Of course, the only condition that had changed is that it was increasingly obvious to everyone except the IPP lobby (and the Globe’s Justine Hunter) that that  these government-imposed requirements were unnecessarily costly, and without question a major contributor to the politically intolerable upward pressure on BC Hydro rates.

The fundamental problem with self-sufficiency and insurance is that it was forcing BC Hydro to buy new sources of electricity supply at prices well in excess of their market value — electricity that BC Hydro did not in fact need to ensure a reliable, environmentally responsible, cost-effective supply. It was a gift to the nascent private IPP industry, and an extraordinarily lucrative one at that.

The question now, however, is what comes next. Will more responsible policies be put in place? Or will the gifting to private interests at the expense of the general public interest continue in a different form. The worry is that the gifting will continue, this time under the cover of a jobs strategy.

The government recognizes that BC Hydro’s standard industrial rates will not recover the cost of supplying the new LNG plants’ demands for power. And it has indicated that the LNG plants will have to pay higher rates. The issue is how much higher. Will the new plants be required to pay for the costs they impose on BC Hydro or will substantial subsidies remain.

A simple policy declaration could clarify the government’s intention. When it amends the Clean Energy Act to eliminate the self-sufficiency and insurance provisions, the government could  require that all new major users of power, including not only the LNG plants but also the new electric-intensive mines proposed for B.C., will have to pay all of the costs that BC Hydro has to incur to meet their requirements. The government could ensure that BC Hydro and its customers will not have to subsidize any of these new developments.

There are creative ways industry could minimize the costs of the power it needs. In the case of the LNG plants, they could combine the development of their own gas-fired generating capacity with purchases of non-firm electricity supply that BC Hydro and others often have available for sale at relatively low cost. The gas-fired capacity would ensure the plants have a reliable source of supply. And the purchases of the non-firm supply when available would reduce the need to burn gas — minimizing the LNG plants’ impact on GHG emissions in the province. Or, they could combine their own gas-fired capacitiy with new wind power development, using the wind power to displace gas whenever available.

What responsible energy policy would not allow, however, is the option of new industry forcing BC Hydro to acquire the electricity they need  and not paying the full cost –for example, forcing BC Hydro to buy and back up wind power at its own expense. The gifting to private interests at the expense of the general public interest would not be allowed to continue.

But don’t hold your breath that new progressive tax changes are in the offing.

First, a closer look at that expert panel: You can find the government’s announcement of the panel’s terms of reference and a list of the panel members here. Sadly, the panel is not mandated to examine the fairness of the overall tax system, nor is it to propose ideas to restore the BC tax system’s progressivity (something that is sorely needed, as we found in this CCPA study last summer).

Rather, the mandate is narrowly to advise on how to improve the “business competitiveness” of BC’s tax system, and to offer recommendations on “administrative improvements to streamline the Provincial Sales Tax.”

The membership of the “expert” panel is entirely made up of business representatives. Not a single person on the panel is an academic economist (the one person with an academic connection is Grace Wong, a former assistant dean with UBC’s Sauder School of Business). There are no representatives from labour or the community or non-profit sectors. The panel chair, Sarah Morgan-Silvester, is the current chancellor of UBC, but has spent most of her career as a senior banking executive.  In short, there is not a single person on the panel one might expect to offer a dissenting voice ­– a perspective that is interested in anything other than how to lower taxes for the corporate sector.

And how about that cool new online BC Budget simulation tool for the public? You can access the “My BC Budget” website here.

Now I love online tools, and I’m told I’m somewhat nerdy when it comes to the BC Budget, so I was all ready to geek-out on this.  And thus, my disappointment is deep.

The stated intent of the online tool is to:

“Let people see the effect of raising and lowering revenues and spending on the provincial budget, with the goal of eliminating the 2013-14 deficit, which was forecast in September to be $458 million. Once people have achieved a balanced budget, they can send their solutions to the finance minister with their comments. The website also includes informative facts about the budget and is one of several ways the government is consulting with British Columbians in the lead-up to Budget 2012.”

The government’s ill-advised (and much-amended) balanced budget legislation commits it to balance the 2013/14 budget (an entirely arbitrary deadline). And so, only when someone has used the online simulator to model a balanced budget does the tool allow you to submit your “solution”.

But the tool is much sillier (and nefarious) than that.

You can reduce any tax you want by as much as 100%, but you can’t increase any tax by more than 10% (which is certainly interesting, given the stated intent of trying to balance the budget).

When you start to fiddle with personal income tax levels, the “information” window kindly informs you that, “BC families generally have one of the lowest overall tax burdens in Canada, and BC currently has the lowest provincial personal income taxes in Canada for individuals earning up to $119,000 a year.”

What’s more, while you can adjust personal income taxes overall, the simulator does not allow you to adjust the income tax brackets (let alone propose one or more new upper-income ones, as I recently did here). Meaning, you cannot modify the progressivity of the tax system (the distribution of taxes by income) – Minister Falcon apparently isn’t interested in hearing about that.

And don’t go trying to propose increases in corporate taxes. If you do, the simulator responds with a finger-wagging note warning: “Raising corporate income tax would make the province less competitive compared to other provinces and countries, and would reduce long-term economic growth. Companies would decide to move to lower-tax jurisdictions, costing B.C. jobs and investment.”

This despite the fact that BC has among the lowest corporate tax rates in the country, and global accounting firm KMPG consistently finds BC to be one of the least expensive places to do business among major industrialized nations. Surely, we have room to move on this front.

Oddly, the one tax increase the simulator does not actively discourage is further increases to MSP premiums, the most regressive tax in the province.

