustainable – for the planet as well as for us. Powerful fossil fuel corporations exercise an undue influence on environmental and economic policy, thwarting our ability to adopt sane and far-sighted energy policies. Here’s what we found:

1. We Did the Climate Change Math: Now We Must Act

We must compel the 200 largest fossil fuel corporations to keep 80% of their carbon assets “in the ground.”  Extracting and burning these reserves of oil, coal and gas would raise the earth’s temperature over 2 degrees centigrade, unleashing climate catastrophe. [Read: Rolling Stone, Bill McKibben, “Global Warming’s Terrifying New Math”]

2. Time to Choose Sides: We Must Raise the Cost of Extracting and Burning Carbon

If we succeed in averting climate catastrophe, it will be because we have succeeded in raising the cost of fossil fuels and forcing the industry to internalize its real costs to society and the environment. This will lower the profitability of the sector – and lower returns for investors.  Our cities, congregations, and universities should not be in a position where we are rooting for the fossil fuel industry to win. It isn’t right that the value of a sector doesn’t reflect its impact on the earth and society. In the long-term, destroying the planet doesn’t help us  boost our investment returns.

3. We Are All Responsible for Carbon Pollution, But the Fossil Fuel Industry Has a Disproportionate Responsibility for Climate Change

While each of us should take personal responsibility for reducing our individual carbon usage, the fossil fuel industry has disproportionate responsibility for climate change. Many of us would like to have lower carbon lifestyles, but we’re systemically blocked from doing so via the lobbying power of the fossil fuel industry. The fossil fuel industry uses their considerable financial and political power to rig the rules to block regulation, block sane energy policy, extract taxpayer subsidies, thwart renewables, and limit consumer choice. They are writing government policies and fundamentally distorting our democracy. The industry is institutionally caught in a short-term system, where their economic interests are aligned with destroying the planet. If we had a carbon tax, innovation and development would be pushed towards energy efficiency.  [See: Oil Change International’s Dirty Energy Money index.]

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4. Fossil Fuel Profitability is Based on Rigging Our Political Systems

The profitability of the fossil fuel sector is based on their ability to politically influence and rig the system and shift the real costs associated with their industry onto society. The externalities that they shift include: environmental pollution, worker health and safety, cost of military deployment in oil-producing regions, negative health impacts, global climate change, and political corruption.  If fossil fuel companies had to absorb the true costs of these externalities, the industry would be transformed—and would probably likely focus first on energy conservation and sustainable energy sourcing before further extraction. Their dependence on political rules makes them a risky and volatile sector as investments.  When their political clout diminishes, as we hope it will, they will become less profitable.  [See: Oil Change International]

5. Investment Returns in Fossil Fuels Will Inevitably Decline

Over the last 20 years, the fossil fuel energy sector has been among the most profitable of all sectors. For a variety of reasons, including those described above, this will not remain true. As policy makers start pushing back, they will eliminate government subsidies for fossil fuel, as President Obama has proposed. They will pass laws requiring fossil fuel producers to be more responsible for their negative environmental and social impacts.  There is also growing evidence that the assets of fossil fuel industries are greatly over-valued. And, if we are successful, many fossil fuel companies will have “stranded assets,” reserves that will not be tapped. When the real value of carbon holdings is adjusted downward, billions in shareholder wealth will evaporate. [See: Carbon Tracker]

6. Divesting from Fossil Fuels Will Not Negatively Impact Return

Investors are understandably concerned that their investments will earn less money if they eliminate profitable fossil fuel corporations. It may not be prudent to sell off securities with large capital gains all at once; individuals and investors should get professional advice on the best divestment strategy.  Some institutions have long-term relationships with trusted investment advisors who have helped their investments grown. It is not ungrateful or unprofessional to direct these advisors to gradually divest from dirty energy and reinvest in socially responsible alternatives. Beware, however, of advisors who tell you it can’t be done or predict huge losses overtime.

It is conventional investment wisdom that if you narrow the breadth of your investments—and fossil fuel securities are approximately 10 percent of the public equities market—that you increase risk. But there is plenty of expertise in the “socially responsible investment” field as to how to divest and design an investment portfolio that will still earn comparable returns. Industry professionals are working now to design “fossil fuel free” investment portfolios and mutual funds.

7. The Fossil Fuel Sector Will Not Reform Itself

The fossil fuel industry will only reform when we change the rules that shape their marketplace and operations.  This can be accomplished through regulation and taxation. Instituting a robust carbon tax, phased in over several years and with offsets to address its regressivity, would signal huge market shifts.  Many thoughtful people believe we should stay invested in fossil fuel corporations to have leverage with them and engage with them.  This has not worked.

8. Support the Movement and an ‘Outside Strategy’

Selling stocks in fossil fuel companies may not drive down stock prices or even devalue the industry since other buyers will purchase those stocks. Regardless, the goal of the dirty energy divestment fight is to change public dialogue and society’s lifestyle, not stock prices. A traditional approach has been inside: engaging with the company and using our ownership stake to press the company to reform. This hasn’t worked. To send a strong message, we need to sever our ties to this sector and make these companies moral pariahs, similar to how the public treated tobacco companies.

