{"id":269929,"date":"2021-12-07T11:30:27","date_gmt":"2021-12-07T16:30:27","guid":{"rendered":"https:\/\/policyoptions.irpp.org\/issues\/b-c-s-oil-and-gas-royalty-review-must-take-climate-action-seriously\/"},"modified":"2025-10-07T23:45:42","modified_gmt":"2025-10-08T03:45:42","slug":"b-c-s-oil-and-gas-royalty-review-must-take-climate-action-seriously","status":"publish","type":"issues","link":"https:\/\/policyoptions.irpp.org\/fr\/2021\/12\/b-c-s-oil-and-gas-royalty-review-must-take-climate-action-seriously\/","title":{"rendered":"B.C.\u2019s oil and gas royalty review must take climate action seriously"},"content":{"rendered":"

British Columbia\u2019s recently updated climate plan, Roadmap to 2030<\/a>, promises to integrate emissions goals into the oil and gas royalty system. But the province\u2019s current royalty system review<\/a> doesn\u2019t include a design with environmental or climate outcomes in mind.<\/p>\n

The policies proposed in the natural gas royalty discussion paper<\/a> and the expert panel\u2019s report follow an outdated policy approach that\u2019s out of step with B.C.\u2019s climate goals. The review is supposed to align royalties with the province\u2019s revenue, sustainability and climate goals, but the five design objectives arbitrarily exclude the environment. As well, not one of the proposed royalty reforms addresses environmental objectives.<\/p>\n

The public consultation phase of the natural gas royalty review process<\/a> ends Dec. 10 and the outcome of the review is to be released in February.<\/p>\n

As an economist studying royalties and emissions from the oil and gas industry in the U.S., I couldn\u2019t help comparing the approaches across the two countries. The U.S. House of Representatives just took a step forward by passing a bill<\/a> raising oil and gas royalties on public lands from the current 12.5 per cent to 18.75 per cent<\/a>, which is closer to market rates.<\/p>\n

B.C. has stronger climate policies than most American states, so one would expect the province to have a reasonable return for publicly owned oil and gas reserves. I thought 12.5 per cent was a low rate \u2013 private U.S. landowners typically get nearly 20 to 25 per cent \u2013 but B.C.\u2019s rate was just 2.4 per cent last year, as determined by the recent independent assessment<\/a> of the natural gas royalty program. Royalties, the assessment found, are depressed by inefficient and outdated tax credits, and the oil and gas royalty program is not achieving<\/a> its goal of producing a fair return on public resources. Expensive and inefficient subsidies are given, for example, for drilling wells deeper than would otherwise be justified. Scrapping these subsidies is a no-brainer.<\/p>\n

Canada\u2019s carbon pricing systems already need a redesign<\/a><\/p>\n

What Canadians think about the future of oil and gas<\/a><\/p>\n

The true measure of BC\u2019s carbon tax<\/a><\/p><\/blockquote>\n

But the bigger issue lurking behind the discussion about scrapping explicit subsidies is the implicit<\/em> fossil fuel subsidy that results from ignoring greenhouse gas impacts. Since the International Monetary Fund finds these implicit subsidies dramatically exceed<\/a> explicit ones, merely reversing the explicit ones would represent only a half measure. Royalty reform should go a step farther by incorporating a carbon surcharge into royalties that reflects the climate impacts of the fossil fuels produced. The U.S. is similarly taking stock<\/a> of the climate impacts of its oil and gas leasing policies, including considering adjusting royalties \u201cto account for corresponding climate costs<\/a>\u201d of fossil fuel production.<\/p>\n

In my recent<\/a> research<\/a>, I studied how to incorporate climate action into U.S. leasing policy by adding a \u201ccarbon charge\u201d to oil and gas royalties. This idea was previously raised in 2016<\/a>, when the Obama administration considered the same approach for coal. Implementing a carbon charge as a royalty is straightforward and analogous to carbon pricing. Under a lease with the province to extract publicly owned oil or gas on Crown land, a company would pay a charge reflecting the climate damage of each tonne of life-cycle CO2<\/sub> emissions embodied in the oil or gas produced. This approach could cover direct emissions released during extraction, processing and transportation, and downstream emissions when it is burned. The size of the charge \u2013 in dollars per tonne of CO2 <\/sub>\u2013 could be set to align with B.C.\u2019s commitment to a steadily increasing carbon price.<\/p>\n

