Nov 4, 2016

I am re-posting this blog with the news that Woodfibre LNG has just been approved. The post below refers to the PNG LNG project which was only proposed to use electricity to compress its gas. Woodfibre LNG has committed to doing so. In doing so, it will be one of the lowest GHG sources of LNG in the world and the discussion below becomes even more relevant.

Original post

Yesterday a group of 90 scientists and climate activists sent a letter to the federal cabinet to argue against federal approval the Pacific Northwest (PNW) LNG project. The activists argue that the project would

make it virtually impossible for BC to meet its GHG [greenhouse gas] emission reduction targets, and would undermine Canada’s international climate change commitments

This morning the British Columbia Minister of the Environment suggested that the 90 activists had taken a myopic view of the situation. The proponents of the project, meanwhile, argue that the project is good for the environment. Now reading these differing statements you might think that someone is not telling the truth. In reality, all sides are correct and that is what makes the environmental debate such an interesting one. I will spend the rest of this post explaining how these apparently mutually exclusive statements are all true and how the Paris Agreement has actually served as a perverse disincentive discouraging international efforts to reduce global greenhouse gas emissions.

Let’s start with the climate activist’s side of the story first because it is by far the easiest. They are completely correct that if the PNW LNG project is approved it will make it harder to meet our international obligations under the Paris Agreement. In doing so this demonstrates the biggest weakness of the current international process to fight climate change (the Paris Agreement). As I have described in my previous posts on the Paris Agreement and its effect on British Columbia’s energy picture, under the Paris Agreement Canada has committed to reducing our greenhouse gas emissions to 30% below our 2005 levels by 2030. As described by the climate activists and scientists, the PNW LNG project would add between 18.5% and 22.5% to British Columbia’s total GHG emissions. Now that increase would make it virtually impossible to meet British Columbia’s GHG targets by 2030. So it sounds like a slam dunk, the project shouldn’t go forward. The problem with that logic is that it takes the classic environmental credo “think globally and act locally” and turns it on its head. But how can this be?

Let’s start with some simple truths about the world energy picture. According to the International Energy Agency:

Globally 1.2 billion people are without access to electricity and more than 2.7 billion people are without clean cooking facilities. More than 95% of these people are either in sub-Saharan African or developing Asia, and around 80% are in rural areas.

From a human health perspective, the indoor air pollution associated with that energy poverty, on its own, kills between 3.5 million and 4.3 million people each year. In response to this global tragedy a number of Asian countries are working hard to get electricity to their poorest citizens. Because it is cheap and easy to produce the go-to source of this energy has been coal. India, on its own, has approximately 455 coal power plants in their energy pipeline with an estimated 519,396 megawatts of installed generating capacity on its way. China, meanwhile, is still piling on the coal plants even as it attempts to diversify its energy mix with renewable and nuclear energy alternatives.

The problem for these countries is the simple reality of energy math: coal represents the cheapest, most easily accessible and fastest way to get energy to its people. The problem is that tonne-for-tonne it is the worst power source from a greenhouse gas perspective. Now a lot of activists argue that these countries should switch to renewables but that is simply not an alternative. Renewables work well in combination with other baseline energy sources but cannot be the basis of an energy grid in a developing country, irrespective of what the 100% Wind, Water and Sunlight people will try to claim. Other activists claim that LNG will simply replace nuclear. Personally I think that is pretty cute; the same people who have spent the last 30 years fighting every advance to nuclear energy are now complaining that the world is not generating enough power using nuclear technology.

These countries’ alternatives to coal are nuclear, which is expensive, technically-challenging and for which the international lenders have been hesitant to supply funding; hydroelectric which comes with its own set of problems in densely populated countries; and natural gas. Now we all know that natural gas is a much better solution to the current energy crunch than coal. It produces approximately half the emissions of coal and has been described as the bridge fuel for these countries. As I will no doubt hear:

In the long term, natural gas plants do indeed produce less warming than coal, the researchers found. But that result comes with a caveat: without high-tech carbon storage, neither gas nor coal can achieve the type of greenhouse-gas reductions demanded by international bodies such as the IPCC.