Overall, the simulator is quick with warnings if you try to increase taxes to close the budget gap, but oddly silent when you try to lower spending. No bias there I guess.

(My thanks to both Shannon Daub and Iglika Ivanova for drawing some of these ridiculous features to my attention.)

We do indeed need a fulsome review of BC’s tax system, and the public certainly does deserve a chance to weigh in with our ideas for how to rethink the ways in which we raise and spend revenues. Sadly, neither this expert panel nor the online simulator will give is that chance. As I’ve said before, we need a full Fair Tax Commission, with an extensive public-engagement process that lets us genuinely deliberate on these matters.

Convention wisdom has it that the public heavily subsidizes post-secondary education. The illusion of a subsidy comes from the fact that tuition fees, high as they are, don’t cover the entire cost of education. But this common misconception ignores a second way in which students pay for their education: through higher taxes after graduation. When these tax payments are added up over the course of graduates’ careers, it turns out that university students fully repay the cost of their degrees and then some.

The report’s main findings are captured in this infographic:

There’s a broad based agreement in this country that higher education is important for our long-term social and economic prosperity, and that it’s something that, as a society, we should promote and invest in. My report finds that we all come up ahead when more people have access to education. Then why is it that what we’ve seen the BC government increasingly withdrawing its financial support for advanced education and downloading the costs to students?

Thirty years ago, government funding covered 88% of BC university operating revenues, but in 2009, government only paid for 58% of the costs of educating students. Universities made up the shortfall by hiking tuition fees, which now account for 44% of all university operating revenues according to CAUT (see fig 1.2 and 1.3). Tuition fees in BC now run over $4,800 per year, and, along with the erosion in student grant programs, present a significant barrier to education.

There’s no better time than now to start reversing these trends. Expanding our society’s investment in higher education today will pay dividends in higher tax revenues, lower unemployment and better social mobility for decades to come.

You can also read my op-ed on this topic in the Vancouver Sun. Or check out the full report, which contains some really interesting — and little known — tidbits about just how big the gap between men’s and women’s earnings is when annual incomes are considered.

But there is one idea to promote jobs in communities we won’t be hearing about from the province. It is an idea that is creating thousands of jobs in communities across the United States. The idea is simple. Local governments should support small businesses in their communities by giving them an advantage when bidding on government work.

Here in BC, thanks to interprovincial trade agreements, it is forbidden for local governments and school boards to give a price advantage to local businesses. And if Canada signs the Canada European Union Trade Agreement (CETA) with support from BC, the situation will get worse.

One example of how a local preference program works is in the City of Los Angeles. The City instructed its lawyers to create a bylaw that would give local businesses an eight percent advantage when it came to bidding on projects. According to a study by Charles Swenson of the University Of Southern California Marshall School Of Business, this move by itself will create 10,000 jobs locally.

According to news reports:

When Mayor Antonio Villaraigosa unveiled the proposed ordinance in September, he said the city “spends approximately 84 percent of its procurement dollars with businesses that are located outside of the city of Los Angeles; therefore, out of $1 billion allocated for governmental contracts, only $180 million goes back to local businesses.”

The City also allows a bidding advantage for local businesses that are certified as minority, women, disabled veteran or disadvantaged-owned business.

This idea is not unique to Los Angeles.  In the US dozens of cities and states have local preference programs for local business. According to the Institute for Local Self Reliance:

A 2007 survey by the National Association of State Purchasing Officials, found that 26 states have preferences for in-state bidders or products grown or manufactured in-state.  These policies may apply broadly or only to certain types of goods and services or in certain situations.  They may be absolute preferences or, more commonly, percentage preferences  (i.e., if a bid from a local business is within a certain percentage of the lowest non-local bid, usually 5 percent but as high as 15 percent, then the contract goes to the local business).

Ironically, the government has acknowledged the value of local purchasing at the same time it has prevented local governments from doing it.  In December 2006 the then Minister for Small Business Rick Thorpe expressed the idea eloquently in the Fort Nelson News when he said:

I’d like all British Columbians to consider the direct, positive impact you can have, on your neighbours, your local businesses, and your community’s growth – simply by supporting local small businesses. By shopping at home, you show that you value your friends and neighbours and the investment they’ve made to keep your community vibrant and growing. Most retailers I know are interested in meeting your needs and earning your business. However, one retailer summed up his dilemma this way:

 ”I’d love to expand my selection – but if it’s not going to leave the shelves, it just becomes a liability for my business.”

 When you buy from sellers outside British Columbia, you just help retailers elsewhere to keep their stores well-stocked at the expense of local businesses. Shopping at home also supports local hospitals, schools and important public services. Provincial sales tax revenues totalled almost $4.2 billion last year. When you choose to shop locally and pay the provincial sales tax on your purchases, you know you’re helping to pay for services of importance to patients, students, seniors, people in need and, in fact, all British Columbians. I’d like all British Columbians to consider the direct, positive impact you can have, on your neighbours, your local businesses, and your community’s growth – simply by supporting local small businesses. By shopping at home, you show that you value your friends and neighbours and the investment they’ve made to keep your community vibrant and growing.

If this is such a good idea for individuals you would think it would be a good idea for our local governments. However, BC’s Trade Investment and Mobility Agreement and the New West Partnership Trade agreement specifically forbid measures that provide for any “preferential treatment of a province’s people, investments and goods, except for justified actual cost-of-service differences.”

Canada is now in the process of negotiating an international agreement with the European Union and one thing the Europeans are pushing hard for is access to local government procurement.  Because local governments fall under provincial jurisdiction, however, the provinces get a say in this. But British Columbia refuses to say what they are putting on the table. If past agreements are any example, BC will give up far more than anyone else will. 

