Prosperity Fund ignores coal, oil and climate change
In its Throne Speech (on Monday, February 12th, 2013), the BC government unveiled its promise for a Prosperity Fund – a fund that promises to channel revenues from natural gas exports to a designated fund to benefit future British Columbians. It’s an idea that the environmental community, including West Coast, has proposed several times over the years, but the throne speech, unfortunately, seems to take a narrow view of “prosperity” – with no recognition that the key to future prosperity is going to involve moving us away from dependence on non-renewable and greenhouse gas producing fossil fuels and adapting to climate change. And why should the revenues for this fund only come from natural gas, which the province likes to argue is the cleanest of the non-renewable fuels, while letting coal and oil off the hook?
Here’s how the government’s press release describes the proposed British Columbia Prosperity Fund:
The throne speech … outlined the government’s plan to establish the British Columbia Prosperity Fund from revenues generated by exporting natural gas to Asian markets. The revenues generated would be directed to eliminate provincial debt and to support additional measures to improve social services and make life more affordable for families.
The idea of such a fund is not new. In 2004 our Recommendation #3 in Oil and Gas in British Columbia: 10 steps for Responsible Development was: “End subsidies and royalty breaks to the oil and gas industry, and direct 25% of oil and gas revenues into a BC ‘heritage’ fund to support a just transition to sustainable industries.” As we explained:
Further, while BC puts all of its oil and gas revenues into current spending, other jurisdictions have recognized the finite nature of fossil fuel revenues and have set aside some of them for the future or for economic diversification. Alberta, Alaska, Norway, and even Chad are either currently building or have at one time built a fund from oil and gas revenues to do this.
Since 1976, Alaska has placed 25% of oil and gas revenues into its Permanent Fund, which is valued at US$27 billion. At the outset of its Heritage Fund, 30% of Alberta’s oil and gas revenues were set aside. Alberta no longer contributes, but since 1995, this fund has been valued at $12 billion. Norway’s State Petroleum Fund stands at over $100 billion.
Again, given the reality of global warming, strong measures must be taken immediately to move our economy and society away from fossil fuels while diversifying into new job-creating industries like renewable energy and hydrogen infrastructure. It is appropriate that fossil fuel revenues be explicitly earmarked to do this. Indeed, BC will need revenues from other industries once non-renewable resources begin to wind down.
So in principle, we like the idea of a “Prosperity Fund.” But although both proposals involve a fund, and increased royalty revenues, our proposal is better for future generations because it:
- involves a clear plan to use the revenue to transition away from a fossil fuel economy; and
- applies to all oil and gas revenues, not just natural gas, or liquid natural gas (LNG) exports; we would argue that it should apply equally to coal and other non-renewables.
The Throne Speech proposal is considerably vaguer and more optimistic as to the amount of revenue to be raised and what it might be used for, attracting skepticism from several journalists (such as Vaughn Palmer and Michael Smyth).
The Throne Speech acknowledges the need to transition from fossil fuels, but arbitrarily increases taxes for a single, growing industry, leaving the impression that the Fund is a mere tax grab. The province identifies paying down the provincial debt as the priority for the Fund, but also suggests that the Fund could “eliminate[e] the provincial sales tax, or mak[e] long-term investments in areas like education or vital infrastructure that strengthen communities …”
About that changing climate…
The entire Throne Speech does not mention climate change – which natural gas and other fossil fuels contribute to – once. Just this past December the BC government released Cost of Adaptation, which found that MetroVancouver will need to invest $9.5 Billion in infrastructure upgrades between now and 2100 to address rising sea level and other climate change impacts. But the government doesn’t seem to think that this threat to future prosperity should be a focus of its Prosperity Fund (despite the fact that expanded use of fossil fuels, like natural gas, are contributing to that $9.5 Billion bill).
Another model of a prosperity fund that deserves close attention is the Better Future Fund proposed by the B.C. Sustainable Energy Association, Clean Energy Canada at Tides Canada, the David Suzuki Foundation, Organizing for Change and the Pembina Institute. The Better Future Fund would expand BC’s carbon tax to include industrial emissions that aren’t currently taxed by the carbon tax, and then put those funds to work for British Columbians. If the province is keen on a “prosperity fund”, and wanted to fight climate change at the same time, we could look at this model, and (if the government wants to look at taxing fossil fuel exports) perhaps extend it to tax emissions from fossil fuels that we’re exporting.
The reality is that climate change is already a threat to BC’s prosperity – some estimates suggest that the Mountain Pine Beetle – no longer killed off by cold winters – will have decreased BC’s timber supply by 15% by 2015. Natural gas is contributing to that economic loss – as are coal exports, oil drilling and other sources of emissions. We need a Prosperity Fund that looks a little less like a tax grab, and a little more like a plan to build a new future, and get us out of this vicious cycle.
By Andrew Gage, Staff Lawyer