Thankfully, there is a radical edge emerging to avert climate catastrophe. The “inside” strategy of working with the fossil fuel industry to reform itself is not moving fast enough.  The new “outside strategy” activists are calling out the historic environmental groups who have compromised themselves into irrelevance. They are calling out Wall Street—those interested in only their own private gain at the expense of society and the earth.  They are upping the ante in terms of direct action, civil disobedience along with traditional organizing and electoral politics.  The call for divestment is part of this movement.  [See: 350.org]

9. Engaged Shareholder: You Can Still Work the “Inside Strategy” If You Want

Some institutional investors argue that they can change the behavior of the fossil fuel industry by retaining ownership of corporate shares and being engaged investors. Institutions or individuals that want to actively engage in shareholder activism—introducing social issue resolutions— should retain the $2,000 of stock that enables them to introduce resolutions, as Greenpeace and the Institute for Policy Studies do.  Ownership is only one source of leverage, however. We should engage as full stakeholders—citizens, employees, consumers, communities, and moral actors.

10. The Moral Question Is Why Should Any Institution or Individual Stay Invested: This Is an Abolitionist Cause

Divestment is not primarily simply an economic strategy, but also a moral and political one. If slavery is wrong, is it wrong to make a profit from it? If Apartheid is wrong, is it wrong to make a profit from it? “If it is wrong to wreck the planet, then it is wrong to profit from it.” [See: The Boston Phoenix, Wen Stephenson, “The New Abolitionists”]

11. We Can Divest from Fossil Fuels and Invest in the New Economy

The next 20 years will be unlike the last 50 years.  We are entering a stage of discontinuity thanks to ecological and economic change. We are in a transition to a new economy—based on an entirely different set of assumptions about energy and the future source of livelihoods.  We need to shift capital investment away from the dinosaur economy and towards the sustainable and just new economy.  Compared to the limited, risky, corrupt and unethical fossil fuel sector, there is a wide range of socially responsible investment opportunities with comparable returns for individuals, religious institutions, and other institutions. [See: New Economy Working Group]

Conclusion: We Should Divest from Fossil Fuels and Invest in the New Economy

There is no good reason why we should remain invested in the fossil fuel industries, not when we can continue to powerfully advocate with corporations and maintain sufficient returns.  We can and should find ways to shift our investment capital to the socially and environmentally attuned institutions and enterprises of the new economy.

Written with assistance from Jonah Reider.

Chuck Collins is a senior scholar at the Institute for Policy Studies where he directs the Program on Inequality and the Common Good (www.inequality.org), and the author of the new book, 99 to 1: How Wealth Inequality Is Wrecking the World and What We Can Do about It.

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Canada's embarassing green jobs record

Canada’s embarrassing green jobs record

Economics, Renewables
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Canada's embarassing green jobs record
Unlike Canada, Germany is a world-leader in renewable energy development

The real-life global competition over clean energy is growing increasingly intense, as countries around the world sense a huge economic opportunity and the opportunity for cleaner air, water, and a healthier planet.

– Former US Energy Secretary Steven Chu, May, 2012

The current Conservative government wants Canadians to believe that economic development and sustainable development are opposing forces. Consequently, Conservatives see their Bills C-38 and C-45, with  draconian anti-environmental components, as justified. Nothing could be further from the truth.

First, the clean tech is among the globe’s fastest growing and highest job-creating sectors. In 2012, global investments in renewable energy amounted to $268.7B – down from $302.3B in 2011 due to decline in prices and costs, policy uncertainty in the US, and European economic woes.

China led the way with $67.7B in clean energy investments in 2012, an increase of 20% over the previous year, due to a surge in its solar tech sector. Investments in 2012 for the US, Japan and Germany were $42.2B, $16.3B and $22.8B respectively.

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On jobs, the employment to date in these sectors that only a few years ago were nascent sectors are extraordinary. The total global numbers of jobs in 2011 in clean energy sectors were 5M with China, once again leading the way with 1.6M, followed by Europe with 1.1M and Germany and India with 372,000 and 350,000 respectively.

Canada, as a result of the absence of adequate federal support for being a full participant in this growth misses out on job opportunities by the 1000’s every year and the gap between Canada and other developed nations grows yearly.

For a sense of lost employment opportunities for Canadians, the November 2012 report of BlueGreen Canada, an organization that represents unions and environmentalists, indicated that if the $1.3B in subsidies allocated to the oil and gas sector which currently supports 2,300 jobs were to be transferred to renewable energy, energy efficiency and public transit, this same amount of money would create 18,000-20,000 jobs in clean energy sectors – 6 to 8 times more jobs per investment unit.

Behind the aforementioned growth figures lies the fact that the point of departure for much of this leadership by other nations is government support for innovation. Specifically, innovation leads to product development and ultimately manufacturing jobs. However, the Conservative Budget 2013-2014, for the first time in over 40 years, did not assign any financing for clean tech innovation – zero!

