B.C. s Climate Action Plan and Carbon Finance Green is the New Black

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1 B.C. s Climate Action Plan and Carbon Finance Green is the New Black March 5, 2014 Rob Abbott, PhD, CMC Executive Director Climate Action Secretariat Government of British Columbia

2 Take-away Message Sustainability and climate action is not a problem to be solved it is a future to be created 2

3 Consider the Following We built cities and infrastructure assuming the environment was a constant. Coastal urban areas assumed there would be no sea level rise. Hydro dams assumed river levels would be stable. Extreme events are increasingly blowing those assumptions apart. 3

4 Climate Change Impact on Capital Assets Experienced and projected climate changes Impacts on natural systems Impacts on capital assets Warmer and wetter winters Warmer summers Reduced snow pack More frequent extreme weather events Glacier melting Ocean warming and volumetric expansion More frequent freezethaw cycles More frequent rain on snow events Earlier snowpack melting Increased flooding Increased slope instability (due to soil saturation and rain on snow events) More frequent heat waves Increased fire frequency & severity Sea level rise Reduced urban air quality Greater probability of water-borne disease outbreaks Stresses on summer hydro-electric supply Property damage & loss due to flooding Stranded investments Energy and emissionsintensive industries are less competitive Damage to buildings and infrastructure new protective infrastructure Higher insurance costs Damage to building envelopes = HIGHER GOVERNMENT EXPENDITURES

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7 Trajectory of Organizational and Community Performance We are at an Inflection Point Rising growth through end of 1990s and into 2000s New Issues: Climate change and declining (cheap) oil Consent to operate AND consent to grow Trust and credibility as influencers on access to talent and markets New Inflection Point? Future Potential? Run-up to the crash 2008 Today

8 A Word about the Climate Action Secretariat Whole-of-BC approach to achieving BC s GHG emission reduction targets, adapting to the impacts of climate change and driving the low carbon economy. Accelerate the work of climate leaders who are emerging in every sector of every region of BC. Recognize that BC cannot address the climate change challenge alone and therefore work with other jurisdictions to help accelerate their leadership on climate action. Recognize that success requires many leaders in many sectors to act. Seek to inspire people through our work while providing support and service to those who take on leadership themselves.

9 and the Climate Action Plan 6% by % by % by % by 2050 A price on carbon Signature policies Carbon Neutral Government Climate Action Charter Offsets Adaptation Forest Carbon Reporting on progress LiveSmart BC BC Jobs Plan/Green Economy BC is, and will remain, a climate change leader

10 Legislated Carbon Neutral Public Sector Established a price on carbon [$25/t] for public sector organizations This price is spurring innovation and opportunity in the low carbon economy [energy efficiency, offsets, and so on] First jurisdiction in North America to achieve carbon neutrality across the public sector three years running Provincial government, schools, universities, colleges and hospitals [SUCH] 300,000 public servants and 2 million British Columbians who work, learn in, or visit public sector facilities.

11 Strengthened Public Sector Leadership $14.5 million in Budget 2014 for expanded carbon neutral capital program. New capital to reduce public sector energy costs and demonstrate clean technology. Invest in energy-saving upgrades that reduce energy costs and allow public sector organizations to redirect financial savings to front line services. New offset program that invests in climate projects across BC driving the creation/acceleration of a green economy.

12 Facilitating Community Action: The Climate Action Charter Introduced in 2007 at UBCM Convention 181 (95%) BC local governments signed on Local governments commit to 3 goals: Make their own operations carbon neutral by 2012 Measure and report on community GHG emissions (i.e., CEEI) Build complete, compact energy efficient communities. 31 LGs are carbon neutral 40 climate action funds

13 The End Game is Extraordinary Communities Resilient in the face of change Clean water, land and air Abundant green space, easily accessible Healthy residents Connected residents Rich in social and cultural capital Rich in intergenerational wisdom Rich in opportunity and possibility

14 Servant Outcomes that Feed the End Game Smart asset management Reduced energy costs Superior delivery of public services Increased social cohesion More and better walkability, public transit, and physical activity Reduction in obesity and heart disease/death Novel collaborations

15 Carbon Finance: First Principles Carbon finance explores the financial implications of living in a carbon-constrained world, a world in which emissions of carbon dioxide and other greenhouse gases (GHGs) carry a price. Financial risks and opportunities impact corporate balance sheets, and market-based instruments are capable of transferring environmental risk and achieving environmental objectives.

