British Columbia has offered a bold-and
politically gutsy-solution to help combat global warming by
becoming the first jurisdiction in North America to introduce a
carbon tax on both business and consumers.
But it's a move that has left executives at
one of the province's biggest mining companies, Teck Cominco
Ltd., scratching their heads over whether they'll be subject to
a tax penalty that could ultimately ruin their competitiveness.
It's also created further uncertainty in the minerals sector
over just what the fight against climate change will ultimately
If the province isn't careful, it could end
up trading off private-sector investment in one of its biggest
industries in favor of becoming an innovator in greenhouse gas
The carbon tax, which kicks in July 1, will
start at $10 per tonne of carbon-equivalent emissions and rise
$5 annually over the next four years. It will apply to all
fossil fuels, including gasoline, diesel, natural gas, coal,
propane and home-heating fuel.
The legislation comes with certain
exceptions, though, that allow industries to get out of paying
the tax on manufacturing processes that use fossil fuels. While
all combustion of fossil fuels will be taxed, hard-to-measure
emissions and fossil fuels used as feedstock will not. These
processes are believed to account for nearly one-third of
emissions in British Columbia.
That has created a gray zone for Teck
Cominco, which uses coal in its furnaces as a "reductant" to
create certain chemical reactions as part of the process to
produce lead at its Trail smelter and refining complex. The
issue is whether that is a combustion use of a fuel source or
can technically be defined as a process use.
The company's use of coal at its smelter
generates a sizeable portion of its carbon emissions in the
province. If taxed, Teck Cominco's costs to produce lead would
shoot up, putting it at a competitive disadvantage to its peers
operating elsewhere in the world.
Teck Cominco plans to take the issue up with
the provincial government, which appears not to have delved too
deeply into such technical matters before announcing the carbon
tax. It's quite possible the government will put the smelter on
its exceptions list, but in the meantime it's created some
Teck Cominco argues that having just one
jurisdiction being subject to a carbon tax isn't good for
business. The province's carbon tax solution runs contrary to
the thinking of the federal government and other provinces,
which generally have rejected such a tax system in favor of
supporting technologies and efforts to capture and store
carbon. Quebec introduced a scaled-down form of a carbon tax
last year that directs revenue to initiatives supporting green
technology-but its plans weren't nearly as far-reaching as
those of British Columbia, which produces less than 0.2 percent
of the world's greenhouse gas emissions.
Putting a tax on the back of both business
and consumers is sure to ruffle a lot of feathers, even though
the intention of the British Columbia government is to return
every penny collected through personal and corporate tax
There's also the question of whether it will
do the environment much good. According to Matthew Bramley of
Canada's non-profit Pembina Institute, a carbon tax would have
to be at least $75 a tonne to have a substantial impact in
reducing carbon-dioxide emissions. Given the British Columbia
tax falls far short of that, and neighboring Alberta-a key
contributor to greenhouse gases because of its rich oil sands
resources-has rejected the tax, it seems that the benefits
could be minimal.
According to the Mining Association of
British Columbia, the industry produces about 3.3 million
tonnes of greenhouse gas emissions annually. That would result
in the mining sector paying $33 million in carbon taxes by 2009
and $99 million by 2013. The association also calculates that
corporate income tax reductions will make up only about 23
percent of the overall climate plan tax reductions, yet
industry will pay approximately 60 to 70 percent of the new
carbon taxes. It urges that more work be done to ensure true
revenue neutrality for all sectors.
But it's not just carbon taxes that concern
The governments of British Columbia and
Manitoba are developing the architecture for a cap-and-trade
program, which could put strict limits on the amount of
greenhouse gases individual polluters can release. Industries
that exceed the caps would have to pay fees to those under
their limits. The mining association wants any cap-and-trade
system to allow for the creation of new mines and smelters, but
how to get to that point is going to take a lot of hard
thinking and consultation between government and industry.
What British Columbia may learn from the
carbon tax is that often there are devils lurking in the
details that can derail the most well-intentioned plans.
Sometimes, taking baby steps toward a solution can be better
than rushing to be the first to implement one.