Re: Mining Association of British Columbia (MABC) Comments on the Clean Growth Program for Industry

Transcription

1 August 24, 2018 VIA The Honourable George Heyman Minister of Environment and Climate Change Strategy Room 112 Parliament Buildings Victoria, BC V8V 1X4 Minister Heyman: Re: Mining Association of British Columbia (MABC) Comments on the Clean Growth Program for Industry The Mining Association of British Columbia (MABC) acknowledges the steps the Government of British Columbia is taking to develop a green clean growth strategy. We are strongly supportive of the proposed Clean Growth Program as it is the first time a solution to the competitiveness challenge created by the carbon tax has been proposed. We were also encouraged with the appointment of Marcia Smith, Senior Vice-President of Sustainability and External Affairs from Teck Resources to co-chair the Climate Advisory Council as we believe a responsible climate strategy needs to be grounded in the economic viability of the jurisdiction. MABC is the voice of mining in BC, representing operating steelmaking coal, metal and industrial mineral producers, as well as smelting operations and advanced development companies in the province. Our mandate is to encourage the safe, responsible development and operation of mining and related facilities across BC. As Canada s largest producer of copper and steelmaking coal, BC is an essential component of Canada s commitment to a lower carbon future. MABC s members include some of this province s most iconic operating companies who directly employ thousands of British Columbians and indirectly support thousands of supplier and support jobs in every region of the province. In 2017, the mining industry contributed $11.7 billion to British Columbia s economy and $859 million in payments to government. Mining is the largest private sector employer of Indigenous people in Canada, and a major partner to Indigenous businesses. Indigenous peoples also share in the benefits of mining through innovative Impact Benefit Agreements that our member companies enter directly with Indigenous nations. Many First Nations in British Columbia also share directly in mineral tax revenue from mines operating within their traditional territories, a policy that is both unique to mining operations in BC, and unique amongst Canadian jurisdictions. Widely recognized for these industry-leading practices, the mining sector in BC remains committed to advancing reconciliation with Indigenous peoples. The BC economy was founded on mining. Mining continues to be a key component of BC s wealth, continued job creation and prosperity. The commodities our mines produce are traded globally, at prices established by world commodity markets. As a result, mining is a price-taker and we are unable to pass along increased costs to customers. The metal and mineral companies in BC are at the end-point within the economy where the cumulative costs of the carbon tax are passed to, resulting in mining companies paying carbon tax on their own emissions, while also having to absorb the carbon tax costs incurred and passed on by our suppliers. This is significantly different than the transportation sector, for example, that can pass on their carbon related costs to the companies whose goods they are moving. The

2 accumulation of these costs for BC s mining sector increases operational costs and erodes the competitiveness of BC mining operations by moving them further up the global cost curve. At a minimum, these additional costs erode the attractiveness and returns on our assets; at worst it threatens the viability of the BC mining sector altogether. MABC supports making changes to the carbon tax that will make the tax more effective and efficient. We consider an effective price on carbon to be one which reduces global emissions and ensures that all emitters and all jurisdictions are contributing to innovative solutions. An efficient price on carbon is one that facilitates the greatest amount of real global reductions in greenhouse gas (GHG) emissions at the lowest cost. Not only should the price on carbon emissions be effective and efficient, it must be implemented in a manner that creates reasonably consistent terms of trade between jurisdictions so that competitive advantages or disadvantages are not created for some emitters that could, in turn, induce carbon leakage and capital misallocation. Jurisdictions across the globe continue to lag in pricing carbon. This is true for the jurisdictions that BC mining companies are in direct competition with such as Australia, China, Chile, Peru, Russia and the United States. Because of the inaction of these mining jurisdictions, BC mines are at a competitive disadvantage even though they are among the lowest GHG emissions-intensive emitters in the world. The shift in production to other jurisdictions due to carbon leakage is likely to not only shift the location of the emissions but it may result in a net increase in GHG emissions. BC has recently increased the carbon tax, at a time when other provinces in Canada are moving away from adopting a price on carbon, and when the federal backstop legislation that will apply provincially if there is no provincial price on carbon has just been made less stringent. Where a carbon tax has been implemented or is under discussion in other Canadian jurisdictions it always includes measures to assist trade exposed industries with every dollar of carbon tax paid. MABC cautions that the Clean Growth Program needs to be developed to ensure that BC mining operations, that are likely the lowest GHG emitters in the country, are not put at a competitive disadvantage by BC s carbon tax relative to our provincial and global counterparts with higher emissions. MABC supports the establishment of the proposed Industrial Incentive which will help the BC mining industry to remain competitive and continue to provide low carbon emission mineral products to the world. However, it remains important to remember that BC mines have been absorbing the costs of the carbon tax for 10 years and the base carbon price, which is not being adjusted by the proposed Industrial Incentive, is eroding the competitiveness and return on assets for BC industry, and is therefore threatening the long term viability of our mining sector. To ensure fairness for BC mining companies with their competitors in other provinces and worldwide, MABC recommends that the Industrial Incentive be available for every dollar of carbon tax paid by trade exposed industries. The above recommendation is our highest priority recommendation for the Clean Growth Program. Additional recommendations and comments regarding the Clean Growth for Industry Intentions Paper (the Paper) are included in the Annex to this letter. This submission is based upon the concepts offered in the Paper and our direct and ongoing engagement with the Climate Action Secretariat. 2

