An
analysis of Nova Scotia's proposed alternative
to the federal carbon pricing system
Larry Hughes, PhD
Dalhousie University
23 August 2022
Introduction
On 18 August 2022, Nova Scotia Premier Tim Houston sent a 13-page letter to Steven Guilbeault, the Federal Minister responsible for Environment and Climate Change Canada, explaining the province's five "facts" for a made-in-Nova-Scotia carbon pricing system.
This report is a review of the letter's five facts.
The five "facts"
(1) Nova Scotia has the most aggressive legislated targets.
The letter states that, "The underlying purpose of your carbon tax is to increase renewable energy usage and decrease GHG emissions by 2030 and achieve net zero by 2050." As evidence, a number of the climate goals in Nova Scotia's Bill 57 - Environmental Goals and Climate Change Reduction Act of 2021 are listed:
(a) 80% of electricity in the Province supplied by renewable energy by 2030;
(b) At least 53% below GHG levels that were emitted in 2005 by 2030;
(c) Phase out coal-fired electricity generation in the Province by the year 2030; and
(d) Net zero by balancing GHG emissions with GHG removals and other offsetting measures by 2050.
Provided Nova Scotia is achieving its targets as set out in (a) and (b), we will be on track to meet the 2050 net zero goal.
These are legislated targets (some of which were legislated by earlier governments); it does not mean they will come to pass. For example, the province has yet to met its 2020 renewable electricity targets, which were an amendment to the original Electricity Act in 2013.
The province's 2050 net-zero targets are opaque. For example, our proposal on recognizing the need to protect Nova Scotia's nature-based solutions was ignored by the province during the Law Amendments Committee hearings on the Environmental Goals and Climate Change Reduction Act.
(2) Meet renewable targets through a Progressive Nova Scotia-Born Approach.
The letter states:
Nova Scotia is a leader in decarbonizing our electricity sector. Emissions from electricity are 43% below 2005 levels and renewable electricity has increased from 9% to 30% in the last ten years.
It is true that Nova Scotia has made considerable progress in reducing emissions in the electrical sector. According to the National Inventory Report (NIR), emissions from electrical generation in Nova Scotia fell by 41% or 4.4 megatonnes between 2005 and 2020, although Alberta's emissions declined 37%, or 19.3 megatonnes.
Nova Scotia's reliance on renewable electricity has increased 30% since 2010. According to the Electricity Act, it should have declined 40% by 2020:
At present, Nova Scotia's electricity mix is expected to be over 40% renewable energy and by the end of the year.
Expected, maybe, but at present it appears that this goal (part of the Electricity Act regulations for 2020) will not be met in 2022. The reasons for this are problems with Muskrat Falls and the Labrador Island Link, bringing renewable electricity from the Muskrat Falls hydroelectric station to Labrador.
The letter goes on to say that:
By 2025-2026, Nova Scotia will reach an energy mix of 75% renewable. With more wind coming online, Nova Scotia will reach its 80% renewable target by 2030 through a combination of Maritime Link, wind, hydro, solar and biomass
Surprisingly, this paragraph omits any mention of Hydro Québec and the Atlantic Loop, something the Nova Scotia government has claimed is necessary. However, two paragraphs later, we see that:
Five of the eight remaining coal plants can be closed by the energy supply options described in Appendix "A," combined with capacity from the new batteries, an expanded Nova Scotia-New Brunswick intertie and two coal-to-gas plant conversions. The remaining three coal units can be replaced by firm capacity which can flow from multiple sources: the Atlantic Loop, off-shore wind and hydrogen, new gas turbines, more Smart Demand Response and Green Button systems as well as longer-duration Batteries and Storage [See Appendix "B" for outline of prospective renewable projects].
The letter does not elaborate on the likelihood and efficacy of any of these technologies, although the final paragraph in this section calls for more federal money and clarity on the Atlantic Loop.
Appendix "B" lists 39 wind and solar projects that have been proposed in the province. The total capacity of these project is about 3,200 MW.