To catch up, Canada’s requires a highly aggressive climate change action plan that includes substantive fiscal, legislative, program and research components for immediate implementation after the next federal election in 2015. Put another way, Canada’s catching up to the rest of the world should not focus principally a dependency on clean tech imports and the sacrificing of the potential for domestic clean tech innovation and manufacturing in Canada.

China

In 2009, China became the largest single energy consumer in the world, putting the US in second place. But, since then, China has also become the largest clean energy market in the world and a leader in the manufacturing of clean technologies for both domestic and international markets.

While thermal coal-fired generating plants continued to dominate new installations of electrical power generation, with 50.7 GW in 2012, wind energy came in second with a record 13.2 GW added. Total 2012 installed wind capacity was 67.7 GW and the installed projections are for 2020 are 200 GW. (Note, for comparative purposes, Quebec’s total electricity capacity is 37 GW, not including Churchill).

From the 150,000 jobs in the Chinese wind sector in 2009, the projections for 2020 in this sector are 500,000 jobs.

With respect to solar energy, there are 14 GW in the pipeline. China had 300,000 people who worked in the photovoltaic sector and  800,000 employed in solar heating/cooling in 2011. Projections for total installed solar capacity for 2020 are on the order of 50 GW.

The United States

The US is the second largest clean tech market and, consequently, its energy portrait is changing rapidly. Wind was the largest new source of electrical power generation in 2012 with 13.1 GW of new installations, bringing the total US installed capacity to 60 GW.

This US migration to a green economy was kick-started with the American Recovery and Reinvestment Act (ARRA), which pumped $70B into the green economy – including major investments in innovation – during the 2009 to 2011 period, the first half of the first Obama mandate. Grants, tax credits loans, loan guarantees and investments in research were among the principle mechanisms applied during the 2009-2011 period. Republicans have since put the brakes on this; nevertheless, a strong momentum has been established.

There are about 75,000 people working in the US wind sector and over 500 facilities manufacturing turbine components. There were about 119,000 jobs in the US solar in 2012, a 13% increase over 2011 and the biomass and geothermal sectors provided 152,000 and 10,000 jobs respectively in 2011. When one adds the sum of the various parts of the renewable energy sectors, renewable energy capacity in the US doubled in the 5 years from 2008 to 2012.

Meanwhile, in parallel, between 2007 and 2012, oil consumption as a percentage of total US energy consumption dropped from 39.3% to 36.7%. As well, the consumption of coal has dropped from 22.5% of total US energy consumption in 2007 to 18.1% in 2012.

The impacts of the above-mentioned factors combined with investments in energy efficiency by power utilities and improved average fuel consumption of US vehicles, have resulted in a 13% drop in US CO2 emissions from 2007 to 2012.

In his late June 2013 statement on new actions on climate Change, President Obama announced an objective of a reduction of 3B metric tons by 2030. Unfortunately, the new support proposed for clean energy in his pronouncements was very modest.

The good news is that President Obama announced that the process for approving clean energy production and distribution on federal lands would be accelerated. This is good because federal lands represent 20% of the US continental land mass. The bad news is the June 2013 proposals are in effect an accelerated version a Department of the Interior mandate assigned during the ARRA 2009-2011 period. No details have been provided as to the nature of initiatives to speed up DOI approvals.

Disappointing in the June 2013 action plan, is the lion’s share of new funding, $8B, is to be allocated to technologies to reduce fossil fuel emissions, in particular to support carbon capture and storage technologies (CCS).  CCS technologies are prohibitively expensive and consume enormous amounts of energy while only offering modest carbon reduction.

Short time line extensions from the ARRA days are 1) the Investment Tax Credit of 30% on investments, primarily applied for the construction of solar farms and 2) the Production Tax Credit of 2.2 cents/kWh used mainly by wind farm developers.

Europe

In Europe, renewable energy represented 69% of new electrical power capacity installed in 2012 while the oil, coal and nuclear sectors experienced negative growth.

There were 11.6 GW of wind power installed in 2012, bringing the total installed capacity in 2012 to 105.6 GW. Wind is expected to reach 136.5 GW by 2014 and 230 GW of installed capacity by 2020.

Solar installations surpassed wind in 2012 with 21 GW of installations, representing one quarter of 2012 global solar installations in that year.

This rapid growth of the European renewable sectors is generating equally rapid employment growth. From 192,000 jobs in Europe’s wind sector in 2009, the European Wind Energy Association (EWEA)  is predicting  280,000 jobs in 2015 and 450,000 by 2020. So quickly is the industry growing that despite the exceptionally high unemployment in many parts of Europe, the EWEA estimates that the industry will experience a skilled labour shortage of 5500 jobs/year.

Germany is a leader among European nations with about 372,000 jobs in its renewable energy sectors for the year 2011. That’s bigger than the German auto industry. By 2020, the projections are for 400,000 to 500,000 employed in the renewable sectors.

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In parallel, Germany’s nuclear sector is on the way out – a consequence of the Fukushima crisis. Germany has shut down 8 of its nuclear plants and intends to shut down the remaining 9 by 2022.