3 MABC respectfully requests that consideration be given to our recommendations as part of the Clean Growth Strategy that is expected this fall. We appreciate the opportunity to submit our comments and we remain committed to engaging with you and Climate Action Secretariat staff on the development of mining industry benchmarks and other elements of the Clean Growth Program. Sincerely, Bryan Cox President and CEO cc: Hon. Bruce Ralston on behalf of Hon. Michelle Mungall, Minister of Energy, Mines and Petroleum Resources Bobbi Plecas, Deputy Minister, Climate Change Strategy Dave Nikolejsin, Deputy Minister, Energy, Mines and Petroleum Resources 3

4 Annex MABC Response to the Clean Growth Program for Industry Intentions Paper MABC respectfully offers the following comments and recommendations on key elements of the Clean Growth Program including the Industrial Incentive and the Clean Industry Fund. Our comments are based upon the concepts presented in the Intentions Paper: A Clean Growth Program for Industry and are augmented by our direct engagement with Climate Action Secretariat. Clean Growth Program MABC supports changes to BC carbon pricing which make the carbon tax more effective and efficient. We consider an effective price on carbon to be one which reduces emissions and ensures that all emitters and all jurisdictions are contributing to solutions. An efficient price on carbon is one that facilitates the greatest amount of real global reductions in GHG emissions at the lowest cost. For over 10 years, BC has operated with a price on carbon. However, the effectiveness of this approach continues to be undermined worldwide by jurisdictional laggards. The jurisdictions that BC mining companies are in direct competition with such as Australia, China, Chile, Peru, Russia and the United States have yet to establish a cost for carbon emissions, placing BC mines at a competitive disadvantage, even though they are among the lowest GHG emissions-intensive emitters in the world. This also leads to carbon leakage (shift in production to other jurisdictions) which inadvertently results in a net increase in global GHG emissions. MABC is strongly supportive of the proposed Clean Growth Program as it will help mitigate the competitiveness challenges that have been created by the BC carbon tax while at the same time maintain a price signal to reduce emissions. We concur with the statement in the Paper that it is the time to help our industries grow and make them cleaner, positioning our energy and products as engines of sustainable prosperity. To date, BC mines have absorbed the carbon tax cost, which has eroded our competitiveness and threatens the viability of the mining sector in BC. As mentioned in the Paper: the program partially addresses the competitive impacts of increasing the carbon tax with new incentives and a new fund to offset the cost of making operations cleaner. For this reason, MABC recommends that the Industrial Incentive be available for every dollar of carbon tax paid by trade exposed industries, to fully offset the competitive impacts of the carbon tax. Recommendation 1 MABC strongly recommends that the Industrial Incentive be available for every dollar of carbon tax paid by trade exposed industries, and not only applicable above $30 a tonne. Recommendation 2 MABC recommends that eligibility for the clean growth program be open only to industrial emitters that report their emissions under BC s Greenhouse Gas Industrial Reporting and Control Act. Industrial Incentive MABC concurs that the Industrial Incentive will help reduce carbon leakage. We are supportive of the concept that the cleaner the industrial operation, the larger the incentive. Given the diversity of metals and minerals mined in British Columbia, significant analysis and consideration is required to establish eligibility benchmarks for the sector. MABC has been impressed with the commitment of the Climate Action Secretariat to engage in collaborative discussions related both the eligibility and performance benchmarks. 4