What are the arguments against this? Some people argue that taxes will be higher but the investment in the community will create far more economic value than it will take out in taxes. The government argues we need to give up these rights to get access to trade deals, but the US has managed both to get trade deals and to leave their states and cities with the right to local procurement policies. And yes there are no communities in BC the size of Los Angeles but surely the program could work at a regional or provincial level and in many less urban communities as well.

We now have a situation where American cities and states can give preferential treatment to their local businesses and we cannot.  Soon, under CETA, the Europeans may have access to our local procurement.

Perhaps we should be asking the premier just how that builds jobs in British Columbia.

In the United States Michael Shuman has written extensively on buy local campaigns.

Here in BC this website discusses the value of shifting some of our consumer spending to local businesses.

The report shows progress, but often in the wrong direction. You can find the whole report here but it will take patience. It weighs in at a hefty 20 MB in PDF format.

The report shows a decline in BC’s standing in Canada in many important areas in the last 10 years. We have gone from 4^th to 5^th place in the economy, from 3^rd to 4^th in personal income and from 5^th to 7^th in jobs.

In terms of social conditions BC sits in 9^th place among the 10 provinces. BC sits in last place in terms of people in poverty (below the low income cut-offs). We are second worst in terms of long term unemployment.

Some of the information is an eye opener given 10 years of very business friendly government. Business productivity grew by 6.3% between 1997 and 2000 and by about 3% in the next ten years. More surprising was that BC ranks 25^th out of 34 OECD jurisdictions when it comes to exports per capita. We ranked 4^th in Canada on per capita spending on research and development.

We did better on items like the environment, university completion and business investment.

In its final press release the Board says:

The provincial government demonstrated great vision and courage when it established the BC Progress Board in 2001 to monitor British Columbia’s performance and advise on ways to improve it. What was remarkable, and what remains unmatched, was the board’s dedication to transparency and independence.

As well as great “vision and courage” the government showed great caution. The Board was made up entirely of captains of industry supported by a few academics and consultants. This may explain why it took the Board several years to publish its first report on social conditions in the province. A more representative group might have noticed people were hurting earlier.

Despite that, over the years the Board has produced reports that shone a critical spotlight on many issues, particularly social issues, in BC.

The Vancouver Sun’s Craig McInnes was moved to tweet:

No wonder Clark’s shutting down Progress Board, no progress to report.

The business dominated Board will now be replaced by the new Jobs and Investment Board.

According to a government press release:

The BC Jobs and Investment Board will provide advice and direction to government on policies and programs to help attract sustainable investment, foster economic development and support job creation. It will focus on the eight key sectors in the BC Jobs Plan – forestry, mining, natural gas, agri-foods, technology, tourism, transportation (ports, marine and aerospace) and international education.

Presumably the awkward issues of poverty and unemployment will no longer be considered.

The government has promised the new board will be more broadly representative. The first two appointments this month have included as co-chairs a business boss and a First Nations Chief.  I guess we will just have to wait and see if the other appointed members are more than the usual suspects.

And with good reason.

Earlier today, I outlined why in a new report for the CCPA which looks at the rapidly expanding usage of fracking in two regions of the province where the gas industry is steadily increasing its efforts to extract natural gas from deeply buried shale rock formations.

The report – Fracking Up Our Water, Hydro Power and Climate: BC’s Reckless Pursuit of Shale Gas – concludes that when all is said and done the gas produced from such operations is the natural gas equivalent of the oil produced from Alberta’s tar sands. The parallels between the two are downright spooky, and even spookier when you consider that a goodly amount of natural gas currently produced in BC is headed to Alberta to . . . facilitate the extraction of raw bitumen from the tar sands.

Both the shale gas fracking indusry and the tar sands oil industry are big consumers of water, big consumers of energy and big emitters of greenhouse gases. And they will be even more so in the years ahead. I was lucky to gain an inkling for what that may mean during a field-trip last year, which took me into the heart of one of the emerging fracking zones in BC’s south Peace region. Fortunately, I had award-winning photographer, Garth Lenz along for the ride. He captured some amazing images of all the ways our public water and hydro resources are being placed at risk as the fracking industry expands. Later, the CCPA’s Terra Poirier worked with the images to create a nifty slideshow which you can access on-line here. You can also check out more of Garth’s images on his website – which also includes portfolios of his photographs in Alberta’s tar sands and over the Athabasca river delta.

Like I said earlier, and as Garth’s work vividly portrays, the parallels between BC’s shale gas industry and Alberta’s tar sands oil industry are many. But the big three of water use, energy demand and greenhouse gas emissions clearly stick out. When you look at those three, the need to enact tough new policies and regulations to deal with BC’s natural gas sector is obvious.

In fracking, immense amounts of water – up to 600 Olympic swimming pools’ worth at some BC fracking operations – are pumped underground along with unknown chemicals and sand to break open cracks or fractures in the shale rock, fractures which allow the trapped gas to be released. That water use is very loosely regulated in BC, leading to all kinds of potential environmental abuses.

The power that the rapidly expanding shale gas industry in BC is projected to need, could, according to BC Hydro, amount to the equivalent of 2 and possibly 3 times the power that would be produced at the proposed Site C dam, on the Peace River, not far from where the pictures in the above-mentioned slideshow were taken.

Lastly, there’s all the additional greenhouse gases associated with shale gas production in BC – emission increases that will undercut any ability for BC to meet its legislatively mandated greenhouse gas emissions reduction targets.

That’s why I argue in today’s Province newspaper that it’s time to put a cap on annual gas production in the province before our shared water and hydro resources and our climate are totally fracked.