But is this double counting? Canada has a carbon tax at the emissions point where the gas is burned, so why also charge one at the point of production? The reality is that only 12 per cent<\/a> of B.C.\u2019s gas production is consumed within the province. More than two-thirds<\/a> is exported to the U.S., which doesn\u2019t have a carbon tax or equivalent regulation. The LNG Canada terminal<\/a>, with phase one under construction in Kitimat, B.C., will provide another export outlet in just a couple of years that will further amplify the problem. Consequently, most emissions from B.C.\u2019s gas production escape Canada\u2019s carbon tax since the gas is burned abroad. It makes sense to bring those emissions under the climate-policy umbrella by aligning royalties with the same level of ambition as B.C.\u2019s carbon tax.<\/p>\n

Lessons from British Columbia\u2019s carbon tax<\/a><\/p>\n

Canada\u2019s carbon leak problem<\/a><\/p><\/blockquote>\n

Policies to reduce fossil fuel production pursued on their own create the challenge of \u201cleakage,\u201d where reductions in fossil fuel supply in one jurisdiction lead to production shifting to other regions that don\u2019t have equally ambitious carbon policies. From an economic perspective, upstream carbon charges are justified because leakage from one area to another is far from complete. I found that concern for the climate motivates substantial carbon charges. As I testified before the United States Congress<\/a> and Interior Department<\/a>, incorporating carbon charges into oil and gas royalties can reduce greenhouse gas emissions \u2014 even accounting for leakage \u2014 while also raising revenues and achieving a better return on public resources. This is just as true for British Columbia as for the U.S.<\/p>\n

Updating B.C.\u2019s royalty policy to coincide with its carbon-pricing commitments would better align with climate goals such as meeting Paris Agreement targets. Indeed, a recent academic study<\/a> estimated that 81 per cent of Canada\u2019s gas reserves must be left in the ground if the world hopes to limit heating of the planet to 1.5 C.<\/p>\n

Yet B.C.\u2019s royalty system remains outdated and untethered to the province\u2019s emissions targets and Canada\u2019s climate goals. The province should eliminate explicit subsidies and correct implicit subsidies through carbon charges. There is no excuse for the B.C. government to continue to ignore climate in the royalty review.<\/p>\n

The David Suzuki Foundation provided financial support to the author to produce this op-ed. The author\u2019s opinions are his own.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

British Columbia\u2019s recently updated climate plan, Roadmap to 2030, promises to integrate emissions goals into the oil and gas royalty system. But the province\u2019s current royalty system review doesn\u2019t include a design with environmental or climate outcomes in mind. The policies proposed in the natural gas royalty discussion paper and the expert panel\u2019s report follow […]<\/p>\n","protected":false},"featured_media":280063,"template":"","meta":{"_acf_changed":false,"content-type":"","ep_exclude_from_search":false,"apple_news_api_created_at":"2025-10-08T03:45:45Z","apple_news_api_id":"52d4bdb9-1e9c-46af-9e68-e0295d5b1376","apple_news_api_modified_at":"2025-10-08T03:45:46Z","apple_news_api_revision":"AAAAAAAAAAD\/\/\/\/\/\/\/\/\/\/w==","apple_news_api_share_url":"https:\/\/apple.news\/AUtS9uR6cRq-eaOApXVsTdg","apple_news_cover_media_provider":"image","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_cover_video_id":0,"apple_news_cover_video_url":"","apple_news_cover_embedwebvideo_url":"","apple_news_is_hidden":"","apple_news_is_paid":"","apple_news_is_preview":"","apple_news_is_sponsored":"","apple_news_maturity_rating":"","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"","apple_news_slug":"","apple_news_sections":[],"apple_news_suppress_video_url":false,"apple_news_use_image_component":false},"categories":[9361,9360,9372],"tags":[8638,8367,8414,8409],"article-status":[],"irpp-category":[4217,4326,4327,4261],"section":[],"irpp-tag":[7087,7090],"class_list":["post-269929","issues","type-issues","status-publish","has-post-thumbnail","hentry","category-environnement","category-international","category-recent-stories-fr","tag-changements-climatiques","tag-british-columbia-fr","tag-lng-fr","tag-carbon-fr","irpp-category-affaires-internationales","irpp-category-changements-climatiques","irpp-category-energie","irpp-category-environnement","irpp-tag-colombie-britannique","irpp-tag-prix-du-carbone"],"acf":[],"apple_news_notices":[],"yoast_head":"\nB.C.\u2019s oil and gas royalty review must take climate action seriously<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/policyoptions.irpp.org\/fr\/2021\/12\/b-c-s-oil-and-gas-royalty-review-must-take-climate-action-seriously\/\" \/>\n<meta property=\"og:locale\" content=\"fr_FR\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"B.C.\u2019s oil and gas royalty review must take climate action seriously\" \/>\n<meta property=\"og:description\" content=\"British Columbia\u2019s recently updated climate plan, Roadmap to 2030, promises to integrate emissions goals into the oil and gas royalty system. 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