This commentary is not about the Maritime Iron project proposed for Belledune. It is about what the Maritime Iron project reveals about the big questions New Brunswick needs to answer if the economy is going to attract industry and investment. Do we have a greenhouse gas emissions target or a cap? How can New Brunswick balance its climate goals with growth opportunities? Of course the biggest question of all, does New Brunswick want industry and investment?
Maritime Iron is a large industrial project that has been proposed to locate at the Port of Belledune to do value added processing of iron ore. I have no information about the project beyond what I learn from media reporting. It is my understanding that beyond the advantages of the deep water port for bringing in iron ore, the co-location with the NB Power Belledune power plant is part of the value proposition of New Brunswick as a location for this project. The forecast is that the construction and installation phase of the project will employ 1,000 or more, and once operating there will be around 200 or more ongoing jobs. This project would be a boost to the region in terms of replacing jobs, income and tax revenues that will be lost with the announced closure of the Glencore smelter in Belledune after its decades of operation.
Based on what I have read and heard in media reporting, no one in the south of New Brunswick is that interested in the jobs or income from this project because it will result in a large increase in carbon emissions for the province. The proposed operation would be the largest single emitter in the province and increase GHG emissions from 14.8 million tonnes today to 17 million tonnes once in operation. This will take the province away from its status of having already met the notional federal target for provinces of a 30 per cent reduction from 2005 levels by 2030, and further away from the more aggressive reduction target of 10.7 million tonnes of GHG emissions by 2030 that is reported to be in provincial legislation.
Many New Brunswickers, it seems, prefer to have the lower emissions over the jobs, the income and the tax revenues. Environment Minister Jeff Carr said “it is a little bit concerning that our emissions will rise when we’re trying to be on the other side of that and reduce our emissions here in New Brunswick.” The minister indicated that any economic boost to the Chaleur region from this project must be balanced against the likelihood the plant would cause the province to miss its emissions-reduction targets.
So we see attempts to make arguments that higher emissions in New Brunswick should be tolerated if that on net reduces global emissions. Maritime Iron appears to have proposed that the rest of the province should seek out offsetting emissions elsewhere. None of the angles seem to be well-received, and the main voices we hear in media reporting are those based in the south of the province arguing that the province should pass on this project.
While it is laudable for the government to signal that the province is serious about meeting climate change obligations, the current situation must be creating confusion for business and investors. The environment minister has acknowledged that there is no clear timeline for the environmental assessment of the project given how broad and complex the considerations appear to be. Add to that there is no approved carbon pricing scheme in place for large emitters like Maritime Iron, and the government and environmental advocates are suggesting that the emissions targets are potentially “hard caps” on provincial emissions even though I don’t believe that legislation defines whatever targets we have as caps on emissions. In our legislation for addressing climate change, do we specify a penalty for missing our target or being above our legislated cap on emissions?
What is the cost of New Brunswick missing the federal emissions-reduction target? After all, Canada is not on track to meet its GHG emissions target by 2030 and it used to be reported that the federal government would atone for this failing by purchasing billions of dollars in carbon offset credits valued according to the federal price on carbon. Is this how the province will also address any excess emissions over its own target? This is a situation where we are seeking to balance an unmeasured cost of missing a policy target risk against hard dollars of income and numbers of jobs. When you can’t easily measure “social net benefit,” or even define a social net benefit, then the decision can only be a political decision.
What we are really missing at this point is clarity on the carbon pricing scheme for large emitters and how that is related to the province’s emissions target(s) or cap(s). Strictly speaking, carbon pricing which Canada has embraced is an approach that can be used to reduce emissions. But it doesn’t have to. Carbon prices that are high enough will raise the cost of production with polluting technologies encouraging cleaner ways to produce, or cleaner energy to produce with. Higher production costs from pricing carbon can reduce emissions by reducing production (e.g. Denmark substituted imports for domestic production, raising global emissions), or by losing producers to competition or lower cost-of-production locations.
In theory, the price we levy on carbon emissions could be set to be high enough to reduce emissions to meet a target level. But, that ignores that so long as emitters pay the required price for emissions there is no necessary reason that emissions fall or that we meet the emissions target. The pollution is priced so whatever amount of emissions we have are “socially efficient.”
For new projects like Maritime Iron, even at the $200 plus per tonne of GHG emissions, investors may not bear the cost of the carbon price. Why? Because the amount that they are willing to pay for fixed factors like land will fall the more we raise the cost of producing in New Brunswick. In short, they will be willing to pay less for land. So instead of the owners of land earning higher rent, or getting a higher price for a land sale, the government will collect more revenue from carbon pricing at the expense of property tax – provincial and local. And emissions may be higher because so long as the emitter pays the price the required price for the emissions they have the right to emit.
Is the province open for business or is our economy “full” with respect industries with emissions? To change the regulation away from price-based emissions rights to an emissions cap means that existing emitters get a “windfall” in terms of rights to produce, and reduced local competition for inputs like labour and land. The south of the province can continue to produce and emit but the north of the province is “out of luck” unless it can find low-emitting businesses to locate in the region.
On the other hand, if the preference of New Brunswickers is to transform the provincial economy to one of a non-emitting, non-industrial shining example of a province meeting its climate change targets, then the government needs to get moving and pick up the pace on developing a clear strategy for the economy – beyond a passive-aggressive approach of ambiguous climate policies that will discourage investments with emissions. What industries and businesses are we picking as winners if low to no emissions is the guiding criteria? What do we need to see this unprecedented transformation of a provincial economy?
As I said at the start, this commentary is not about the Maritime Iron project and its merits. It is about understanding what the Maritime Iron project means for the industrial development of the province. Government cannot afford to leave the rules of the game with respect to its climate policies and industry emissions ambiguous if there is any desire to attract industry and investment.
Then again, there may not be that much to do because how New Brunswick deals with the Maritime Iron project for Belledune, whatever it decides, will answer the big question for investors and business – is New Brunswick a good place to invest?
Herb Emery is a Brunswick News columnist and Vaughan Chair of Regional Economics at the University of New Brunswick.
The JDI Roundtable on Manufacturing Competitiveness in New Brunswick is an independent research program made possible through the generosity of J.D. Irving, Ltd. The funding supports arms-length research conducted at UNB.
