BC Energy, Mines and Petroleum Resources Minister Michelle Mungall marked Mining Month last week by acknowledging that the industry provides 30,000 direct jobs in B.C. and will play a critical role in the global decarbonization effort.

Indeed, because of the role it plays in providing the metals and minerals needed for renewable energy and electric cars, mining’s hitherto environmentally destructive image has taken on a greenish tinge.

But Mining Month just happened to coincide this year with the wind-down of the Mount Polley copper mine, which is being put into care and maintenance indefinitely.

If the BC NDP government is serious about supporting B.C.’s mining industry, it needs to do something about carbon taxes and leakage, says a chorus of B.C. copper miners.

They are feeling the pinch of B.C.’s relatively high carbon taxes, which becomes particularly painful when gasoline and diesel prices soar, as they have lately.

“Energy’s a big part of running a mine, between fuel and power – and they’re both going up,” said Brian Kynoch, CEO of Imperial Metals (TSX:III).

“The carbon tax presently costs Copper Mountain $3.5 million per year without reducing carbon emissions,” said Gil Clausen, CEO of Copper Mountain Mining Corp. (TSX:CMMC).

The carbon tax that Taseko Mines Ltd. (TSX:TKO) has paid annually on its Gibraltar copper mine has risen to $4 million from about $3 million since 2008, said Taseko CEO Russell Hallbauer.

“That’s $30 million that has been spent on carbon tax,” he said. “But now it’s not revenue neutral.” The NDP government has touted B.C.’s mining industry as a key element of its CleanBC climate plan. It acknowledges the mining of metals like copper as essential to the low-carbon energy transition because of their use in renewable energy, transmission and electric vehicles

Copper mining executives who spoke to Business in Vancouver generally agreed they are not averse to carbon taxes per se. But promises of a revenue-neutral carbon tax have been broken, and mechanisms that were promised to protect energy-intensive trade-exposed industries have not materialized. Nor do they appear to be even on the horizon.

And the one advantage that B.C. miners once enjoyed over other copper mining jurisdictions such as Chile – cheap, clean power – is quickly vanishing. Power prices in B.C. have steadily increased over the past decade and promise to go up another 8% over the next five years.

“We are competing against the Chileans, the Africans, everybody else producing copper,” Hallbauer said. “They’re not paying carbon tax like we are.

“There are a lot of companies that are not supportive of the carbon tax for these exact reasons. And it’s not just big companies. The bulk of Canadian employment comes from medium- and small-sized business, and we’re getting hammered on carbon tax.”

Their complaints are legitimate, said Chris Bataille, an adjunct professor in Simon Fraser University’s School of Resource and Environmental Management.

“B.C. energy-intensive and trade-exposed sectors (EITEs) are legitimately facing differential GHG [greenhouse gas] prices of up to $35 [per tonne] against their competitors,” he wrote in an email to Business in Vancouver. The one advantage that B.C. miners once enjoyed over other copper mining jurisdictions such as Chile – cheap, clean power – is quickly vanishing

When a carbon tax was first introduced by Gordon Campbell’s BC Liberal government in 2008, industries that had to pay the new tax on fuel at least got a break on income taxes, because the tax was then revenue neutral.

With the introduction of the carbon tax, the Campbell Liberals slashed the corporate tax rate to 10%.

The neutrality began to erode, however, under his successor, Christy Clark, and then John Horgan’s BC NDP government scrapped neutrality altogether. The corporate income tax rate has also gone back up to 12%.

As Bataille points out, when the provincial carbon tax was introduced, B.C. planned to join California, Quebec and Ontario in the Western Climate Initiative (WCI) – a cap-and-trade system.

“WCI has mechanisms to hand out compensatory, free emissions permits to emissions-intensive, trade-exposed sectors,” Bataille wrote. “For various reasons, that didn’t happen.”

The NDP government’s own Mining Jobs Task Force agrees that B.C.’s carbon tax puts its miners at a disadvantage.

“Although government has proposed some targeted support to industry to alleviate competitiveness concerns related to the B.C. carbon tax through the Clean Growth Incentive Program, mining companies operating in B.C. currently, and will continue to, pay substantially more than their competitors in other jurisdictions,” the report states.

“This cost burden has a direct effect on the competitiveness of existing operations and creates a challenging investment environment for new mines and mine expansions.”

Although carbon taxes alone would not account for Imperial Metals shutting down Mount Polley (the company cited low copper prices), it’s another cost that makes it more difficult for miners operating in B.C. to compete.

The NDP government has touted B.C.’s mining industry as a key element of its CleanBC climate plan. It acknowledges the mining of metals like copper as essential to the low-carbon energy transition because of their use in renewable energy, transmission and electric vehicles.

Mungall’s office says it has a memorandum of understanding with the Business Council of BC to address the disadvantage for energy-intensive trade-exposed industries in B.C. from carbon taxes. But it plans to use “non-carbon tax measures,” which may not be enough to put copper miners in B.C. on a level competitive playing field.

So far, the only real break that the mining industry in B.C. has had is a reduction – and now the elimination – of PST on electricity. While the industry welcomes that tax cut, miners point out that electricity costs continue to increase in B.C., eroding a competitive advantage they once had.

The cost of power in Chile, for example, used to be three times what it was in B.C., but that advantage has begun to shrink as power prices in B.C. soar.

Bataille suggests that B.C.’s mining sector might be better off if it were part of a federal carbon tax backstop.

“Ultimately, the eventual answer is for Canada as a whole to protect its industries facing domestic climate policy by raising what is called a border carbon adjustment, or tariff based on differential GHG intensity,” Bataille said. “These are WTO [World Trade Organization] compliant if both foreign and domestic producers are treated transparently equally.”

But the federal mechanism for insulating industries from leakage does not apply in B.C., says Environment Canada. It is available as part of the federal backstop only in provinces that don’t have carbon pricing. It doesn’t appear the B.C. government has plans – or jurisdictional authority – to implement such a mechanism.

“We are acting to implement the recommendations [the mining task force] made to support B.C.’s mining competitiveness and innovation,” Mungall said in an emailed statement. “This includes making proven mining tax credits permanent as well as eliminating the PST on industry’s hydroelectricity.”

(This article first appeared in Business in Vancouver)

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