Germany’s installed wind capacity was 31.3 GW in 2012, representing 30% of the European Union total. Its installed capacity of solar energy in 2012 reached 32 GW, making it the second largest solar market in the world after China. With respect to its renewables targets for the percentage of total energy consumption by 2020 (including the transportation sector), Germany has a higher target than the 20% target of the European Union. Germany is going for 35% and offshore wind will play a major role in pursuing this target. To this end, the German development bank, kfw will be backing offshore wind development with $7.2B (€5B) in financing.

Conclusion

The US, Europe, China and other developed nations are well-engaged in the migration to a green economy – from supporting domestic innovation; to the construction of green technology manufacturing plants; to the development of clean energy production sites; and more generally, to the expansion of national and international markets.

These developments continue to give rise to the creation of jobs by the thousands in most regions of the developed world – with the exception of Canada. They also offer hope for developing countries, where more than 50% of the global potential for renewable energy power production exists.

Conversely, all the evidence indicates that the old model – the fossil fuel-based economy – no longer makes sense. The old model not only requires massive dependencies on importing energy and the resulting exportation and concentration of energy wealth, but it is also not good for the planet. Surely a healthy economy cannot exist in a planet that cannot sustain healthy life.

For at least the next 2 and a half years, until the federal election of 2015, Canada will largely miss out on the global green economy opportunities, both in terms of spreading the energy-related wealth across the country and in terms of green technology market possibilities, domestic and export markets alike.

Perhaps more importantly, under the present circumstances, Canadian innovation capabilities cannot be adequately supported to keep pace with the rest of the world and ultimately offer Canada high-job creating manufacturing and export opportunities.

In a recent special report on renewables to the United Nations, the International Panel on Climate Change concluded that public policies, rather than the availability of the resource, are the key determinants regarding expansion or constraints to renewable energy development/deployment. In its June 2013 report, the International Energy Agency came to similar conclusions and added that uncertainty about renewable policies may hamper investment and growth.

In other words, the extent to which nations benefit from the high job-creating clean tech sectors, while reducing emissions, is a matter of political will. There certainly are no lack of possibilities for those who choose to be a part of the solution, in light of the fact that less than 2.5% of the globally available technical potential for renewables is currently exploited – leaving over 97 % untapped.

Indeed, the technical potential of renewable energy technologies exceeds the current global energy demand by a considerable amount. Meanwhile, the prices of clean technologies have declined considerably.

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Liberal Lies on LNG, Hydro Debt, Budget Spell Fiscal Disaster for BC

Economics, Hydropower, LNG
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Crown utility BC Hydro has been saddled with massive debt associated with overpriced private power contracts
Crown utility BC Hydro has been saddled with massive debt associated with overpriced private power contracts

We are getting barrow after barrow of barnyard droppings dumped on our laps and we should know it.

Premier Clark promised us huge LNG (Liquefied Natural Gas) revenues in a few years. We would be debt free and have $100 BILLION in the to be created “Prosperity Fund”.  That was at the start of the election campaign. Then it became a year after the next election. Now, according to Mike Smyth of the Province, this is 15 years away.

It’s all bullshit. For LNG to become a major export industry 15 years from now requires a phenomenal outlay of capital and it isn’t going to happen. Of course companies will, cross their hearts and hope to die, promise great things but they will not happen. We have only begun to learn about the reserves of shale gas and oil around the world but, in all likelihood, they will be everywhere and in abundance. Premier Clark and Finance Minister de Jong are telling us not to worry but it will all happen.

Well, then, would the two of you please outline the timetable for all this?

As Mario Cuomo said, “you campaign in poetry and govern in prose.” These promises however, are dangerous and deliberate nonsense.

Within the mandate of this government, it will try to break up BC Hydro and sell off the parts. Just like BC Rail, the government will retain residual ownership, in 900 years, to take back the dams. At the rate we’re going, this will have to happen. BC Hydro is awash in debt in its normal operations and new projects and is now facing an ever-increasing debt as private power producers (IPPs) provide power to BC Hydro at double-plus the market price and 10x what it can generate for itself from heritage assets.

This is the elephant in the room no one will talk seriously about – not the Premier, not the Minister of Finance, certainly not a government MLA, not Vaughn Palmer or Mike Smyth – it just throws its weight around unchecked.

Now BC Hydro is committed to a $10 BILLION Site “C” dam to subsidize the government’s dusty-eyed plans to make us all rich with LNG.

BC Hydro has only one source of revenue – you and me, the taxpayer and ratepayer – and when the government comes clean, the rate increases will be beyond our ability to pay.

This all started with the Gordon Campbell government and my bet is that privatization talks have been ongoing since then.

The balanced budget of Mike de Jong is bullshit too. In the first place, you can hardly say with a straight face that you’ve balanced a budget when, to make ends meet, you’ve sold hard assets for your revenue side. This is precisely like you balancing your personal budget by taking on a new mortgage or selling the car.

The real debt of the province per capita, under the Liberals, has quintupled. It will continue to grow at a frightening rate.

There’s insufficient money for current social funding, let alone increasing it.