Some of the project appear to have been submitted to the Rate Base Procurement process. The results of the procurement process were announced the day before the Premier's letter was released; five projects were selected, with a total capacity of 372 megawatts and expected to meet 12% of Nova Scotia's electricity demand.
The letter also lists five proposed green hydrogen projects. The province has a history of such lists, including the promises of offshore oil and natural gas; tidal power in the Minas Passage; LNG import facilities to be built in Bear Head and Goldboro; LNG export facilities in Bear Head and Goldboro; and green hydrogen export facilities in Bear Head and Goldboro.
Ideally, some of the renewable and hydrogen projects will come to fruition. However, if they are intended for export, it is unclear how beneficial they will be to the province
(3) Exceed GHG reduction targets through an Aggressive Nova Scotia-Born Approach.
The letter states, "Nova Scotia is a leader in GHG reductions. In 2020, the province's emissions were 36.4% below 2005 levels, making Nova Scotia one of the national leaders in GHG reductions (second largest reduction among all provinces) [See Appendix "C"]."
Appendix "C" is a table, comparing changes in provincial and territorial emissions for 1990 to 2020 and 2005 and 2020.
In 2020, Nova Scotia's emissions were 36.5% below 2005 levels. To claim that Nova Scotia was one of the national leaders in GHG reductions is misleading: first, it masks a number of other indicators affecting emissions, notably changes in GDP, energy demand, and population; and second, results for 2020 are not indicative of long-term changes because 2020 was the first year of the pandemic. Table 1 shows the change in these indicators and compares changes for 2005 to 2019 and 2005 to 2020.
Table 1: A comparison of regional changes in
emissions, GDP, energy demand, and population
(Data from NIR: Emissions;
Statistics Canada: GDP,
Energy
Demand, and Population;
Author's calculations)
|
|
Δ Emissions |
Δ GDP |
Δ Energy Demand |
Δ Population |
||||
|
Region |
2005-19 |
2005-20 |
2005-19 |
2005-20 |
2005-19 |
2005-20 |
2005-19 |
2005-20 |
|
CA |
-0.4% |
-9.3% |
28.3% |
21.6% |
19.1% |
8.6% |
16.6% |
18.0% |
|
NL |
5.7% |
-9.5% |
13.2% |
7.1% |
4.4% |
-7.3% |
1.8% |
1.4% |
|
PE |
-10.5% |
-15.8% |
28.3% |
26.1% |
0.9% |
-0.8% |
14.0% |
16.9% |
|
NS |
-30.0% |
-36.5% |
17.6% |
14.6% |
-12.5% |
-21.5% |
3.4% |
4.7% |
|
NB |
-33.8% |
-37.4% |
10.2% |
6.7% |
-13.9% |
-18.4% |
3.9% |
4.7% |
|
QC |
-3.1% |
-11.7% |
26.5% |
19.6% |
7.2% |
-5.1% |
12.2% |
13.1% |
|
ON |
-19.0% |
-26.8% |
25.4% |
19.0% |
2.9% |
-7.4% |
16.1% |
17.7% |
|
MB |
8.8% |
5.9% |
35.7% |
29.4% |
16.5% |
9.3% |
16.3% |
17.2% |
|
SK |
9.4% |
-7.6% |
26.9% |
20.8% |
39.2% |
31.1% |
18.0% |
18.7% |
|
AB |
17.6% |
8.2% |
33.9% |
23.3% |
72.9% |
60.4% |
31.3% |
33.1% |
|
BC |
2.2% |
-3.0% |
41.4% |
36.7% |
11.1% |
2.7% |
21.4% |
22.9% |
|
YK |
16.7% |
0.0% |
51.7% |
59.5% |
40.6% |
22.6% |
29.7% |
32.2% |
|
NWT+NU |
0.0% |
-13.0% |
13.4% |
7.4% |
17.1% |
2.3% |
13.5% |
14.6% |
Table 1 shows that Nova Scotia had the second largest decline in emissions in Canada between 2005 and 2020 (-36.5%), as it did between 2005 and 2019 (-30.0%). While most of this is due to a decline in emissions in electrical generation, a significant part is due to the closure and shuttering of petroleum refining, natural gas extraction, and coal mining.
