Are Nova Scotia’s de-carbonization programs working?

Nova Scotia Auditor General Kim Adair today released her Performance Audit of the province’s Green Fund. Problem is, she looked at the wrong thing.

Adair looked at the minutiae of spending controls related to decarbonization programs (spoiler: there’s nothing much to worry about, at least not yet), but neither she nor anyone else is assessing if the programs are the best path to getting off carbon.

Let’s back up.

As I wrote earlier today, the Green Fund was created in 2019 to disperse money collected through the province’s cap-and-trade program, created as an alternative to the federal carbon tax. The cap-and-trade program set capped greenhouse gas (GHG) limits on the province’s 23 largest emitters, with those exceeding the limits required to purchase credits. The money raised through the sale of credits was to be dispersed to various programs to fund climate change initiatives focusing on mitigation, adaptation, and research.

Last fall, the federal government rejected the provincial government’s proposal to extend the provincial cap-and-trade system, and instead imposed the federal carbon tax. In practice, the carbon tax consists of both a fuel charge (on gasoline and natural gas) that most people will pay, and a performance-based system for large industries, known as the Output-Based Pricing System.

The federal government will decide how to spend the fuel charge revenues (mostly, for rebates to people), but the province will control the revenues from the Output-Based Pricing System. With that change, the province’s Green Fund will become the Nova Scotia Climate Change Fund, and as the federal targets increase, the money going into the Climate Change Fund should increase over time.

Back to Adair’s Performance Audit.

Again, as I wrote this morning:

The Green Fund began funding programs in 2021, allocating $73.7 million to “partner” agencies — EfficiencyOne, Clean Foundation, the Nova Scotia Federation of Municipalities, and various provincial programs. EfficiencyOne received the bulk of the funding — $46.7 million (63%). Clean Foundation got $5.5 million, or 7.5% of the funds.

Adair looked at the Green Fund allocations to EfficiencyOne and Clean Foundation. She found that as the two agencies spent the money, they did so according to contractual terms and to the purpose of the Green Fund — there’s no suggestion of waste or misappropriation of funds at either agency. 

The problem, however, is that while the money was transferred to the two agencies, most of it was not spent. Management of the Green Fund program said that’s because the money is funding multi-year programs, and the agencies need certainty to hire staff and plan over several years.

Adair rejected that explanation: “In our view, the objective of ensuring multi-year funding certainty for program partners can be more appropriately achieved through contractual terms and conditions, while continuing to hold the funds until needed.”

The point of holding the funds in provincial bank accounts, said Adair, was to give the province flexibility it allocating funds quickly, for example for new technologies. Moreover, by allocating the entire amounts to the agencies, the agencies received the bank interest in the unused funds, not the province.

That lost interest amounted to ‘just’ $151,000 over the two years, but still, that’s $151,000 that could have been allocated for other Green Fund purchases.

Well, OK. But this struck me as… much ado about not much.

I had this exchange with Adair at a press conference this morning:

Bousquet: Can you can you help me assess how big of a deal this is? I mean, forgive me. I just quickly read the report this morning and I think I understand the critique that you’re providing. But on the other hand, the loss of interest, $151,000 is how I read that compared to $76 million — that seems almost inconsequential. And then the administrative costs, which were not in place at Clean Foundation, but were at EfficiencyOne, were well under 5%, which strikes me as as pretty good. So just help me wrap my head around where we are here. 

Adair: So our purpose here was to get in early. We only looked at the first two years of operations of the Green Fund and these cap-and-trade options. We knew going forward under that regime would happen twice a year. And you can see in the first two years, the funding that came in was in the $24 million range. Then it was $40 million adding up to $70 million, so expected to grow. So our thought was let’s get in and audit it in the early first two years of operations and look at whether or not we can make recommendations for improvement. So the point about the interest — the contract with Clean Foundation didn’t have any clause about the interest. So going forward, that interest and if there’s $5 million in their bank account at the end of the audit period, that interest over time could accumulate and especially if they get more funding in future years. But there was no clause in their agreement saying that that interest revenue should be applied to Green Fund programs. So that’s an example. And also for administration, the amounts, as you mentioned, are not significant, but over time it could accumulate to be much, much more. 

Bousquet: So just to recap, you’re not singling out any any suggestion of graft or misappropriation of funds. You’re more about the financial controls and the system controls in place. And not a big worry yet, but could explode into the future. 

Adair: Yes. In practice of emptying the special purpose account at the end of each year, we couldn’t find or weren’t given a good reason or rationale for doing that. And I liken it to the example of, if you were going to build a house and you have a contract with the builder, would you give the builder 100% of the funds to build that house before you even start? So if it’s not appropriate to do it with personal funds, how could it make sense for with public funds?