This government’s election platform was a tissue of lies, but so what? It kept the bad guys out and left the white hats in control, didn’t it?

The Liberals have a hell of a lot to answer for. So do the NDP, who ran a pitiful campaign.

So do the nearly 50% of voters who stayed home last May 14.

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Mainstream media ignoring real story on BC Hydro debt, skyrocketing power bills

Economics, Hydropower, Media, WATER
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Mainstream Media Ignoring Real Story on BC Hydro Debt, Skyrocketing Power Bills
Vancouver Sun columnist Vaughn Palmer

I find myself in complete empathy with H.L. Mencken, when he said “Every normal man must be tempted, at times, to spit on his hands, hoist the black flag, and begin slitting throats.”

I read Vaughn Palmer in Friday’s Sun, where he said, talking about the challenges facing Bill Bennett (not the real one but the one now in charge of BC Hydro), saying his mandate is “to minimize rate increases to consumers.” Palmer counters, “Yet Hydro needs to manage soaring debt, rising costs and billions of dollars worth of spending in unresolved deferral accounts. Plus it is being pressured to deliver gobs of clean, cheap power for an expanded liquefied natural gas industry.”

Vaughn – where the hell have you been?

I’ve defended the pussycat approach you and your colleague Mike Smyth have taken towards this government for some years, saying that, unlike me, you have mortgages and education fees for your children that I don’t have thus I shouldn’t criticize the ongoing corporate blowjobs you have given and continue to give the Campbell/Clark government. No more.

BC Hydro is in a terrible way, as are we, its shareholders. And many, starting with Dr. John Calvert of SFU and other academics along with environmentalists like Tom Rankin, Damien Gillis and me – and most notably economist Erik Andersen – have been saying as loudly as our limited public outlets will permit that the Campbell/Clark government has forced BC Hydro into making deals with private companies for energy they don’t need yet must take at a cost at least double the market price and up to ten times what they can produce it for themselves. AND, these contracts are now in the range of $50-60 BILLION.

Where the hell have you and the government sucks that employ you been on this issue? A little one-liner in your column implying that this is something surprising that perhaps we should investigate. Golly, gee whiz, look what I found Mommy – a suspicious looking expenditure by BC Hydro that maybe, just maybe we should have a look at!

The scandal is not just the government and the private companies that just financed their re-election – not just the woefully inept Opposition Party – but YOU! Yes, Vaughn, you and those who employ you bear ultimate responsibility for covering this up, going back to the beginning of the Campbell/Clark government that connived to create these secret pay-offs.

I, personally, bear some of that responsibility, for it wasn’t until 2005 that I started questioning this energy policy. I interviewed David Austin, the lawyer for the Independent Power Producers for several years and never questioned closely these secret deals. I admit that and I’m ashamed of it. But I did start to ask questions, penetrating questions and, hearing no honest answers, persisted.

I repeat, Vaughn, where the hell have you and the mainstream media been? How can you now just slough the matter off with sort of a dreamy observation that BC Hydro has some bills to pay?

BC Hydro is broke, Bust. Bankrupt. At least it certainly would be were it in the private sector. Its only salvation is that it can raise its rates to the long-suffering ratepayers.

Now, in the June 15 Weekend Sun, Scott Simpson and Derrick Penner do an interview with Rich Coleman, who is in charge of getting Liquefied Natural Gas rolling. Good Grief! Can’t anyone ask a question? A real question? One slow pitch after another!

Of course the Liberals are to blame as are the NDP for being a pitiful example of what an Opposition is supposed to look like, both in the Legislature and on the hustings.

But the mainstream media and their neutered columnists are as much to blame as is the lily-livered Opposition. You have never even questioned this so-called “run of river”, private power policy, just as you have never questioned salmon farms, pipelines and tankers. You have let it happen and thus it happened. Now, it would seem, you will give Coleman and company free rein as they try with LNG to make a silk purse out of a sow’s ear – and fail.

All of you should at least admit it, late in the day though it is, and start telling the people the truth and force the government to do the same.

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New report: Canada-EU trade agreement threatens fracking bans

Economics, Energy and Resources, Fracking, International, Politics
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The Council of Canadians, along with the Transnational Institute and Corporate Europe Observatory, released a report this week examining the threat that a proposed Canada-EU free trade deal would have on a community’s ability to implement fracking regulations and fracking bans on both sides of the Atlantic.

Canada began negotiations with Europe on the Comprehensive and Economic Trade Agreement (CETA) in 2009 and hope to conclude the agreement by this summer. As Canadian negotiators visit Brussels this week to continue negotiations, the report, The Right to Say No: EU-Canada trade agreement threatens fracking bans, warns the proposed investment protection clauses in the agreement would jeopardise governments’ ability to regulate or ban fracking.

The report draws attention to Lone Pine Resources’ lawsuit against Quebec’s fracking moratorium under the North American Free Trade Agreement (NAFTA). Last fall, Lone Pine Resources, a U.S.-funded energy firm, filed a notice of intent to challenge Quebec’s moratorium on fracking under NAFTA and is asking for $250 million in compensation.