5 Performance benchmarks in the mining sector can be impacted by operational efficiency, and commodity prices. To ensure performance benchmarks are set at an appropriate level to recognize successes and incentivize improved performance we recommend that GHG intensity benchmarks be determined based on performance over longer business cycles (e.g. 10 years). The effectiveness of the Industrial Incentive will be influenced by a variety of factors including the strength of the provincial economy, fluctuating commodity prices, and the evolving jurisdictional approaches to carbon pricing and reducing GHG emissions. To ensure the province is tackling climate change in the most effective manner possible, MABC recommends scheduled reviews of the Industrial Incentive program. To avoid unnecessary disruption, and to create certainty for business, we recommend that a five-year review cycle be adopted. Recommendation 3 MABC recommends that the eligibility benchmarks for the mining sector be developed and agreed to between MABC and the Climate Action Secretariat that recognize the various commodities produced by the mining and metal sector. Recommendation 4 MABC recommends that all performance benchmarks be determined based on BC industry emission intensity against comparable sectoral emission intensity worldwide. This will incentivize BC industry to become the cleanest facilities in the world and recognize the global nature of managing carbon emissions. Recommendation 5 MABC recommends that GHG intensity benchmarks be determined based on performance over longer business cycles (e.g. 10 years). Recommendation 6 MABC recommends that given the transparency and reliability issues of obtaining international emissions data, that quartiles be used when determining the Industrial Incentive payments. For example, those companies in the top quartile would receive an industrial incentive payment equal to 100% of the carbon tax paid, where those companies in the bottom quartile would receive a payment equal to 25% of the carbon tax paid. This would also serve as an incentive for companies to lower emissions. Recommendation 7 MABC recommends that the industrial incentive program be structured to allow new entrants into the mining sector to be eligible for the Industrial Incentive despite having no long-term production data. Recommendation 8 MABC recommends that all performance benchmarks be reviewed on a 5-year cycle. Clean Industry Fund MABC understands that the Clean Industry Fund is being proposed with the expectation that incremental carbon tax revenue from industry will remain after the Industrial Incentives have been provided. Given the challenge government grant funding programs have in predicting winning investments, it is recommended that funds targeted for the Clean Industry Fund be used to offer the Industrial Incentive program below the proposed $30 per tonne cap. 5

6 Should this recommendation not be accepted by government, MABC has the following recommendations related to the proposed Clean Industry Fund. The sectoral funds available in the Clean Industry Fund should first be available to the sector from which these funds were derived. If and only when this sector declines to pursue a GHG reducing project under the fund or a reasonable time has elapsed, should these funds be made available to other sectors that are eligible under the Fund. MABC supports the concept of initially focusing Fund investments on readily-available technology but remaining open to supporting emerging technologies in the future. Finally, we are supportive of using the Fund to leverage investment funding from other sources. However, we do not believe this should be a mandatory requirement. Recommendation 8 MABC recommends that funds targeted for the Clean Industry Fund be used to offer the Industrial Incentive below the proposed $30 per tonne cap. Recommendation 9 MABC supports that the eligibility for the Clean Industry Fund be restricted to Industrial Operations that report their emissions under the Industrial Incentive program. Recommendation 10 MABC recommends that sectoral funds available in the Clean Industry Fund should be allocated to the sector that generated the funds. These funds should remain available for that sector s sole use for a reasonable time, and only reallocated to other eligible Fund participants after a term of not less than 2 years. Recommendation 11 MABC is supportive of including projects along the technology readiness spectrum and giving preference to projects that leverage additional investments from other sources. 6