Coping with carbons

BCBusiness | Image: Perry Zavitz | Published: May 01, 2008

Everyone living in B.C. is now part of a great policy experiment, whether they want to be or not – and that goes double for businesses.

When the latest B.C. budget dropped North America’s first true carbon tax in our laps, we were stunned and strangely silent. Even though the tax had been widely expected, its arrival was hard to believe. The tax is tiny today, but it will grow and will also bring a friend: the long-debated cap-and-trade system the Campbell government is building with select provinces and U.S. states is supposed to be designed by August.

If you’re doing business in B.C., where the first set of carbon emission rules is in place, the big question is: what are you going to do about it?

We brought three experts together to talk about what B.C.’s carbon-fighting schemes mean for business. James Tansey is an assistant professor at UBC’s Sauder School of Business and the co-founder and CEO of Offsetters Climate Neutral Society, a non-profit that helps organizations

reduce their carbon footprint. Chris Bataille is an adjunct professor with the School of Resource and Environmental Management at SFU and a principal at M.K. Jaccard and Associates, an environmental consulting firm that has worked closely with B.C. and federal government climate thinkers. Peter ter Weeme is a principal with the Vancouver-based sustainability consulting firm Junxion Strategy Inc.

One of the major issues for businesses today when it comes to climate change is the new government regulation. James, to start us off, what are the logics of these plans introduced by B.C.?

JAMES TANSEY: The carbon tax is really as much about educational change as it is about behavioural change. It’s a way of letting consumers know the extent that carbon is embedded in the choices that they make. But it’s not set at a high enough rate to enable great behavioural change. It may have a significant effect on major fuel users, like truck fleets for instance, so it sends a small signal through the system.

I think the cap-and-trade scheme sends a secondary signal right into the manufacturing base, the major users of energy who are more sensitive to marginal increases and energy costs. If it’s set at the right

level and if it’s a robust system, then there will be strong incentives to reduce emissions.

How are these plans supposed to work if all goes well?

CHRIS BATAILLE: The carbon tax and the cap-and-trade system are essentially close cousins of one another. What they do is put a marginal price on emitting carbon into the atmosphere.
With a cap-and-trade system, ideally what you’ll do is issue permits for how much you want to emit, and then you let the market decide who is going to do what emitting. So you issue these permits somehow, whether it’s by auction or according to previous recorded emissions, and then you let companies trade amongst each other to determine who gets to do the emitting and who does the reductions.

What has been the reaction to these ideas among businesses?

PETER TER WEEME: I think it’s been relatively muted, and I think people had expected a lot more of an uproar. I agree that the tax is not nearly high enough to really send a strong enough signal, but I think it’s the beginning of a series of measures that we’re easing the public into. I think the business community is kind of worried about where this might go now. What other taxes might be coming our way? Is this the thin edge of a big wedge? I think it is, quite frankly.

TANSEY: It’s also clear that the carbon tax has been set up to be revenue-neutral. So for Consumers there’s an offset within the tax system for the additional cost. That’s not going to be the case, as I understand it, for the cap-and-trade system and for the system that will be in place in 2010, where government ministries, universities, hospitals and Crown corporations have to be climate neutral. This will be a real cost to those organizations.

I’m involved in chairing the committee at UBC looking at greenhouse gas emissions and where the opportunities lie for reducing those. The operations guys are trying to work out what to do about their 50,000-tonne-a-year gas furnace and suddenly a whole bunch of alternatives start to look very appealing when there’s a fee of $25 a tonne for the emissions in 2010.

TER WEEME: One of the other things is that businesses like certainty and they like level playing fields. One of the challenges is, if every jurisdiction starts to do its own program and use different policy instruments, it makes it challenging as a business to try and figure out how to manage that and how to make good decisions in terms of investment and so on. There’s a desire to see some national solutions to these issues.