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August 8, 2020 | Recovery Strategy: “Focus on the Leading Economic Engines”

Stewart Muir is founder and executive director of the Resource Works Society, a Vancouver-based group open to participation by British Columbians from all walks of life who are concerned about their future economic opportunities. He is an author, journalist and historian with experience on three continents including a financial editor of The Vancouver Sun responsible for mining and markets coverage. Since Resource Works was established in 2014, the group has gained international recognition for its practical approach to the public challenges of responsible natural resource development and use.

It turns out that industries producing the materials at the centre of modern life can be a driving force for economic recovery after the pandemic. Stewart Muir looks at how the new Stronger Tomorrow strategy looks to leverage, and evolve, longstanding job and GDP pillars in the natural resource sector.

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Timely ideas

Released July 29 in the sweet spot of a B.C. summer, the Stronger Tomorrow recommendations from the Business Council of British Columbia provide some thoughtful considerations to ruminate on in the backyard alongside our choice of holiday fiction and, perhaps, the odd sniff of local artisanal gin. It’s particularly timely since governments at all levels are looking for ideas to construct robust return-to-health policies.

In keeping with the times, a surprising number of the recommendations have to do with how resource fields generally – including not just commodities, but also very sizeable chunks of manufacturing and construction – are rolling with the times by adapting to changing expectations in an era when environmental, social and economic systems are interconnected like never before. Challenging though this may be, it is an operational necessity not just for the intrinsic reasons of wanting to do right by the environment and society, but also because staying internationally competitive means trading Canadian resource products – including energy, minerals and metals, forest products and agri-foods – in exchange for things we need but can’t produce ourselves.

On that theme, here are some highlights from the the Stronger Tomorrow plan:

Lower-carbon future

Focus on the leading economic engines: For the next two years at least, B.C. will need every job and every dollar of GDP it can muster. A glance at our export mix shows B.C has proven comparative advantages in high value-added sectors such as natural resources, transport, manufacturing, and advanced technologies, along with film production, education, and technical and professional services. The most surefooted path to economic recovery is to do more of what we are already good at. In this regard, we should not overlook the fact that B.C. is a relatively low carbon producer of natural resources and manufactured goods, in a world that is moving to a lower-carbon future.

Certainty for delayed capital projects

Actively support already underway or imminent private sector capital projects that have faced delays and uncertainty (e.g., the Trans Mountain expansion, Coastal GasLink Pipeline).

Getting to market

Advance and support Gateway infrastructure spending based on lists of ready-to-go projects at Port of Vancouver, the Port of Prince Rupert and YVR.

Technology bridges to the future

A Global Transportation Gateway to the New Economy Precinct to attract global talent and support the development of data systems and smart regionally connected infrastructure. An innovative and integrated Gateway cluster could focus on the safe movement of people and goods in the post COVID world, using new transportation and fuel modes and digital applications. YVR would be an ideal location for such a centre.

Agri-tech

A Global Agri-Tech Precinct to promote innovation and growth in B.C.’s diverse and steadily expanding agri-food and related technology cluster. This would grow local companies that can expand safe food production while reducing climate, water and toxicity impacts using less land. Supporting companies that are using technologies and biochemistry, B.C. should aspire to become a leader in healthy, higher yield, sustainable food production. Combined, this approach can meet the growing local and global demand for safe, secure and low environmental impact food products and production.

Address carbon pricing gaps

Today, B.C. natural resource companies, agricultural producers, manufacturers, and transportation companies are paying hundreds of millions of dollars in carbon taxes every year, while competitors elsewhere do not face the same tax burden. Nor does B.C. any longer have an advantage in other areas of business taxation — in fact, just the opposite is true. Breaking it down:

  • Maximize our low carbon advantage to level the playing field for B.C.’s export businesses and their employees. B.C. businesses have supported carbon pricing as part of the policy tool kit to utilize B.C.’s low carbon advantage. B.C. is the only jurisdiction in the world that has adopted broad carbon pricing but done virtually nothing to protect export-oriented local industries from the negative financial effects of domestic carbon pricing. Leaders in climate like Norway and California have those measures in place, as do other Canadian provinces. Only B.C. does not.
  • The B.C. carbon tax was introduced at $5/tonne and rose over time to $40/tonne. For a time, offsetting reductions in personal and corporate income tax rates were implemented as the carbon tax crept higher. But starting in 2013, the main offsetting business tax reductions were reversed, thus removing any financial benefit from carbon pricing for large segments of the business community.
  • B.C.’s current approach to carbon pricing is undermining the commercial viability of some of the province’s leading export industries and threatens to accelerate “carbon leakage” as industrial production in the natural resource and manufacturing sectors migrates out of B.C. to jurisdictions with no or less burdensome carbon pricing schemes.
  • Compared to the U.S., most other provinces, and much of the world, B.C. export goods have comparatively low-carbon content. In fact, on average our energy and other resource-based commodity exports have half the greenhouse gas intensity as similar goods produced by competing jurisdictions. The main reason for B.C.’s low carbon advantage is that virtually all of our electric power comes from carbon-free sources — mainly hydro.
  • Electricity is a significant input into the production of many B.C. export products — from natural gas through food, pulp and paper, aluminum, minerals/metals, lumber, and many other manufactured items — resulting in substantially lower carbon content than comparable goods produced in other provinces, states and countries. Many jurisdictions that B.C. competes with rely on fossil fuel-based electricity such as coal and levy lower (or no) carbon taxes on their industries, including their export industries.
  • B.C. can contribute to reducing global greenhouse gas emissions by selling more of our relatively low-carbon goods to customers abroad. Instead, the province’s current policy regime increasingly disadvantages our own low-carbon exports and producers.
  • The added cost burden is prompting many B.C. companies to invest and create jobs elsewhere or to delay or cancel investment in the refurbishment and upgrading of equipment and buildings here in the province. This is jeopardizing high-paying jobs in some of our biggest export industries.

