Monday, April 26, 2010

Alberta innovation: cap and trade and next generation broadband

[Many are surprised to discover that Canada is the biggest oil exporter to the US almost shipping double the oil that the US imports from Saudi Arabia. Most of this oil unfortunately comes from the Alberta tar sands – which are one of the largest emitters of CO2 in North America.

Alberta is as large as Texas and not unlike Texas is generally perceived as a right wing, conservative oil rich province. But despite this reputation and its production of dirty oil, Alberta has been a world leader in deploying cap and trade and building a province wide broadband network. Alberta implemented one of the first cap and trade programs in the world (albeit an intensity based system as opposed to a true cap and trade system) years before most people even heard of the expression “cap and trade”. As well Alberta deployed SuperNet – one of the first government sponsored open access networks to provide Internet service throughout Alberta.

One of the biggest issues facing Alberta is the potential for US Congress to pass a national cap and trade program. If this happens the Canadian government has publicly committed to implementing a matching program in Canada to insure there is no trade distortions between Canada and the US with respect to the cost of carbon. The TD Bank and Pembina institute estimates that that this will cost Alberta anywhere between $40 to $70 billion in carbon offsets. They will need to purchase these offset from the rest of Canada and/or internationally in order to comply with these programs. This will be a huge transfer of wealth out of Alberta in order to comply with a North American cap and trade program. This underlines the problem of many proposed cap and trade systems in that they can cause huge regional variances and disparities in terms of money flows.

While I believe anthropogenic warming is real and present danger to this planet I am not a big fan of cap and trade or carbon taxes. Cap and trade systems have worked extremely well in eliminating sulfur dioxide pollution. But these have been narrowly defined relatively small scale markets. CO2 cap and trade is a much larger beast as it touches so many industry sectors. Many CO2 abatement strategies are also very suspect. Already many CO2 cap and trade systems have been tainted with scandal and dubious claims of CO2 reduction. Combined with such huge regional financial disparity in terms of its cost, I think cap and trade will be a difficult sell in Canada as anywhere else in the world. They same issue lies with carbon taxes – although more likely to equitably distributed in terms of the pain – nobody wants more taxes disappearing into the maws of government (even though most governments claim such taxes will be revenue neutral – we have all heard that line before).

There are now several proposals for alternatives to cap and trade such as “cap and dividend” and “cap and reward”. Jim Hansen has also come out in favour of a scheme similar to cap and dividend called “People’s Climate Stewardship Act” which is very similar the Cap and Dividend bill now before Congress. In both situations there is an effective carbon tax and cap but the revenues are turned over directly to consumers who are then free to spend the money in reducing their energy bill. A variant of “cap and dividend” is “cap and reward” where the money raised from a carbon tax and cap is also handed over to consumers, but they can only spend the money on activities that further reduce their carbon footprint. Such activities may include next generation broadband, tele-working, distance education, downloading virtual goods over the Internet etc. Cap and Reward will hopefully create a virtuous circle of carbon reduction in all walks of life.

Alberta’s cap and trade intensity program is also running into many of the same problems as other cap and trade programs in that they are having a difficult time finding well qualified projects that will reduce carbon in a measurable and verifiable way. I think Alberta has the opportunity to once again show world leadership in adopting a province wide cap and reward program as an alternate solution. Much in the same way that Alberta deployed North America’s first cap and trade system and the first government funded province wide open access network, they could once again set the mark of deploying the worlds first cap and reward system. Rather than waiting for the inevitable cap and trade bill to come out of congress whether it is this year or 10 years from now, Alberta could do a pre-emptive strike by implementing a cap and reward program where the proceeds going to consumers could be used for the purchase of low carbon goods and services produced in Alberta. This would provide Alberta’s industry and education sectors with new revenue opportunities and demonstrate an alternate approach to addressing the global challenge of CO2 emissions.

For example Alberta operates Canada’s only open university – University of Athabasca. Its course programs and degrees could be offered for free in exchange for the offset dollars earned by families under a cap and reward systems. Clearly distance education over the Internet will have a very small carbon footprint. Alberta has also been a leader, through its provincial R&E network Cybera in deploying advanced cyber-infrastructure, clouds and grids. They also operate one of the nodes on the Greenstar network – the world’s first zero carbon Internet. Again these low carbon activities, as well as related industry projects could be funded under a cap and reward program.

But most importantly Alberta needs to address the challenge of deploying a next generation broadband network. Supernet was a wonderful achievement for getting broadband deployed to rural areas. But it not address the challenge of building high speed open access competitive broadband in the urban centers. A “cap and reward” system could easily pay for such a network deployment. Many of the energy companies in Alberta who would need to collect the carbon fees already have extensive fiber networks. This could be a loss leader opportunity for them to expend the money on their customer’s behalf in building a next generation open access fiber to the home network.

Of course all these low carbon activities need to be properly quantified to prove that they genuinely reduce CO2 emissions. Organizations like Canada Standards Association, ClimateCheck amongst others are now developing the necessary standards for the ICT sector to enable a successful cap and reward program.

Despite its reputation as a right wing conservative province, Alberta has the unique opportunity to use its oil wealth in solutions that do not penalize the province in terms of CO2 emisssions, but instead create new opportunities for its businesses and education sectors by promoting a low carbon society through a cap and reward program – BSA]

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