Other factors which have affected Nova Scotia's changes in emissions become apparent when considering GDP, energy demand, and population:
GDP: Nova Scotia's GDP growth in 2020 relative to 2005 (14.6%) was the fourth lowest in the country; whereas the change in 2019 relative to 2005 (17.6%) made it the third lowest (after New Brunswick and Newfoundland and Labrador). Industrial and manufacturing closures have all contributed to Nova Scotia's weak GDP growth compared to the rest of the country.
Energy demand: Nova Scotia's energy demand has been declining since 2005, in large part because of industrial closures and, in 2020, a decline in transportation energy use.
Population: Nova Scotia has experienced a slight increase because of immigrants from other provinces such as Ontario. However, the province's increase was the second lowest relative to 2005 in both 2019 and 2020. Other regions, such as Manitoba, Saskatchewan, and Alberta experienced population and emissions increases. British Columbia is an example of a leader in increasing population and GDP with minimal impact on emissions.
The same paragraph states:
We know we can do more, that's why Nova Scotia has the most ambitious target in the country, with a target to reduce GHGs by 53% below 2005 levels, while the federal government's target is set at 40-45% below 2005 [See Appendix "D" outlining roadmap to achieve our goals by 2030].
The data used in Appendix "D" does not appear to match that found in the National Inventory Report. The chart shows the province's total emissions to be about 16.6 megatonnes CO2e in 2020 (see Figure 1); this was the NIR value for 2015. The NIR states the province's emissions were 14.6 megatonnes in 2020; however, according to the chart, the province's emissions will be 14.6 megatonnes in 2025.
Figure 1: Province's view on future emissions
In our 2021 report An Analysis of the Greenhouse Gas Emissions Reduction Targets in Nova Scotia's Environmental Goals and Sustainable Prosperity Act we did a similar analysis and reached the same conclusion: the only way the province will meet its 2030 reduction target of 53% is through considerable reductions in emissions from electricity.
The province also overlooks the possibility of Nova Scotia Power not reaching its ideal 2030 target. According to Nova Scotia Power, there are 27 possible emissions scenarios for 2030 (see Figure 2).
Figure 2: Nova Scotia Power's scenario emissions for 2030 (from 2021 Report)
In our 2021 report, we showed a range of possible emissions in 2030, depending on the emissions in the electrical sector, using low, median, and high emissions scenarios (see Figure 3).
Figure 3: The importance of emissions reduction in the electrical sector (from 2021 Report)
The province goes a step further and gives the expected emissions by sector in 2020, 2025, and 2030, as shown in Table 2.
Table 2: Percent emissions for various years (from Appendix "E")
|
Sector |
2020 |
2025 |
2030 |
|
Industry |
5% |
5% |
8% |
|
Waste |
4% |
5% |
7% |
|
Agriculture |
3% |
3% |
4% |
|
Marine and air transport |
4% |
5% |
9% |
|
Vehicles |
30% |
31% |
45% |
|
Buildings |
12% |
11% |
16% |
|
Electricity generation |
42% |
41% |
10% |
|
Total |
100% |
101% |
99% |
Determining the emissions by sector gives insight into the changes in emissions in sectors other than electricity, notably transportation and buildings (see Table 3).
Table 3: Comparison of emissions from 2020 to 2030 for
the Letter and the 2021 report
(the Letter's 2030 total emissions are estimated from graph in Appendix "D")
|
Sector |
Letter data |
Letter data |
|
|
2020 |
2030 |
2030 Low |
|
|
Industry |
0.73 |
0.68 |
0.81 |
|
Waste |
0.73 |
0.60 |
0.71 |
|
Agriculture |
0.44 |
0.34 |
0.40 |
|
Vehicles + Marine and air |
5.26 |
4.59 |
5.45 |
|
Buildings |
1.61 |
1.36 |
1.62 |
|
Electricity generation |
5.99 |
0.85 |
1.01 |
|
Total emissions |
14.75 |
8.42 |
10.00 |
What the percentage breakdown shows is that while electricity emissions decline dramatically, emissions from transportation (Vehicles + Marine and air) and Buildings show little change for 2030 in both the Letter and the 2021 Report. This insulates Nova Scotians from the federal carbon price, but it simply delays the inevitable changes which will be needed in the transportation and building sectors.
