Sunday, January 13, 2008

Ontario’s Debt Retirement Charge: voila! It’s a carbon tax
Back in November, I suggested renaming the Debt Retirement Charge portion of every Ontarian’s electricity bill to Climate Change Contribution (see article).


This is just one way of acknowledging that the Darlington nuclear generating plant—which the debt retirement charge pays for—offsets around 27 million tonnes of greenhouse gases (GHGs) every year. History proves that if Darlington weren’t there, we’d be getting its annual 27 billion kWh from coal—and according to Environment Canada coal produces about a kilogram of GHGs for every kWh.

As an electricity consumer, I pay less than $4 a month for Darlington. That’s a small price to pay for the plant’s high quality, zero-emission power.

Last week a federal organization caused a stir by saying that Canadians have to start paying for their carbon. It was suggested that this could result in electricity rate hikes of 50 percent. (Of course it was never mentioned that it is Albertans who would suffer this pain; after all, Alberta’s electricity system is primarily coal-fired. Quebeckers, who already have the cleanest power in the industrialized world, would see no change in power rates. But it is unwise in Canada to point this out.)

Ontario’s experience with the debt retirement charge suggests that the cost of bringing zero-emission power into a system will not result in rate hikes anywhere near 50 percent.

Ontario’s experience also suggests that subsequent incremental rate hikes won’t result in a political apocalypse for the government that brings them in. Other than the usual tax haters and anti-nuclear greens, nobody has raised a fuss over the debt retirement charge.

And if the Debt Retirement Charge were re-framed as the Climate Change Contribution, it would become positively risky to attack it.

8 Comments:

Anonymous Brad F said...

Steve,

You may as well wish it be re-named to "the political meddling charge." It ain't gonna happen.

BTW, Nova Scotia gets a substantial portion (75-80%) of its electricity from coal, and although NB has Pt. Lepreau, they have a lot of fossil generation as well, so the pain will be felt in the east as well. But if you look at emissions of GHG per capita, Alberta and Saskatchewan are head and shoulders above the rest of us, at something like 70 tonnes per capita in 2005 versus around 25 tonnes and below for the rest of us.

I assume that is the massive consumption associated with the oil sands development. So you are correct, Alberta would suffer most due to a carbon tax. But would oil sands investment suffer, or is the price of oil such that the increase in cost would be an acceptable business cost?

9:44 PM  
Blogger Steve Aplin said...

Thanks Brad,

Yes, the NS, NB, and SK power sectors are big coal consumers, and major per-kWh GHG emitters, as well as Alberta. I didn’t want to leave anyone out, I just wanted to contrast Alberta’s power sector with Quebec’s in order to illustrate why the issue makes federal government politicians squirm.

The Alberta oil sector emits even more GHGs than its power sector, and will certainly not meet the federal government’s requirement for an 18 percent emission reduction by 2010 (pick whatever baseline year you want).

The question is, what will happen when it fails to meet the target? If the world price of oil goes high enough, then you may be right that a carbon tax would just be another acceptable cost of doing business. Maybe the proposed technology fund, fed by carbon tax revenue, would swell large enough to fund a few nuclear reactors in Alberta.

But the big problem would be political. This is another federal government, all kissy-kissy with Quebec, impeding free enterprise in the west -- just to please a bunch of leftist tree huggers who hate Big Oil. Or at least that’s how it could be spun in Alberta.

10:07 PM  
Blogger Randal Leavitt said...

Perhaps we should be a little bit more realistic about all this. Canadians can do whatever they want - burn coal, not burn coal, fission uranium, not fission uranium. It won't make any difference for the planet. We are just too few, there are not enough of us to influence the carbon dioxide crisis. Consequently, I think we should be a bit hesitant about pointing fingers at each other's energy systems. Down deep everyone wants to be a good guy if they could just figure out how. The really important aspect of all this that we need to keep in mind is that our health, prosperity, happiness, and security are all based on a very high energy life style. We cannot move to a low energy mode of living as advocated by some enviro-alarmists and provide a good environment for our children. If we lose this key insight we will watch our descendants struggle with starvation, illness, fear, cold, and shortened lives. This raises a problem - how to live a high energy life without harming the world. Nuclear fission looks like a solution. Great. But if some of us take a bit longer to figure that out, well, it won't end the world like forgetting about the importance of energy will.

11:17 PM  
Blogger Steve Aplin said...

You are right Randal. In spite of what the anti-energy advocates say, the world needs more, not less, energy.

Canada may be next to irrelevant in terms of our puny emissions relative to the U.S., China, and India, but we punch above our weight when it comes to the sophistication of our energy generation.

Ontario, with its 50 to 60 percent nuclear-powered electricity, could and should be touted as a global best practice in emissions management.

12:12 PM  
Anonymous JB said...

Perhaps use a modest carbon tax to help pay for building nukes *in the province the CO2 is emitted*.

That way at least it wouldn't be a case of certain provinces getting hit with a big tax that gets spent elsewhere.

Maybe the law could be written so the funds go to any non-fossil energy source, but given an otherwise level playing field the result would be mostly nuclear.

11:34 AM  
Blogger Steve Aplin said...

Good points JB. Why not take it a step further and make it a carbon tax whose revenues would go to reducing the emission intensity of generator portfolios? Instead of having portfolio standards based on renewables, which would not make much of a difference in a system's overall emissions, why not base portfolio standards on emission intensity. That would channel investment into nuclear, because that is the most effective way for a company like, say, Epcor to reduce its portfolio emissions.

11:51 AM  
Anonymous JB (in Calgary) said...

I'm not quite sure I understand your point about "emission intensity of generator portfolios".

I'd like to see this sort of fund go to *anyone* building non-fossil generators in an area where much generation is currently fossil, not just the companies that are now the major polluters. Would your variation on the idea allow that?

10:38 PM  
Blogger Steve Aplin said...

JB:

Rather than forcing utilities or authorities in charge of electricity systems to adopt renewable portfolio standards, which would require some percentage of wind/solar/micro-hudro/biomass generation, my proposal is to simply mandate a certain level of emissions per kilowatt-hour. It would then be up to individual power companies to figure out how to achieve that level. The outcome is the same, except the intensity-based approach does away with the fixation on politically correct but insignificant forms of generation. And of course anyone with the desire to build non-fossil generation should be free to do so; I only mentioned the current emitters because they are already players in the industry and most likely to shift to non-emitting generation on the scale necessary to actually achieve reductions.

6:27 AM  

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