Digitize regulatory processes for greater efficiency

Make B.C. the first fully digital regulator in North America for land use, environment and climate approvals and regulations. Current regulatory review and permitting processes across land-based industries depend heavily on in-person interactions and outmoded, traditional paperwork that cannot consolidate all data and information resulting in added costs, time and complexity. Much of what needs to be done can be completed electronically, as evidenced by the responses to the COVID-19 shutdown and the shift to online communications. This would require consolidation of all infrastructure, climate, biodiversity and land use data to allow for faster and more integrated project approval and permitting processes, while also enabling streaming of regulatory and permit compliance data from operations, infrastructure maintenance and monitoring, including for forest fire risks. The result will be greater efficiency, more transparency and better environmental and business outcomes. We believe B.C. has the capability to fully digitize and stream these approvals and permitting processes using locally developed visual and connected data technologies. In turn this creates data volumes that could support capital investment for expanded rural and reliable broadband connectivity that enables online learning and healthcare and market access for Indigenous and remote communities and businesses.

Support alternative fuels

Support the development of infrastructure and solutions that speed the adoption of alternative fuels for vehicles, vessels and trains as well as landbased business operations B.C. has abundant clean energy resources: carbon-free electric power, the capacity to develop and use more carbon-free electricity, and huge reserves of low-carbon natural gas. The province also has scope to stimulate local demand for such energy as well as to expand local supply. Recent policies announced by the federal government create a strong incentive for the use of alternative fuels to lower GHG emissions. B.C. is going in a similar direction. But greater uptake of such fuels requires infrastructure to support existing operations and policy to encourage new investment and certainty for ongoing operations. The Province should continue to encourage the uptake of alternative fuels such as marine LNG fuel use and bunkering. It should also do more to leverage B.C.’s multiple clean energy assets and advantages across the spectrum of energy sources. Position B.C.’s regulatory framework to capitalize on growing global demand for low carbon fuels with incentives for local production and job creation.

Carbon offsets for the net-zero era

Establish and implement a credible system that enables the creation and purchase of carbon credits (offsets). Many businesses and even some individuals are looking to “offset” their emissions of greenhouse gases by purchasing or acquiring carbon offsets. These offset purchases need certainty about the validity of acquired credits. Emissions offsets are being used around the world as part of the climate change policy tool kit. Offsets were a component of B.C.’s framework for managing GHGs in 2008. They are also recognized in global agreements. B.C. has the potential to develop significant carbon offsets, but to date the province has done little to put in place the rules and legal frameworks to allow this opportunity to be realized. Meeting the aggressive GHG reduction targets the province has set — as well as the targets that a growing number of companies have adopted to reach “net zero” emissions by 2050 — cannot be done without access to and use of carbon offsets. With its extensive Crown and Indigenous land base, B.C. is well positioned to become a global leader in GHG-related technologies and nature-based solutions through a well structured offsets system that links up over time with similar systems in other provinces and non-Canadian jurisdictions. B.C. can also advance its leadership using technology like blockchain to verify these offsets that will be purchased by households and corporations seeking to achieve netzero emissions. Therefore, a priority for the provincial government should be pursuit of this carbon offset market structure and the development of technology and systems to verify the quality of offsets and then establish mechanisms to sell/trade accredited carbon offsets into the future.

Build a clean energy, clean tech cluster

Develop a global centre for clean energy/clean technology innovation. British Columbia is already home to a sizable clean energy/ clean technology cluster. However, there is significant advantage in pursing a more globally impactful virtual cluster with Alberta and Saskatchewan by combining our strengths that create scale and impact. Each jurisdiction, through business, investors, researchers and entrepreneurs, is working to address climate change, reduce emissions and sequester and utilize carbon through natural and technological means. This work is pursued to provide commercially viable technology solutions through new Canadian companies that can be adopted at scale to reduce the cause and effects of climate change here and abroad. At the same time, the province should identify and commit to policy consistency and certainty over longer periods that are required to realize innovation uptake. The government should also ensure that the B.C. public sector offers more local market access for made-in-B.C. clean technology solutions through public sector procurement. Finally, the growing global interest in “sustainable finance” suggests these provinces need to be part of this trend. British Columbia and these western provinces have numerous companies, investment funds and other organizations operating in each province that are active in mobilizing finance for sustainable growth. The province should consider how B.C. can reap economic and job benefits from the development of sustainable financing products, solutions and standards within this recommendation.

Distress signal

Amid all of these positive ideas comes a sort of warning, I would even call it a distress signal: in the arena of intense global competition, lowest cost wins, and Canadian producers are at risk. As the report points out, global producers are taking advantage of the rising Canada-only costs. Most of our resource competitors don’t have a carbon price, possess more efficient regulatory process and are not subject to clean fuel standard in the expansive way the Canadian government is planning. Through a perhaps unconscious belief that everyone will follow our example – there is scant evidence that this is actually the case – we are at risk of entering a period when we trade fewer Canadian resources, resulting in less money in the economy, fewer top-paying jobs, less new investment and – the most ironic part – a lessened ability to contributed to lower GHG emissions, not just at home but globally too.

If there is some good in the pandemic, perhaps it will serve as a reminder for British Columbia, and the parts of Canada that depend so much on being able to move their goods to market through the province, that we don’t need to face a decline in living standards because of challenged economic rebound from COVID-19. Nor do we need to accept that a deeper environmental footprint is the inevitable outcome of natural resources. Efficient development, enabled and supported by optimized public policy, will benefit all residents.

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August 8th, 2020

Posted In: Resource Works

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