(4) Our Nova Scotia-Born Approach is Superior to a Carbon Tax.
The letter states that:
Nova Scotia is leading the country on environmental policies and targets. Other established goals include:
- The closure of all coal plants by 2030.
- 30% zero-emissions vehicle standard (complimented by federal ZEV standard) by 2030.
While it is true that Nova Scotia has progressive environmental policies and targets, these two claims are not out of the ordinary. For example, Alberta is to retire all its coal-fired generation by 2023, well ahead of its (and Nova Scotia's) 2030 target.
The 30% zero-emissions vehicle standard refers to Nova Scotia's planned 2030 target of 30% of vehicles sales to be electric. This is not the same as 30% of all vehicles being electric by 2030, an important distinction.
The letter claims that Nova Scotia's approach to addressing the national 2030 emissions target makes more sense for the province than does the federal carbon pricing system:
Not only is our approach more effective in terms of its reduction of GHGs, but will be more cost effective for Nova Scotia families than implementing a tax of over 14 cents per litre on fuel [See Appendix "F" for Nova Scotia's household impact of a carbon tax].
Unfortunately, there is so little data given in either the body of the letter or Appendix "F" it is impossible to reach a conclusion regarding the province's argument. Additional data is required.
(5) Nova Scotia's Ask: Work with us as we move along a more effective, affordable and visionary path.
The Premier's letter argues that the federal carbon-pricing system (a "carbon tax") would be "punitive" because Nova Scotians would be required to pay the federal price on carbon as well as absorb the rising cost of electricity caused by Nova Scotia Power's transition to renewables.
As mentioned above, the table in Appendix "F" gives very little information to work with; for example, there is no mention of the expected energy demand of the "average household consumption" in 2025 and 2030 or the energy costs used by the province to reach their conclusions. Moreover, the letter does not contain a comparison of the cost of the federal carbon-pricing system to Nova Scotians.
The letter argues that if the federal carbon-pricing system goes ahead, Nova Scotians will face two financial burdens, one from the changes to Nova Scotia Power's energy mix and the other from the federal price on carbon. Rather, the province should consider ways of combining the provincial approach with the federal; for example, by not having a carbon price on electricity and the federal system on other carbon-intensive fuels. By considering such alternatives, Nova Scotians can understand the advantages and differences of potential systems.
Summary
This has been a review of the Premier of Nova Scotia's letter to the Federal Minister responsible for Environment and Climate Change Canada. The province's letter argues that is should be left to its own devices when addressing climate change.
While a home-grown approach can be designed to protect Nova Scotians (as the province's 2018 cap-and-trade program was intended to do), it is not necessarily the most effective method, for example:
- If Nova Scotia Power does not supply 80% of its power from renewable sources, the province will most likely fall short of its 2030 target. This would require other sectors to reduce their emissions, something for which the province is ill-prepared.
- By avoiding the carbon price, Nova Scotians are protected only until it is imposed on them. The province's argument that this is not the right time to have a 14-cent increase in the price of gasoline is a consequence of Nova Scotia's carbon price not being nearly as stringent as the federal price over the past four years.
- How the province intends to deal with emissions in the transportation and building sectors after 2030 is unclear as their 2050 net-zero plan has yet to be released.
- The province's proposal does not appear to address the Premier's plan to double the province's population over the next 30 years.
It is undoubtedly unpalatable to be responsible for an increase in the cost of energy; however, the federal carbon pricing system has been reworked so that it reduces the impact to those on low-income by issuing quarterly rebates and encourages behavioural change in those who can afford to make the changes.
The province should look carefully at the federal carbon pricing system, note its faults, and develop a made-in-Nova-Scotia program using evidence-based data. Ideally, the province can develop a carbon pricing system that meets both Nova Scotia's and the federal government's commitments to reducing greenhouse gas emissions.