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Doing business in BC means shelling out more to deal with carbon costs, writes Stewart Muir.
Stewart Muir, Resource Works’ founder, argues that Canadian businesses are at a disadvantage with the pricing system on greenhouse gasses.
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At the heart of British Columbia’s economic saga unfolds a narrative, the tale of the province’s bold attempt to impose an “output-based pricing system” (OBPS) on greenhouse gasses.
Picture a menu, where each CO2 emission – an uninvited but hard-to-escape by-product of business operations – comes with a price. Commendable? Certainly. But amid the cheers for such environmental stewardship, a subplot of potential economic turbulence arises, casting long shadows over the employment landscape of BC.
Visualize a BC saw mill, churning out lumber to build homes near and far. For the past 15 years since BC became one of the first jurisdictions anywhere in the world to adopt a carbon tax, each release of CO2 comes with a growing bill.
Now, throw in a twist: imagine a lumber mill in the United States that gets to whistle while it works, free of any carbon-tax yoke. Suddenly, our virtuous BC lumber mill is the underdog, its product potentially seen as too costly in comparison to its counterpart’s offerings.
Imagine a smelter in a faraway corner of the world, producing metal using the cheapest and dirtiest fuels, and the laugh they are having at the sight of their green-powered British Columbia competitors being squeezed out of business for the crime of being not green enough.
In the cutthroat world of global commerce, being costlier equates to being less attractive. It’s somewhat like the class valedictorian being penalized for diligently following the rules while the schoolyard bully gets off scot-free.
This ominous trend isn’t a fantasy. Only a few months ago, Parkland Refinery packed its bags, abandoning a green project in Vancouver for greener pastures down south, where investor incentives glittered enticingly.
If doing business in BC becomes synonymous with shelling out more due to carbon costs, what stops others from taking the Parkland route?
An eco-conscious policy, while noble, could inadvertently cause economic fallout.
The unions have their antennae up, sensing a threat to some of the province’s most mortgage-supporting jobs.
Meanwhile, some propose a countermeasure: “border carbon adjustments,” a levy on imports relative to their greenhouse gas footprint. A sound proposition on the surface, but potentially a can of worms, unraveled by international trade disputes and complications.
This problem is compounded by the concerns of energy-intensive trade-exposed (EITE) industries, which wish they were more involved in the development of the plan now unfolding.
Rumours are circulating that the OBPS (for any slackers in the back row: “output-based pricing system”) might not provide the benefits of a truly well-structured system, causing skepticism to brew.
Businesses are so apprehensive that a dozen of BC’s largest trade associations got together last month to send a firmly worded letter to Victoria expressing concern.
You’d think there’d be a response. No such luck. So far, crickets (“The food of the future!”).
Business deciders, in my experience earnest individuals tasked with crucial decision-making, find themselves in a state of contemplation as they grapple with the intricacies of the new levy. They create entire new spreadsheets to analyze its operational framework, debating among themselves whether it will be uniformly applied across industries or subject to variation.
Daringly (for this set) they might even seek to comprehend its relative merits in comparison to similar systems already in place here and elsewhere.
However, their predicament evokes a sense of empathy, for they find themselves in a situation akin to ordering a delectable all-dressed pizza, only to be presented with a plain cheese variation.
The province of BC, in pursuit of a better system, may have unintentionally left the job-providing sector longing for a more satisfactory outcome. It rushes me back to my pathetic university student days, as if to say: “You wanted a pizza, this is a pizza. Suck it up.”
As I often lament to the family dog, no good deed goes unpunished.
Some suggest this predicament arises from notorious Canadian niceness, normally an admirable trait, but a handicap in ruthless global economics. Or perhaps the reverse mullet of Canadian politics is at work – party out front, business out back.
Murmurs are heard, hinting at an idealistic faction of the BC government winning out over the practical minds. Not because there is an unassailable case supporting Fluevogs over flue gases, but rather due to political maneuverings in a province torn between visions of its future where comity is desperately needed, yet scarce.
Like water, investors tend to favor the path of least resistance. As BC gears up to battle climate change with its new OBPS, it may unwittingly export more than inanimate products: people’s jobs may flow to more accommodating locales.
Tackling climate change is, undeniably, a worthy cause. Through this, costs to the economy and job market loom large, and warrant careful consideration.
If the strategy behind BC’s climate plan is successful, it will lower emissions while protecting deserving industries and their employees. If it isn’t, voters should get used to the view from under the not-very-green buses of those far afield benefiting from our losses.
Can BC navigate the thin line that safeguards both its people and the planet? We’ll see.
Stewart Muir is the founder and CEO of the Resource Works Society. This article was originally published in Business in Vancouver.
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