Fracking, or hydraulic fracturing, is a controversial process that uses massive amounts of water mixed with sand and toxic chemicals to blast apart shale rock or coal beds to extract natural gas or oil. Fracking fluid can contaminate drinking water with substances that cause cancer and organ damage, and affect neurological, reproductive and endocrine systems. Safely disposing of fracking wastewater is incredibly difficult. Fracking has also been linked to earthquakes and methane leaks that exacerbate climate change.

“The Right to Say No” looks at how CETA threatens fracking bans, the North American companies already invested in Europe and the state of fracking in both Canada and Europe.

The report is timely as the County of Inverness in Nova Scotia voted Monday to pass a by-law banning fracking within county limits. Cumberland County in Nova Scotia has also passed a motion banning fracking. Burnaby, B.C., Niagara-on-the-Lake, Ontario and a number of Quebec municipalities have passed resolutions calling for the protection of water sources and provincial moratoria. Nova Scotia is not issuing permits until their review on shale gas is complete and Quebec has implemented a moratorium within the province.

With the growing community opposition to fracking, we’ll likely see more by-laws banning fracking in the coming years and it’s crucial that we protect communities’ right to say no to fracking. An appellate panel of the New York Supreme Court recently upheld municipal bans on frackingin the state of New York. So while it’s not a Canadian example, the New York Supreme Court decision is a strong precedent for respecting municipalities right to ban fracking in North America.

The EU and Canada must exclude an investor-to-state dispute settlement process in the agreement, or not only will they be hamerping communities’ democratic right to determine their own environmental laws but Canada and EU countries could also find themselves targets of CETA lawsuits.

The report is available in English and French.

Emma Lui is a water campaigner with the Council of Canadians based in Ottawa. Emma’s work focuses on the Great Lakes, human rights, water privatization and the connection between energy and water.

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To Tiny Bhutan, “Progress” Means Happiness, Not GDP

Economics
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My parents lived through the Great Depression of the 1930s and were profoundly affected by it. They taught us to work hard to earn a living, live within our means, save for tomorrow, share and not be greedy and help our neighbours because one day we might need their help. Those homilies and teachings seem quaint in today’s world of credit cards, hyper-consumption and massive debt.

Society has undergone huge changes since the Second World War. Our lives have been transformed by jet travel, oral contraceptives, plastics, satellites, television, cellphones, computers and digital technology. We seem endlessly adaptable as we adjust to the impacts of these new technologies, products and ideas. We only become aware of how dependant on them we are when they malfunction (work comes to a standstill when the network goes down) or don’t exist (when we visit a “developing country”). Most of the time, we can’t even imagine a way of living beyond being endlessly occupied with making money to get more stuff to make our lives “easier”.

But some people have had the benefit of directly comparing a simpler way with the accelerated societies we’ve created. In the mid-20th century, the tiny Kingdom of Bhutan, hidden deep in the Himalayas between China and India, emerged from three hundred years of isolation. In 1961, the third king of Bhutan started sending students to schools in India. From there, some went on to Oxford, Cambridge, Harvard and other universities. The first of their nation to encounter Western society after three centuries of separation, those young people clearly saw the contrast in values. Upon returning to Bhutan, they expressed shock that, in the West, “development” and “progress” were measured in terms of money and material possessions.

At a 1972 international conference in India, a reporter asked Bhutan’s king about his country’s gross national product – a measure of economic activity. His response was semi-facetious: He said Bhutan’s priority was not the GNP but GNH – gross national happiness. Bhutan’s government has since taken the concept of GNH seriously and galvanized thinking around the world with the notion that the economy should serve people, not the other way around.

In 2004, Crown Prince Jigme Khesar Namgyel Wangchuck, who became king in late 2006, said, “There cannot be enduring peace, prosperity, equality and brotherhood in this world if our aims are so separate and divergent – if we do not accept that in the end we are people, all alike, sharing the earth among ourselves and also with other sentient beings.”

In July 2011, Bhutan introduced the only resolution it has ever presented at the United Nations. Resolution 65/309 was called “Happiness: towards a holistic approach to development.” The country’s position was “that the pursuit of happiness is a fundamental human goal” and “that the gross domestic product…does not adequately reflect the happiness and well-being of people.” The General Assembly passed the resolution unanimously. It was “intended as a landmark step towards adoption of a new global sustainability-based economic paradigm for human happiness and well-being of all life forms to replace the current dysfunctional system that is based on the unsustainable premise of limitless growth on a finite planet.”

That empowered Bhutan to convene a high-level meeting. I was delighted when its leaders asked me to serve on a working group charged with defining happiness and well-being, and developing ways to measure these states and strategies. Prime Minister Jigmi Thinley even cited the David Suzuki Foundation’s “Declaration of Interdependence” as an inspiration for the proposal.

The Bhutanese understand that well-being and happiness depend on a healthy environment. They vow to protect 60 per cent of forest cover in their country, are already carbon-neutral (they generate electricity from hydro) and have vowed to make their entire agriculture sector organic. They have snow leopards, elephants, rhinos, tigers and valleys of tree-sized rhododendrons – and know their happiness depends on protecting them.