Fair enough. Auditors are going to audit. There’s no indication of wasted money, or worse, misappropriation of funds. In fact, Adair found that the two agencies were spending the money appropriately, once they spent it. But, of course, finance people and managers can always to a better job, and it’s her job to push them to do so. All good.

But should the rest of us average people care? What should we be concerned about?

The goal: saving the planet

What gets lost here is the ultimate goal: reducing GHG emissions quickly, to zero. Does the Green Plan achieve that? Will the Climate Change Fund? And are the specific expenditures by EfficiencyOne and Clean Foundation the best ways to get there?

Adair: “One of the findings is trying to link the objective of greenhouse gas emission reductions intended with this these programs in the Climate Action Plan and in the legislation. The province has the goal of reducing greenhouse gas emissions 2030 target net zero by 2050. There is no clear lines of expectations as to what this spending is supposed to do to achieve those goals. So I think that that’s now part of the plan that they will be looking at.”

Translation: ‘damned if I know.’

I’d like to see an honest cost-benefit assessment of the various programs, to see if, say, in terms of getting to net zero GHG emissions, spending $15 million on the Sustainable Communities Challenge Fund is a better or worse use of public money than spending the same amount on retrofitting homes.

I don’t know the answer to that. Does anyone?

I’ve got a big problem with how Nova Scotia is supposedly addressing climate change. The provincial government is throwing money around at various untested and unassessed initiatives that kind of feel good, but no one really knows if they’ve achieve their goals, at least quickly enough.

At the same time, the very same provincial government has extended the life of the Donkin coal mine; burning the coal from the mine will likely release more carbon into the atmosphere than the reduction in GHG emissions achieved by all the provincial climate change programs combined.

The Climate Change Action Plan released in December is basically “life goes on as normal, but with electric engines.”

There are at least two problems with this approach.

First, is it even possible to produce enough renewably generated electricity to run all the hoped for electric cars and heat pumps? With its existing coal and fuel oil plants, Nova Scotia Power can’t even get us through a significant storm now without significant power failures; how do we get to the additional power load required for the electrification-of-everything while taking those coal and fuel oil plants offline? I want this as much as anyone, but I’ve never seen a clear explanation or the hard math that points us to that future.

Second, simply electrifying everything doesn’t achieve the goal of net-zero GHG emissions. It is, however, the easy way out, because it makes no demands on citizens to change anything at all about their current behaviour.

For example, let’s talk about electric cars. As I wrote in December, in response to the release of the Climate Change Action Plan:

It is perhaps overly reliant on the introduction of electric vehicles as a mechanism for reducing greenhouse gas emissions related to transportation. 

The plan mentions “transit” just once, and that’s in relation to electrifying existing transit systems with the help of federal money; no mention is made of increasing the percentage of commuters who use transit instead of private vehicles. Neither does the plan propose that the province fund the expansion of transit. Meanwhile, hundreds of millions of dollars are planned to be spent in coming years to expand the existing highway network.

As I commented in January:

In fact, I’d argue that the push for electric cars is in fact a push against transit. It’s a supposed cheap techno fix for the climate bind we find ourselves in: we don’t have to do anything any differently, we’ll just change the way the cars work. Otherwise, everything else will be the same: same single-person vehicle commutes, same traffic jams, same continued highway construction forever and ever, same unsustainable suburban sprawl.

But electric cars won’t solve the climate crisis. Clearly, electrification makes sense for some uses — see the above electrification of transit, and also for work vehicles of various types — but it’s not clear that the electrification of the entire global fleet of commuter vehicles is even technically feasible (how much lithium exists, anyway?). Even if it is, it will be enormously expensive, taking resources away from much more cost-effective means of reducing emissions.

Like transit.

Former premier and current opposition environment critic Iain Rankin showed up at the press conference today, so I asked him about transit:

Bousquet: It struck me, and this isn’t directly related to the auditor’s report today, but in other recent environmental announcements and such, that the province is spending no money on transit or very little money, none for Halifax Transit. And that would strike me as a much more efficient and more impactful way to reduce greenhouse gases. 

Rainkin: Yeah, that’s a good observation. The province got out of funding transit before our government for quite a while. That lasted in through our government until we invested, in my short term as premier, we invested significant funds into the electrification of the Ragged Lake and Burnside transit terminals. That should continue because you’re right, it is one of the most effective ways to move people around, to transition people out of the sole-occupancy vehicles. And so not only Halifax but outside of the province. So I’d like to see this government go back to the way that we can fund transit. 

Here’s an idea: dump half the money collected from the Green Fund and the Climate Change Fund into expanding transit systems and promoting the use of transit.

Fact is, no one can demonstrate that that would be a better or worse use of the money than any of the decarbonization programs, because no one is auditing the programs for their relative ability to reach net zero GHG emissions.