PAUL YOUNG, CPA, CGAJANUARY 28, 2018

Case Study – Carbon Tax and Carbon Pricing – Clean Tech Investment – January 20187

Paul Young - Bio

• CPA, CGA• Financial Solutions• Academia• SME – Risk Management• SME – Close, Consolidate and Reporting• SME – Public Policy • SME – Financial Solutions• SME – Supply Chain Management

Contact information:Paul_Young_CGA@Hotmail.com

This presentation discusses clean technology in Canada. The presentation will look at the market for clean technology and issues facing Canada transforming to low carbon economy.

Carbon tax are punitive which means they hurt the low to middle class more in terms of costs.

Description

GDP Analysis

Cleantech Market Canada

Carbon less economy

Cleantech products

Cleantech environmental impact

Cleantech VC/Canada

Cleantech Subsidies USA

Agenda

Companies developing technologies to cut carbon emissions are in line for an opportunity worth up to $120 billion, as the federal government kicks off a carbon pricing program aimed at cutting greenhouse gas emissions.

This is according to a report by Boston-based research and advisory firm Lux Research.Prime Minister Justin Trudeau has mandated that all 10 provinces implement a carbon pricing scheme by 2018, with a minimum of $10 per metric tonne (MT) and steadily increasing to $50 per MT in 2022. By 2030, our government seeks to cut emissions by 28 per cent, to 524 million MT of CO2 equivalent.

• Money would have to flow to clean technology investment• Clean technology relies on raw material, fabrication, delivery and installation• Consumers will pay 6-8% more for goods and services• CO2 is not a pollutant, but the building block for life• Many government are using carbon tax and/or pricing to plug their fiscal gap between taxation

and program spending

Canadian Manufacturing – April 24 2017

Carbon Tax Market

California’s carbon market hasn’t worked as envisioned at any point during its relatively short life, but at this point it’s not an exaggeration to say it’s downright broken. It has so many problems that it becomes necessary to unpack them all in order to see the mess in all its glory, so let’s start with the biggest one of all: the price of carbon permits in the system just aren’t high enough. Bloomberg reports:

Source - https://www.biv.com/article/2017/2/british-columbias-not-so-revenue-neutral-carbon-ta/

British Colombia Carbon Tax not Revenue Neutral

The B.C. government claims it is, in fact, revenue negative because the amount of tax reductions it

offers actually exceeds the amount of money brought in through the $30 per tonne carbon tax.

Last year, the reductions exceeded carbon tax revenue by $500 million, according to the Ministry of

Finance.

“Since the carbon tax was established in 2008-09, it has returned over $1.6 billion more in tax cuts to

B.C. employers, individuals and families than it has raised for government,” Sonja Zoeller, senior

public affairs officer with the ministry, said in an email to Business in Vancouver.

But a recent Fraser Institute analysis concludes that the carbon tax was indeed revenue neutral for

its first five years, but ceased being so in 2013.

That’s when the government hiked corporate tax rates and then started factoring in old pre-existing tax credits to make it look as if the carbon tax were still being offset, as revenue from the tax continued to increase, despite being frozen at $30 per tonne since 2013.The pre-existing tax credits have included the film and TV tax credit and the scientific research and experimental development credit. When they are removed from the calculation, the carbon tax has actually cost British Columbians an additional $377 million over two fiscal years, concludes Charles Lammam, the Fraser Institute’s director of fiscal studies.

GDP Analysis

Source – Stats Canada

The introduction of a federal carbon tax could “shrink” Canada’s GDP by as much as $3 billion in 2018 and lead to a slight depreciation of the Canadian dollar, a new report says.

In a study released Tuesday, the Conference Board of Canada said the tax could cause a broad slowdown in economic activity as “higher energy prices ripple throughout the economy.” Prices for natural gas, gasoline, electricity and other goods will rise, collectively raising costs of goods and services.