The people of this tiny nation see that money and hyper-consumption aren’t what contribute to happiness and well-being. I’m proud to be part of the important initiative they’ve embarked upon, and look forward to the work leading up to a presentation to the UN by 2015.

Dr. David Suzuki is a scientist, broadcaster, author and co-founder of the David Suzuki Foundation.
 
Learn more at www.davidsuzuki.org.

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Dix Fails to Call Clark on ‘Debt Free BC’ Whopper

Economics, Energy and Resources, LNG, Oil&Gas, Pipelines and Supertankers, Politics, Western Canada
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On the side of the Christy Clark bus are the words “Debt Free BC”.

This could mean one of two things – we are now debt free or we will be. Either way, this statement stands as the all-time whopper in BC history and that covers a hell of a lot of territory.

I do not rely on politically-oriented think tanks for my information, rather noted independent economist Erik Andersen. If you add the $70 Billion in direct debt projected in Clark’s latest Budget to secret “taxpayer obligations” relating to private power contracts and public-private partnership (P3) infrastructure deals, you get – wait for it – over $170 BILLION, that’s with a “B”.

What is important to know about the debt is that in 2001, when the Liberals took over, every man, woman and child owed a shade over $8,000. Today we each owe $40,000 – five times what we owed before this so-called business-oriented, fiscally careful bunch of cheats and hypocrites took over.

No matter how you crunch the numbers, the NDP governments in their decade look like misers and skinflints next to this bunch.

Assuming that Premier Clark is referring to her “Prosperity Fund”, this is pie in the sky and cow pie at that.

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You may remember that the Premier first announced this as imminent. Now it is after the 2017 election! It might be added that by then, BC will be in even deeper financial trouble than today.

There is little, if any, certainty that the Liquefied Natural Gas (LNG) will ever come on stream. There must be markets for it offshore, since the domestic market is flooded in natural gas from “fracking”. To give you a bit o f a feel for this, only a few months ago, the industry and government flacks were talking about the huge Asian need for our gas in LNG form, then recently learned that our biggest potential customer, China, was sitting on some of the world’s biggest unconventional gas reserves. Russia has the largest supply of gas in the world.

The plain truth of the matter is that a large scale LNG industry in BC is speculative at best.

Let’s look at a couple of natal difficulties faced by companies.

A long-term market demand such as would justify LNG from BC just isn’t likely to be there in four years’ time.

Secondly, the LNG industry faces huge environmental hurdles. Two major questions in that regard are:

  1. Where will the massive amount of water needed come from? We simply don’t have “free water” available.
  2. After this water is laced with highly toxic chemicals, where will if go? Into the water table?

These two matters only touch some of the environmental issues – which include the climate impacts of all the greenhouse gases associated with this industry.

The underpinning of the industry is hundreds of millions of dollars in pipelines and port facilities. Premier Clark wants voters to brush aside these and many collateral concerns, thus convince voters that in four or five years all these issues will be resolved, including air-tight contracts with Asian customers to take this LNG. (It should be added that if, say, China, signs such a contract, the minute they no longer need our product they will vanish into the atmosphere.).

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It surprises me that Adrian Dix is playing softball with these issues. This is looking like ’09 all over again.

Mr. Dix, your position on the Kinder Morgan tanker port proposal was nice but marred by the delay. I told you many months ago that if you were opposed to Enbridge that logic should make you opposed to Kinder Morgan as the issues are the same.

Your position favouring LNG plants is puzzling, if only because you seem to be following Clark’s pied piper’s seductive path to supporting a dream that is almost certain never to come true.

To you, Mr. Dix, there is no way this government can win on its merits – you have to give it to them and you seem to be trying your best to do just this. What is truly troublesome is your amiable Adrian approach, with an endless stream of small policy announcements – sort of a fart a day.

I realize that people tell you that they want a politer politics in BC. That’s what Bob Skelly tried in the 80s and you know what happened to him.

Politics is a blood sport and your nicely, nicely approach is letting Premier Clark get away with murder. Despite a fivefold increase in the provincial debt, she’s painting you as wastrels and her government as  careful money managers!

Your best issue, the appalling fiscal policy of the Campbell/Clark government, is being used as a positive thing for them and you are responding rather than attacking. We’re seeing a tactic similar to when agents acting for George W. Bush, a draft dodger, denigrated the much-decorated John Kerry’s war record so they could lay claim to being strong on national defence. You’re becoming the essence of John Kerry, reacting weakly on issues that should have you on the attack!

On environmental issues you seem to be passive and non-threatening! These issues, along with the dismal Liberal record on money matters, ought to have you leading firmly, not cowering behind a cloud of good manners.

Mr. Dix, it’s yours to win and to quote the Baseball manager Lou Durocher, “nice guys finish last”.

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BC Liberal Legacy: A Huge Debt Burden

Economics, Politics, Western Canada
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BC Liberal Legacy: A Huge Debt Burden
Former BC Premier Gordon Campbell with his Finance Minister Colin Hansen

It might be instructive to the citizens of BC to have a financial report card on their Provincial Government before casting their vote in the coming election.