From the outset, the Occupy movement has been united in standing against the massive increase in inequality in our society. That inequality poisons the limited amount of democracy we have, so people increasingly feel they have nothing vote for, and that, in the end, ostensibly progressive, charismatic leaders will only betray those who supported them. On the ground, there is a feeling of despair about the future, while insiders rake in millions if not billions. So is it any surprise that the Occupy movement, while diverse, is rooted in youth who practice consensus-based democracy?

In that spirit, and its origins on Wall St – the epitome of corruption, greed and an unfair economic system – can a deeply democratic spirit be channeled into economic institutions that better meet our needs and don’t destroy the ecosystems that underpin a viable human civilization? Historically, protests against inequality, injustice and a lack of democracy of unfettered capitalism have led to diverse opposition movements: trade unionism, socialism and communism get the most attention, but the cooperative movement is part of that anti-capitalist response as well, and could ultimately be what resonates most as an alternative economic model.

The link between the radical democracy of the Occupy movement and coops is straightforward. Coops are member-owned and more deeply anchored in the local economy. They are a way of doing business that is not capitalist but democratic (though you probably won’t see any hands twinkling in the air at general meetings). There is a rich history of coops around the world, as reviewed by John Restakis of the BC Cooperative Association in his book Humanizing the Economy (reviewed by yours trulyhere). Based on principles of cooperation and reciprocity, the mandate of coops is to serve members, not maximize profits for distant shareholders.

Coming back to finance, credit unions are of great interest, as “banking cooperatives” that are better at the bread-and-butter business of banking than banks themselves. While banks have moved to investment banking, high transaction fees, securitization and “wealth management” to make their money, it is credit unions that focus on the heavily lifting of providing mortgages, personal loans and financing for small and medium sized businesses. Even the rabidly right-wing Canadian Federation of Independent Business notes in a survey of its members that credit unions provide better service than banks, with smaller fees and a lower loan rejection rate.

There is also good evidence that credit unions can play exactly the stabilizing influence on the economy that averts the type of crisis we find ourselves in. Based on some research I’ve seen, bank lending tends to be more volatile, with big surges in loans up to the peak of the economic cycle then crashing when a recession hits (a familiar story for those following the current crisis), while credit union loans tend to be relatively steady. Banks basically tend to take on riskier loans as the business cycle progresses, then have much higher rates of write-offs down the road. A number of structural factors – built-in risk aversion, inability to easily raise equity in the financial markets, and stronger regulatory oversight – mean that credit unions better embody the “public purpose of private banking” than do the big banks.

OK, credit unions are not exactly a rallying cry for revolution. But it is a simple and tangible act to close your bank account and join a credit union. In fact, an action I saw on facebook yesterday asked for this exact thing this November 5.

More support for credit unions and cooperatives is but one piece of a bigger puzzle about how develop and more just and sustainable world. Humanizing the economy and democratizing the production system recognizes that humans need goods and services but not necessarily transnational corporations and banks to provide them.

The following are just a few of the issues that hit the convention floor.

The RCMP and public private partnerships

There was a lot of coverage in the media about the breakdown in negotiations over a new RCMP contract between British Columbia and the federal government. A side bar issue that got no coverage dealt with the new RCMP Division Headquarters in Surrey.

Solicitor General Shirley Bond complained to a UBCM panel about the province’s inability to control rising RCMP costs. The example she gave was the RCMP’s new Division E headquarters that saw costs balloon from $300 million to $1 billion.

However, it turns out that the new headquarters is a federal public private partnerships and that so far the province’s privatization agency, Partnerships BC, has billed $2.5 million in consulting fees on the project. Remember when the government argued that P3s offered fixed costs and price stability?

The Municipal Auditor General

Mayors and councilors were not happy about the province’s decision to impose a Municipal Auditor General on them. Councilors argued from the convention floor that they were already forbidden by law to run a deficit and had many of their major projects subject to referendum.

However, the province backed down on most of the issues promising to pay for the new office (but not for the cost of audits) as well as swearing that new MAG would not have the power to second guess local policies, including tax policy.

The big issue that still remains is governance. The UBCM wants the same model the province enjoys in its relationship with its own AGM. That would mean an MAG would report to an accounting board made up of local government representatives. No dice Communities Minister Ida Chong told the convention. Apparently local governments will make up only a minority of the board. The business community has been promised its own chair at the table.

The business community (primarily the Canadian Federation of Independent Business) is on a full-court press to see business property taxes cut with the cost being shifted to homeowners. Of course business, unlike homeowners, can write off their property taxes against federal and provincial taxes.

Government downloading and rural areas

Every UBCM convention holds individual forums for different sized communities. My favorite is always the Electoral Area Directors’ forum made up of mainly people representing spread out rural areas. While diplomacy is the order of the day when big communities talk to the provincial government, with Area Directors you get a lot more down-to-earth candor.

Over the years Area directors have had a continuing complaint about downloading of costs. This year the complaint was over diking policy. As a Central Kootenay Director told the provincial officials at the forum, “One of the reasons you are downloading is that you lack resources. If you can’t handle it, we sure can’t.” The chair of the presentation on diking sent the provincial officials away with this message:

We don’t have the expertise, equipment or money. Flood mitigation needs more funding. Send the message back.

Extended Producer Responsibility (EPR)

Over the years residents, particularly in urban areas, have become used to a growing level of recycling. Blue boxes take away our newspapers, cans and plastics. For many of us there will soon be recycling of kitchen scraps.

It turns out there is some risk of things going the other direction. The Area Directors heard a presentation on Extended Producer Responsibility. Under this program producers and consumers or products will have responsibility for them. It sounds attractive but what will it actually mean?