16 The Investment Gap Big Picture Total global climate investment equaled $359 billion in 2012 that s roughly the same as the year before and not nearly enough $5 trillion needed through 2020 We re falling further and further behind globally agreed-upon goals for safe GHG emissions levels. We need to accelerate transformative changes and grow carbon risk management and carbon finance literacy.

17 Capital Asset Management Framework [CAMF] Government is not consistently incorporating the tax, the offsets charge or future impacts in making capital decisions. Key message: Incorporating climate-responsive strategies into the evaluation and decision making for capital investments will more efficiently manage public assets and help address financial risk related to climate change and its impacts on natural and human systems.

18 Examples of Carbon Finance Beyond B.C. On-bill financing (Manitoba has province-wide PAYS in place, Ontario is implementing next year) Revolving funds (TAF case study, many PSE institutions in the US and some in Canada). Municipal policy tools: LICs in Canada, PACE in the US paying for energy retrofits via a property tax levy tied to the property. Benchmarking/green rating systems for commercial/institutional buildings: Linked to green lease and other market mechanisms to monetize the competitive advantage from a high energy efficiency rating

19 Toronto Atmospheric Fund Purpose: Toronto City Council established the TAF in 1991 to finance Toronto-based initiatives that combat global climate change and improve air quality. TAF has approximately $1.2 million available annually for grants and special projects. Up to $8 million in financing is currently available for mandate-related loans. Current priority interests are: renewable energy development for Toronto, energy conservation and efficiency and fuel switching. Initial Capitalization: Working with a $23 million endowment from the sale of the long-closed Langstaff Jail Farm. Administration: TAF operates as an arms-length agency at no cost to the City. Results: TAF-supported projects such as a street lighting retrofit, traffic light LED conversion, and building retrofits have generated $55 million in savings for the city to date.

20 Shadow Carbon Pricing Many private sector companies incorporate a national market or shadow price for carbon in internal financial analysis and decision making processes to deal with the risks/uncertainties of climate change. Ten major energy companies studies by Sustainable Prosperity use a shadow carbon price between $15/tonne to $68 per tonne. Both Shell and BP use a $40/tonne carbon price on major capital investments. Suncor uses a $15/tonne carbon price which ramps up to $50/tonne by BP originally developed a tight gas play in BC called Noel. In developing this project BP used a $40/tonne price of carbon. This $40 carbon price resulted in the well sites being designed as zero venting, and electric drive compression instead of gas driven compression. The gas not vented and not burned for compression directly results in gas which makes it to market thus generating royalty revenue for the province.

21 New Financing and Economic Development Tools: Green Bonds Green Bonds (GB) enable capital-raising and investment for new and existing projects with environmental benefits. HSBC estimates $10T are needed between to achieve a global low carbon economy. In Canada, the NRTEE* estimates about $2B per year between Market for GBs is developing rapidly: In 2013 HSBC announced GBs for $346B. Jan Green Bond Principles: voluntary guidelines for use of proceeds, project evaluation and selection, management of proceeds, and reporting. *National Round Table on the Environment and the Economy

22 Local Leadership Matters Vancouver s leadership in climate action and sustainability is beginning to be recognized around the world: Vancouver was added last year to the C40. Group of mega-cities working with the Clinton Initiative to drive meaningful climate action. The invite to Vancouver to join is instrumental recognition that the city/region has made huge strides on climate action and sustainability. We need to challenge ourselves and others to raise their game and join Vancouver. It s not just about reminders to turn off lights or not idle your vehicle. Cleantech should be a core focus of our economic development thinking and strategy.

23 Local Clean Technology Leaders Ostara Nutrient recovery technology that helps recover phosphorus and nitrogen from municipal and industrial wastewater streams and transforms them into a slow-release eco-friendly fertilizer. Minesense - Proven platform for the sensing and sorting of low grade ore to a level of precision unprecedented in the mining industry. Cooledge - Large array of small LEDs that is physically flexible and easy to incorporate into a wide rage of materials and designs.

24 The Idea of Narrative Overall Excellence We should act because these actions demonstrate excellence and we are excellent at all we do (leadership vision) Instrumental We should act because others have had good results (cost savings) Offensive CHANGE FOR SUSTAINABILITY Defensive Analytical We should act because an evaluation of our situation suggests action is in our best business interest (competitive advantage) Reactive We should react to this trend Risk Avoidance We should act because if we do not, something bad will happen to us (negative value) What is your organization s narrative?

25 Thank you Rob Abbott, PhD, CMC Executive Director Climate Action Secretariat BC Ministry of Environment