Sunday, April 29, 2012

TransAlta and friends cancel carbon capture program

The Keephills 3 plant.
Photo by Bruce Edwards for the Edmonton Journal.
Last Thursday a $1.4 billion carbon capture program by TransAlta, Capital Power and Enbridge was cancelled on the grounds of it being uneconomic. "Project Pioneer" was supposed to capture carbon from a new coal plant, Keephills 3, west of Edmonton at a rate of a million tons per year for ten years. The project had received $800 million in provincial and federal government subsidies, most of which will now presumably be paid back.

The Pembina institute says this demonstrates that there is no incentive for companies to do this without a price on carbon. Jim Carter, former president of Syncrude and chair of the Alberta Carbon Capture and Storage Development Council, says it's hard for governments to implement a cost on carbon because it makes businesses less competitive and increases prices for consumers.

I agree with Pembina on this one. There is no reason to expect companies to capture carbon if they aren't required to and it costs them money. If the government is serious about reducing emissions, it either needs to make it a law or put a price on carbon somehow. I do not agree with making it a law; it is unlikely to be practical or even possible for many companies and applying it will be inevitably come out being unfair to someone. 

A cost on carbon is a more attractive option. Rather than picking a winner, as the government has done with carbon capture, this would motivate companies to do anything that accomplishes the ultimate goal of reducing carbon emissions. For example, maybe the best way for electricity companies to reduce emissions isn't carbon capture at all, but to build more transmission lines with BC and import their hydroelectricity, or maybe replacing coal generators with natural gas would make sense, or even nuclear plants. Let the companies decide how best to reduce emissions, don't tell them to do what the government thinks is the best way.

There are two flavours available for putting a price on carbon - a cap and trade program or a carbon tax. I think either of these options could work, but I believe a carbon tax is the better choice, despite the fear of one having been used by the Conservatives to bludgeon the Liberals in the last federal election, which probably makes it impossibly awkward to implement one now. Regardless of its political baggage in Canada, I believe a carbon tax would be much more transparent and even-handed than a cap and trade program. Cap and trade requires a system of permitting that is an invitation for problems in my opinion, particularly when governments start handing out waivers to select companies or industries but not others. I think international cap and trade programs - where a country has acceptable emissions levels chosen and then they are required to pay other countries if they go over that - are a total non-starter. This is part of why I support Canada's decision to leave the Kyoto agreement - it is ridiculous that Canada should be fined billions of dollars, most of which would go to Eastern European countries that beat their targets only  because their heavy soviet industry collapsed between the baseline set in 1990 and today. In other words, Canada was expected to pay between $6 and $14 billion to countries, some of which are notably corrupt, whose main environmental virtue was the total failure of their economic system. While Kyoto is not a cap and trade program, I believe such programs would face similar problems for similar reason.

Cap and trade  also doesn't address consumer emissions directly, only the companies that provide it. In the case of oil, the biggest part of the emissions is when it's burned in the consumers car. I don't believe the refinery that makes that oil should be responsible for this emission, the driver should, but there's no easy way to do that with a cap and trade program.

With a carbon tax it can be easy - for every unit of carbon released, whoever releases it pays a set amount. It doesn't matter if that's an individual driver or a huge power plant. Everyone can understand it and no one has to worry about getting a worse deal than their competitors. Because it is applied to the end user, it is more likely to spur that end user to reduce their emissions.

But ADS, you say, this is a blog about the oil sands, what is this story about a power plant even doing here? As I've mentioned before, I believe mitigating CO2 emissions by the oil sands, either by releasing less CO2 in the oil sands themselves or in other Alberta industries, is critical for the industry to secure support in the rest of Canada and the world. It doesn't really matter if we believe CO2 is responsible for global warming - if we appear to be recklessly disregarding outside opinion on the matter we will increase resistance to our oil. Although it seems counter-intuitive, I believe a carbon tax would be good for Alberta, because it would insulate us from criticism, fair and otherwise, leveled at our environmental performance.

1 comment:

  1. Well written and pretty much spot on. The carbon tax can even be revenue neutral if desired, which (depending on how they use it to reduce taxes) would actually reduce most people's overall tax bill (the median household's emissions being lower than the mean).