A Director from the Sunshine Coast told the panel they were planning to extend their blue box program and asked for advice considering the EPR policy. An industry spokesman advised the Director that they couldn’t give practical advice but that it would be “prudent to wait.”  An industry spokesman reported that some governments were putting a pause on such projects. “Remain nimble” she advised.

It turns out we may all have to be more nimble if we have to start taking our newspapers to depots rather than having them picked up in blue boxes.

Wages for public employees

It appears Christy Clark’s government is determined to make public employees pay for the government’s ineptitude on the HST. In a panel on the economy Finance Minister Kevin Falcon told the audience:

With respect to the wage mandate for the whole public service at net zero for two years – that tough mandate is likely to continue.

Public sector wages have already fallen due to inflation and the two year wage freeze. The Finance Minister appears determined to push them down further. Meanwhile, at least for now, wages in the private sector are going up.

Ferries

At the forum on the economy an Island Trust Trustee told the panel of Ministers:

Ferry fares are killing our communities. We are losing jobs because of the ferry fares.  If government isn’t willing to put money into ferry infrastructure we are going to continue to lose jobs.

Transportation Minister Blair Lekstrum said they were cutting 400 sailings but that it would not likely affect fares. Finance Minister Falcon suggested fares really didn’t make much difference because when they cut fares temporarily during the recession, ridership didn’t go up. The Island Trustee disagreed.

Open government

I went to one of the 7:30 am “clinics” on Thursday morning on “open government.” I had hoped it might deal with the government’s poor record on access to information but instead it dealt with the governments new web sites.

It wasn’t a total loss though. The government’s data website that now contains more than 2,400 data sets looks pretty interesting. And the open information site that publishes the government’s FOI releases is certainly worth reading on a rainy Sunday afternoon. Too bad their policy of releasing the information only 72 hours after it goes to the FOI requestor will probably discourage media from using FOI.

Workshop on market housing

Thursday afternoon there was a workshop on market housing that was much more interesting than last year’s all day workshop. Last year was mainly taken up by how little the province could or would do. This year instead focused on how much was actually being done in communities like Vernon, Langford and Surrey.

 There were dozens of other policy issues addressed in the week long convention. Paul Willcocks has an interesting column on the debate about smart meters here. It is remarkable just how much information flows in a meeting like this.

This has been one of the more challenging research projects I’ve engaged in to date. It is the first attempt I have seen anywhere to bring together research in different fields – home energy efficiency, climate change and energy poverty – towards a coherent action plan. In particular, we look at BC Hydro’s pricing policies and model distributional impacts, and we take a closer look at energy efficiency retrofit programs. We then outline a series of next steps for BC that strive for win-win outcomes that reduce energy poverty and create green jobs (about 12,000 direct jobs per year) in the context of aggressive climate action.

I have an oped in today’s Vancouver Sun:

Power policy should protect low-income households

By Marc Lee

If BC is going to meet its climate action targets, the province needs to shift away from natural gas and rely instead on clean electricity. Coupled with aggressive conservation and energy efficiency investments, this transition could be the source of new green jobs, particularly in the residential housing sector.

The challenge is this: while upper-income households tend to consume (and waste) more energy, it is low-income households who spend a larger share of their incomes on energy, and are the most constrained in terms of changing their behaviour.

This means that across-the-board price increases can worsen energy poverty, a condition where a household spends a disproportionate share of their income on energy. Living in energy poverty poses a range of health risks, including respiratory, cardiovascular, and other health problems, as well as preventable winter deaths.

BC Hydro’s proposal earlier this year to dramatically increase electricity rates is a case in point. While a recent review of BC Hydro led to compromise that would slow rate increases for the next couple of years, higher prices are to some extent inevitable due to the higher costs of new electricity supplies, the installation of smart meters, and new capital projects.

More than three-quarters of energy in the home is used for temperature control and hot water. For low-income households – especially ones with electric baseboard heaters – the real issue is keeping the heat on.

Lower-income households already spend a greater share of their income on energy. The bottom 20% of households spent 5% of their total income on energy in 2009, and 3% of income just on electricity. Households in the top 20% spent only 1.5% of their total income on energy, and less than 1% on electricity.

But BC Hydro also shows us what a fairer path could look like. The shift to two-tier pricing in 2008 has moved modestly in this direction, with modest savings for low-income households and increases for higher-income households. The greediest 20% of electricity consumers use up 44% of the residential power, and they should indeed pay more.

If electricity price increases are needed, they should be concentrated on the second tier of rates. Increasing refundable tax credits for low- to middle-income households could also offset price increases. Assessing the impacts of pricing policies across income levels needs to be part of the BC Utilities Commission’s rate approval process.

The BC government can also help by delivering targeted energy efficiency programs for low-income households and multi-unit buildings, including rental units. Low-income households are typically renters. This means they are less likely to have capacity to invest in energy efficiency upgrades.

Currently, the vast majority of public subsidies for retofits (for example, BC’s LiveSmart program) goes to affluent homeowners in single-family dwellings. Existing programs have been criticized for two common problems: free rider effects (public subsidies going to households who would have made investments anyway) and rebound effects (where savings are offset by increased energy use).

In contrast, well-designed programs for energy efficiency for low-income households are “low-hanging fruit” that would dramatically reduce these effects, target some of the province’s least efficient housing stock, and make better use of public dollars.

A danger is that electricity price hikes will create a perverse incentive for people to switch to natural gas for their home heating. In the Lower Mainland, the delivered cost of natural gas is about half the cost of the lower tier electricity rate and 39% of the tier two rate.

But this would add to BC’s greenhouse gas inventory at a time when the province needs to reduce and eventually eliminate those emissions. This should be a key component of a next generation LiveSmart program for BC, and it should also be linked to green job creation and skills development.