Okay, now let’s look at this from a global perspective. It is accepted dogma that no first-world government on the planet is willing to go into energy poverty in order to meet climate change goals. It is similarly understood that no matter what the activists have to say there is simply no way that these 2.7 billion people are going to stay in energy poverty in perpetuity. So LNG is not the perfect solution but it is the best of many poor choices.

Talk all you want about the future risks of climate change but right now these Asian countries are seeing millions of their citizens dying yearly due to energy poverty and they want to deal with that problem now. So to repeat myself, due to the state of the technology and the state of these countries, their alternatives for baseline power are coal, nuclear or natural gas. Being environmentally aware many have decided that natural gas is the preferred option over coal and have built plants that need LNG.

Now let’s go back to the PNW LNG project. According to Environment Canada (not the proponent but Environment Canada):

The greenhouse gas intensity for the Project would be 0.27 tonnes carbon dioxide per tonne of LNG produced, but the proponent stated that this ratio could be less if additional engineering solutions  to mitigate greenhouse gases…. Of the twelve worldwide projects compared, the average greenhouse gas intensity is 0.33 tonnes carbon dioxide per tonne of LNG

So doing the simple math the PNW LNG project has a 18% lower greenhouse gas intensity versus our average competitor. Moreover, according to life cycle analysis of LNG, the raw material acquisition energy cost for LNG is equivalent to 3% – 4% of the energy generated by the LNG. If the British Columbia government can electrify the process then the PNW LNG project can operate at an intensity equivalent to 80% of our competitors. What that means is that if consumers in Asia use British Columbia LNG the global emissions for the LNG will be 20% lower than existing LNG sources. If this LNG replaces coal as an energy source the global benefit of using BC LNG is even greater. So from a global perspective this is also a slam dunk, we sell our LNG to Asian clients and in doing so prevent the emissions of millions of tonnes of carbon dioxide that would otherwise have come from using coal or dirtier LNG sold by our competitors.

See what happened here? Both sides are correct, neither is wrong.

This brings us back to the perverse disincentive of the Paris Agreement. Because the Agreement is between state-level actors, all the math is based on national emissions. You essentially get no points for helping your neighbours. The problem with the process is that not all countries are part of the Paris Agreement and, more importantly, we all share the same planet. From a greenhouse gas perspective, energy decisions in Asia will affect British Columbia just as as much as energy decisions in BC will.

This brings us to our dilemma. By exporting LNG, British Columbia can have a net positive (good) effect on global emissions by reducing the amount of carbon dioxide that will be spewed into the global atmosphere. We can provide a fuel with some of the lowest carbon intensity per kilowatt/hour generated and in doing so help reduce global emissions. Unfortunately, in doing so we will likely exceed our national NDC limits and look like bad guys under the Paris Agreement. So what do we do? Well the climate activists and scientists have made their opinion clear. They want to meet our Paris Agreement obligations even if in doing so has the perverse effect of incresing global greenhouse gas emissions.  They are the neighbour who keeps a spotless front yard but will not step onto the sidewalk to pick up the garbage that is strewn there.

The BC government, on the other hand, has taken a different view. They are looking at the big picture and see an opportunity to help the world reduce global emissions while starting a lucrative industry in BC. They have written legislation to make BC LNG as low-emitting as possible while working to change the accounting system to not count all the emissions from our export fuels against our Provincial carbon budget. That way they can show leadership on a provincial level while also showing leadership on an international level.

Which side is right? Well it really depends on how you look at the world. As a pragmatist I think the BC government is on the right path. I recognize that all the work we do to reduce our greenhouse gas emissions in BC can be undone with the flick of a pen in China or India. I see the opportunity to help the BC economy while making a difference on the international stage. I refuse to take the myopic view that BC meeting its local commitments is more important than controlling global emissions. I might be wrong in this, but I have yet to read a cogent argument that makes me think that may be the case.