A good starting point is the 2001 publication by Gordon Campbell and the BC Liberal Party titled “A Vision for Hope & Prosperity for the next Decade and beyond”. Ten “visions” were presented – numbers 9 and 10 are of particular interest:

9. The most open, accountable and democratic government in Canada.

10. Responsible, accountable management of your public resources and tax dollars.

It is generally known that our government tasked BC Hydro to contract with Independent Power Producers (IPPs) for new electricity generation. These contracts are for lengthy terms and billions of dollars in payment obligations. Contrary to “Vision 9” the government made these contracts secret as shown by a reply from the BC Utilities Commission dated December 29, 2009: “Pursuant to Section 71 of the Utilities Commission Act, we are unable to fulfill your request as the Agreement [contract] was filed explicitly in confidence by BC Hydro.”

Because these contracts have been made secret it means we can speculate as to why. The most obvious reason is that the government knows the IPP contracts are not in the best interests of the public. That in turn means they are very much in the interests of private investors who wish to get a “free ride” on the citizens of BC. It is highly likely these contracts will be with us for 20-40 years and while we pay off the cost of this infrastructure, we likely earn no ownership in the end. Nice work if you can find it.

Next, let’s take a look at what the BC Auditor General had to say about BC Hydro’s accounting practices in a letter dated October 2011:

Unfortunately, though, government is requiring BC Hydro to adopt part of an American accounting standard that allows rate regulation, abandoning the transparency that will be required by Canadian GAAP. It is my hope they will reconsider.

They have not.

It takes little imagination to understand the departure of the Auditor General after trying to get full disclosure at BC Hydro and from the government itself. There have been more than ten years of annual reporting inadequacies that the government has ignored, mostly regarding disclosures of debts.

To help readers come to grips with this deliberate pattern of non-disclosure the following graph is offered for your consideration.

debt-contractual-obligations-infographic

The period shown is a little greater than 35 years.  For the first 15 the government of the day was BC Social Credit. Reported debt in that period tripled from a low base of $5 billion. However, it should be noted that a lot of infrastructure was built in that timeframe.

The following 10 years was a period of the BC NDP having dominion in the Legislature. In that period the reported debt doubled to about $35 billion, or $8,428 per capita.

Staying with this theme the Liberals declared they would “Pass real Balanced Budget legislation, to make balanced budgets mandatory by our third full budget and to hold all ministers individually accountable.”

They also vowed to “Pass real Truth in Budgeting legislation that ensures all provincial finances are fully, accurately and honestly reported under Generally Accepted Accounting Principals.”

Since making those bold promises the record does not provide evidence of follow through. Since 2005, the government has been accumulating debt at a breathtaking pace, mostly under the heading of what the Auditor General calls “Contingencies and Contractual Obligations”.

By letter, he states that the total for fiscal year end 2011/12 in this category is “$96.374 billion and can be found on the Summary Financial Statements page 77.” Before anyone asks if there is double counting of this number, the answer, according to the Auditor General, is “They are not included in the liabilities recorded on the Summary Financial Statement’s Consolidated Statement of Financial Position.”

Virtually every person we have spoken with has had no idea that on top of the $70 billion in liabilities (debt + other liabilities), that the government disclosed a year ago, there is an additional $96.374 billion in contractual obligations. That translates into a total debt of approximately $170 billion and will be significantly more when the 2012/13 financial reports are presented. In the last eleven years under the BC Liberal government the provincial debt has increased by a factor of 5 times, or to a per capita amount of about $40,000.

Provincial Budgeting Considerations

When there is talk of the growth in provincial GDP (economy), one should realize that it happened almost exclusively because of the binge in borrowing and building, a practice that cannot continue without serious consequences for the population. Debt repayment and its attendant interest has and continues to crowd out all other funding requirements when preparing budgets.

Two years ago Standard & Poor’s Credit Rating Agency delivered a report titled “Canadian Provinces Face Tough Choices in Restoring Fiscal Balance”.

The report states, “Health care and education make up a commanding share of their [provinces] overall spending; typically health care and education spending accounts for more than 65% of a province’s operating expenditures.”

“Rising debt service burdens further limit financial flexibility because as these burdens increase as a share of total spending, they crowd out other program spending.”

Two years ago this was in the hands of the government, yet it did not curb borrowing and spending in any discernible way.  Nor did the troubling news cause the government to seek new revenues from the “free riders” and those with the capacity to pay more. In stark contrast to heeding these warnings, the government resolved to further cripple budgets for health care and education.

The Liberal government of BC has prepared a financial “poison chalice” for the citizens of BC through runaway debt. The consequence of too much debt is loss of democracy – at least that is what the Greeks, Cypriots, Italians, Spanish, Portuguese and Irish have realized.

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References:

  • BC Ministry of Finance, Provincial Debt Summary/ Debt Statistics
  • BC Ministry of Finance, Contractual Obligations Supplemental/Public Accounts/Summary Financial Statements

Links to data sources for total provincial debt:

Links to data sources for contractual obligations:

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