We estimate a budget of $220 million per year in support of a decade-long retrofit of BC’s housing stock would lead to substantial reductions in GHG emissions and energy poverty in BC homes. Carbon tax revenues are an ideal source of public subsidies for such a program.

This investment would lead to 12,000 direct green jobs per year (and a total increase in employment of 20,000 jobs if we include indirect and induced job creation).

The challenge of the next generation is to enable a smooth transition to zero-emissions housing, while paying attention to impacts on low-income households and other vulnerable populations, as well as the housing stock where they live.

Rather than trying to sell more polluting fossil fuels to Asia, the BC government should be leading the charge on climate action. A coherent housing strategy could provide win-win opportunities for the province, and is the type of jobs program BC needs.

The most illustrative part for me was the announcement that there was going to be a review of BC’s tax system.  The CCPA has called for a Fair Tax Commission but the review promised by Christy Clark promises to be anything but fair.  Instead, as the government backgrounder states:

The panel of business leaders and experts will be asked to:

• Develop recommendations to help support a globally competitive, diverse economy that supports jobs and innovation with the Province’s balanced budget framework.
• Develop recommendations to simplify and streamline the sales tax system to make common-sense improvements to reduce administration for government and business
• Develop recommendations for closing tax loopholes

The point here is that, once again, our tax policy will be made by “business leaders and experts” – the same people who gave us the HST.

So that is who the government will be listening to. Who did they present their plan to? Not the legislature. Not the people we elect to represent us. On Wednesday the Premier’s speech was to the Surrey Board of Trade.  Thursday the Vancouver Board of Trade got to see the plan. Friday it was a speech to the BC Business Council.  Some people have called this the Liberal Party’s annual report to donors.

Now business plays a vital role in British Columbia. Their voice needs to be heard. But for ten years it is the only voice that has been heard. The result has been cuts in taxes for business and the wealthy, increases in fees we all pay and cuts in services for those who need them most. And for the government the result last month was a humiliating defeat of their centerpiece tax policy.

If the government had been just a little less deaf to the concerns of ordinary people we might have seen a tax change that worked for all of us.  Ontario implemented an HST after a year of consultations. As a result of those consultations the Ontario HST looked different than ours and there was much less hostility than we saw in BC.

Eric Reguly had a very good column in the Globe and Mail last month when he addressed this question in the context of Italy’s decision to kill a minimal wealth tax.  He concluded:

The point is that austerity programs will fail if they hurt, or are merely thought to hurt, the poor and middle classes more than the rich. If the average taxpayer knows that the rich are feeling no pain while he or she is, rebellions are almost certain and history shows that they can end badly for the privileged. Afflicting the rich and the unrich together is the way to go. It would also help build trust in governments at a time when they, like Italy’s, suffer a severe trust deficit.

There is no doubt in BC when it comes to government there is a trust deficit. The process by which the Jobs Plan was rolled out and a continuation of having “business leaders and experts” make tax law will make it worse.

The plan for new jobs is concentrated on the development of very electric intensive projects that will impose major financial losses on BC Hydro — losses that existing ratepayers will have to make up.

The proposed LNG plant in Kitimat provides a good example. The first phase of that project reportedly needs 1.5 million megawatt hours of electricity per year, and apparently the developer hopes to buy that power from BC Hydro instead of producing it itself (which LNG plants in the rest of the world commonly do). With that additional demand for power, BC Hydro will sooner or later have to acquire or develop 1.5 million megawatt hours of additional supply. And the cost of that will greatly exceed what the LNG plant will pay under BC Hydro’s current rate policy.

The average cost of new sources of electricity supply in BC Hydro’s last call was over $125 per megawatt hour. The revenues BC Hydro receives from industrial customers averages less than $40. Based on those new supply costs, the loss to BC Hydro would be over $85 per megawatt hour, or over $125 million per year.

BC Hydro should be able to acquire or develop new supply at a lower cost than what it did in its last call — an expensive vestige from former Premier Campbell’s Energy Plan. But new electricity supply is still expensive and the loss will be substantial, at least $60 million, likely closer to $100 million per year. That is the amount that the rest of us will have to make up just for the first phase of the LNG plant to proceed. Then there are the next phases, and the next plants, each adding to the losses BC Hydro incurs and we have to pay.

Though not to the same extent as LNG, metal mines, another major component of the government’s jobs strategy,  are also very electric intensive. Each one of those that go ahead will be purchasing power from BC Hydro at far less than the cost they impose on BC Hydro, contributing tens of millions of additional losses per year.

The problem is that we have a jobs strategy premised on the offer of cheap power that BC Hydro does not have. The cheap power that was developed years ago is fully committed. New demands for power  require new supply, and new supply even without the nastier provisions of the Clean Energy Act is costly, both in economic and environmental terms.

And here is the ultimate irony. The answer to the upward pressure on rates, at least in the government pronouncements to date — is to lay off more BC Hydro workers. Beyond that, rates will simply go up whatever adverse disposable income and jobs impact that may have. It isn’t a jobs strategy. It’s a jobs for jobs strategy.

The idea of leveraging education, especially post-secondary education, to boost the economy is in itself a good one. Education is a policy area where strategic investment made today can produce large benefits down the road in the form of better educated, more innovative and adaptable citizens, who can be the engine of the economy of the future.

However, the BC post-secondary education system is stretched thin after a decade of mandated enrollment increases that were not accompanied by sufficient funding to properly educate and support these new students. As a result, many of our programs are underfunded and university leaders have started to acknowledge that:

The quality of undergraduate education at Canada’s universities is eroding, even as the price of earning a degree rises steadily, leaving students more anxious about their prospects after graduating.

The Ministry of Advanced education already has a service plan outlining goals and challenges for education policy in BC. It identifies several important challenges to be addressed, including the need to:

• provide high quality education choices that are affordable and accessible to address the fact that 77% of job openings over the 10-year period 2009 – 2019 are expected to require some form of post secondary education while only 60% of the BC population has this level of education.
• provide education & training opportunities in areas that address BC’s future workforce needs
• increase the participation of Aboriginal People & other under-represented groups

Focusing on these key challenges is what would strengthen the BC education system and provide jobs now and in the future.

The Premier’s announcement of regional workforce tables and bringing training closer to where British Columbians live and work makes some sense within this framework, though arguably is neither new nor very well funded.

But instead of focusing funding to remedy the declining quality and increasing lack of affordability & accessibility of education in BC, the Premier plans to increase the number of international students in post-secondary institutions by 50% over just four years.

It’s hard to see expanding international student enrollment as a top priority at this stage, before we have addressed the eroding affordability and quality of education (after years of underfunding teaching), and got a handle on how we can enable all British Columbians, particularly Aboriginal people and other underrepresented groups, to realize their full potential.

And what the Premier is proposing is a huge increase, close to 20,000 more students every year (it is estimated that there are 39,000 international students in the BC post-secondary system). That’s 10% of the total projected spaces in public post-secondary institutions in 2013/14 (202,114 according to the Ministry of Advanced Education Annual Service Plan).

It is not clear whether the Premier is proposing to increase enrollment by 10% over this year’s service plan or whether the international students would take spaces that would otherwise go to Canadian students.

Either way, it’s hard to read the government’s press release and not end up feeling like they’re treating international students as a revenue generator (aka cash cow). Yes, international students pay higher tuition fees and spend money in the local economy, but it is not reasonable to rely on international tuition to make up funding shortfalls in college/university budgets.

Bringing in international students will benefit BC and Canada in the long run. However, we need to make sure that we have the resources to offer them good quality education and that the international students that we do attract are prepared to learn.

Far too many international students are already enrolled in local colleges and universities without having the necessary English-language skills to learn well. Anybody who has recently been in college or university has seen that. Ask any post-secondary instructor, and they will readily share frustrating stories of otherwise intelligent students in their classes with such severe English language difficulties that they were having trouble understanding much of the material. Even if they manage to get a diploma, these students end up receiving a very poor education.

It hardly makes sense to focus on growing the number of our international students without providing proper educational supports for them. And I didn’t see anything in this announcement about that.

Creating a new industry with the capacity to export B.C.’s natural gas to overseas markets for the very first time will instantly increase economic prosperity and create jobs. By adopting a more aggressive approach to the development of the natural gas sector, I am confident British Columbia can create a prosperous LNG industry that will bring local jobs to our communities and deliver important dollars into our economy.

A couple months ago I did the math on the greenhouse gas emissions associated with these LNG facilities. Basically, GHG emissions represent a massive carbon bomb:

If we take the 5.5 billion cubic feet per day production number that “could ultimately be much higher”, that adds up to 112 Mt, almost double all of the emissions in BC’s total inventory of GHGs (burning fossil fuels in province and all other sources).

Because the gas will be exported, most of these emissions will count in the GHG inventories of other countries rather than BC. Still, it is our crack they are smoking.

What is the payoff in term of jobs. The press release goes on: ”projects are each expected to create approximately 1,500 person-years of work during construction. The export terminal will create 120-140 permanent positions once it is in operation.” There will be additional jobs from fracking all that land to get at the sweet gas.

But overall, our green jobs and sustainable production paper estimated that mining and oil and gas extraction created 523 tonnes of CO2 per worker per year. That is just emissions in BC from extraction and processing. If we were to count emissions elsewhere due to the carbon content of the fuel that is combusted, that figure would be eight times higher.

If the objective of public policy was to put as much carbon in the atmosphere, as quickly as possible, Day One of the BC Jobs tour would have to be counted as a stunning success. For those of us who want a viable future for our kids, it is a tragedy.

I am in Prince Rupert today because if you are looking at Canada from Asia, with an eye to investing in our country, Canada truly starts here. It is through British Columbia ports where resources are shipped to Asia, and where goods arrive for distribution at home and to the rest of North America. A bright economic future for British Columbians is linked to opening up Asia-Pacific markets to the rest of Canada, and B.C.’s transportation network will be the key to success.

This is some wonderfully fresh thinking about BC’s economy and how government can create new jobs for the future. Oh, wait a sec, expanding exports to Asia has been the status quo for a couple decades now. Extracting resources for foreign markets goes back a century and a half.

But not only is this a replay of Greatest Hits from the 1980s and 1990s, it shows a government totally trapped in a resource extraction mentality, and an utter lack of imagination about developing an industrial strategy for the 21st century. While China has turned itself into an industrial super-power over the past couple decades, BC continues to rely on digging up and shipping out raw materials, then importing finished products. Increasingly, we have been exporting less processed materials like raw logs. If we are harvesting resources, minimally they need to have much more value added to them if we want to create good jobs.

Technically speaking, the government is committing a mere $15 million in support of transportation infrastructure, part of a $90 million project for which $30 million being put in by CN Rail. The Port of Prince Rupert is kicking in another $30 million, and the hope is that the feds will contribute another $15 million, so the full public subsidy is $60 million. A sweet deal for CN, who gets to pay 33 cent dollars on the project. And given the press release’s talk of transporting goods to market, let’s remember that CN is the company that bought BC Rail when it was privatized.

There was a time when the BC Liberals stood in stern opposition to public subsidies to business. But when we look across the resource landscape to private power projects, coal mines, and oil and gas, we see massive public subsidies all over the place.

This plan is predicated on continued expansion of trade to Asia, even as the price of fuel closes in on all-time highs. And that is with a global economy teetering on the brink of recession — if global demand were to pick up in a major way the costs of transportation could escalate even further. It is also trapped in a mindset that says all governments can do is create the conditions for foreign investors to come to BC and create our jobs for us.

In addition, there is also no consideration whatsoever of any environmental consequences in BC or elsewhere of ripping coal and other materials out of the ground for export markets. BC’s environmental assessment is essentially a rubber stamp for whatever big resource companies want to do, and provincial government workers that used to be eyes and ears of British Columbians on the ground have mostly been laid off (the context for the so-called “jobs plan” is a provincial effort to cut even deeper into public sector).

There are both local and global dimensions to environmental problems. The destruction of habitat in BC is just another cost of the resource extraction game that fails to be represented in the price of commodities we sell. Fossil fuel exports like coal also lead to huge greenhouse gas emissions in the Asian locales where they are combusted. Already, the amount of GHG emissions from burning BC coal in other jurisdictions are about the same as all of the fossil fuels we burn in BC each year.

Instead of rebranding the status quo to make it look like a jobs plan, I’d much prefer to see an industrial strategy aimed at weaning ourselves off of fossil fuels by investing in zero-emissions transportation infrastructure, retrofits of homes and buildings, aggressive recycling of materials in BC, and training and education to supply a skilled workforce to take on these green jobs. Phase one of the jobs plan will only lock us further into being a quarry for the rest of the world.

UPDATE: Clark will be expounding on plans for liquid natural gas terminals in Kitimat this afternoon. See this post for a review of this carbon bomb that would put almost twice BC’s current GHG emissions into the atmosphere each year.

The Minster’s presentation focused on highlighting the cost of the move back to PST/GST, providing some large numbers for the media headlines, instead of looking at the big picture.

In case you missed the media coverage, the provincial coffers are projected to suffer a loss of $2.8 billion over the next 3 years, relative to the estimates presented in February’s Budget 2011. The Ministry estimates that $2.3 billion of the loss is brought about by the HST defeat and the move back to the PST/GST system.

The Minister argued the impact of the HST defeat is manageable, but warned that:

“We’re going to be very tough on operating expenditures and people need to understand it is going to be a government that is going to be run very, very tightly from a fiscal point of view.”

However, closer look at the numbers reveal that the provincial financial situation is not nearly as dire as it may seem. And that returning to PST/GST is not all that costly, when compared with how much it would have cost to keep the “fixed” HST.

Firstly, comparing the costs of repealing the HST to the February budget estimates is misleading. Budget 2011 numbers did not include the cost of the last minute HST “fix” that Premier Clark announced this summer. Keeping the HST would have involved a significant budget loss relative to the numbers announced in February, as Seth Klein pointed out here. This is why the impact of reverting to PST/GST should be compared to the impact of keeping the “fixed” HST.

The cost of the one time rebates of $175 per child regardless of family income and for low- and modest- income seniors were estimated at $200 million. The government’s news release announced that these checks would go out before the end of the year, so they should be considered as expenses in 2011/12.

In addition, the HST was slated to be reduced to 11% in July 2012, which would have cost the government around $638 million in 2012/13 — 3/4 of the annual cost of a 1 percentage point reduction (estimated at $850 million). In 2013/14 the government would have given up $850 million. And this isn’t even considering that in July 2014, the tax was going to be reduced to 10%, giving up a total of $1.7 billion in revenues every year. At that rate, the government’s actually going to be collecting more revenue with the PST/GST than otherwise.

Some of these extra costs would have been offset by the increase in the corporate income tax to 12% (from the current 10%) in January 2012 and by postponing the small business tax cut slated for April 2012. These would have generated an additional $100 mil  in 2011/12 (1/4 of the annual revenue gain, estimated at $400 mil) and just over $400 million each in 2012/13 and 2013/14.

Thus, the real comparison of the costs of repealing the HST looks more like this:

My analysis shows that the provincial treasury would have faced a shortfall of $800 million even if the HST had survived the referendum. The real net costs of reverting to PST/GST are $1.5 billion, not $2.3 billion.

Of course, using the bigger number is more effective if one were looking to lay the blame for provincial fiscal challenges onto the referendum results.

Now, let’s turn to the total provincial fiscal position. Many analysts/commentators seem to have forgotten that the fiscal plan features unusually large contingencies and forecast allowances over the next 3 years. These total $2.5 billion over the 3 years and thus entirely cover the costs of the HST reversal.

If the HST defeat is not an unexpected event worth dipping into the contingency funds for, I don’t know what is.

As for the forecast allowance, the government has already built a lot of prudence into the budget projections by using economic growth forecasts that are considerably lower than the private sector consensus forecast (2% vs 2.8% growth for 2011 and 2.3% vs 2.8% growth in 2012).

In other words, the BC government has a real fiscal gap of only about $300 million over 3 years relative to Budget 2011, not $2.8 billion. This is a lot more manageable and hardly requires the kind of tight-fisted approach advocated by Minister Falcon.

Some of the media commentary around the fiscal update, such as Vaughn Palmer’s piece in the Sun are suggesting that the BC government is using the current fiscal challenges as an opportunity to punish British Columbians for exercising their rights in the HST referendum. This would be a great mistake. Not only would it go against our country’s respect for democracy, but it would also put a drag on the already fragile recovery (latest job numbers released today show BC is shedding jobs, full-time jobs in particular).