Source -http://business.financialpost.com/commodities/energy/ottawas-carbon-tax-plan-to-shrink-economy-by-3-billion-hurt-loonie-in-2018-study

Canada Clean Tech Market

Key Programs• SDTC• Trade/FIPA • Provincial Funds

for Clean Technology

Market Size /Clean Technology• $52B

Market Growth• 10% or about

$4.4B/year• Technology evolving

(storage, micro grids, solar, advance materials, etc)

Downsize Risk• Ability to commercialize• Projects have to be profitable without Government Grants• Access to raw materials• Access to skills / Training• Trade/FIPA Agreements• The requirement for Carbon (mining to installation)

“Analytica Advisors said in its seventh annual report that despite years of publicly funded support for research and development, losses for clean tech companies widened to $3.56 billion in 2015 from $3.18 billion in 2014, and shareholder returns limped in below the Canadian average. Figures for 2016 are not yet available.

https://www.bnn.ca/awash-in-red-ink-canadian-clean-tech-struggling-despite-ottawa-s-green-goals-1.729679

Cleantech companies are losing money

You need substitute material for carbon based material, i.e. coal, metals, plastics, wood, etc.

You cannot transformed an economy overnight

Transforming to carbon-less economy

Clean Tech examples

Refining

Lithium

Vanadium

Rare Metals

Assembling

Fabrication

Assembling

Raw Materials

Lithium

Vanadium

Rare Metals

Aluminum

Nickel

Copper

Environmental Impact of Clean Technology

Source - https://investingnews.com/daily/resource-investing/critical-metals-investing/rare-earth-investing/rare-earth-producing-countries/ or http://www.mining.com/canada-identifies-top-rare-earth-projects-48319/

Rare Metals Proven ReservesRanking Country Reserves

1 China 105,000 (MT)

2 Australia 14,000 (MT)

3 Russia 3,000 (MT)

4 India 1,700 (MT)

5 Brazil 1,100 (MT)

6 Thailand 800 (MT)

7 Vietnam 300 (MT)

Canadian industry want to secure 20% of global supply by 2018. At the moment

China produces some 90% of the world's rare earths – used in a variety of

industries including green technology, defence systems and consumer

electronics – and also consumes the bulk of global production. – Mining News -

2014

Lithium Production

1. Australia - Mine production: 13,400 MT

2. Chile - Mine production: 12,900 MT

3. Argentina - Mine production: 3,800 MT

4. China - Mine production: 2,200 MT

5. Zimbabwe - Mine production: 900 MT

Vanadium - Production

1. China - Mine production - 42,000 MT

2. South Africa - Mine production - 19,000 MT

3. Russia - Mine production - 15,000 MT

4. Brazil – Mine Production – 2,800 MT

Graphene - Production

1. China - Mine production - 780,000 MT

2. India - Mine production -170,000 MT

3. Brazil - Mine production - 80,000 MT

4. Turkey - Mine production - 32,000 MT

5. Canada - Mine production - 32,000 MT

Canada Mining – Clean Technology Metals Canadian industry want to secure 20% of global supply by 2018. At the moment China produces

some 90% of the world's rare earths – used in a variety of industries including green technology, defence systems and consumer electronics – and imposes export quotas. Frontrunners among Canadian juniors racing to build the country's first rare earth mine include Rare Element Resources (TSE:RES), Avalon Rare Metals (TSE:AVL) and Quest Rare Minerals (TSX:QRM) while Saskatoon-based Great Western Minerals (CVE:GWG) is recommissioning the Steenkampskraal mine in South Africa with Chinese backing.

Canada hosts vanadium deposits in locations such as Manitoba, Ontario and Quebec. Total reserves are unknown at this time, but plenty of companies are working in the country to develop projects

Lithium projects – Manitoba, NWT, Ontario and Quebec

Graphite – New Brunswick

Venture Capital Issues

United States Subsidies for Clean Technology

https://qz.com/794542/air-pollution-map-by-country-fine-particulate-matter/

Air Quality

How many of these countries are OPEC?

How many of these countries are using coal as their chief source power?

How many of these countries are emerging economies?

Source - http://www.canadianmanufacturing.com/environment-and-safety/manitoba-saskatchewan-excluded-ottawas-2b-carbon-fund-195527/

Canada and Cleantech Funds

http://business.financialpost.com/opinion/canada-may-already-be-carbon-neutral-so-why-are-we-keeping-it-a-secret

Canada and Carbon Neutral

https://www.youtube.com/watch?v=nCyPcGo-Gro

Carbon Tax / Costs

Source - http://www.cbc.ca/news/canada/saskatoon/australian-carbon-tax-opponent-chris-berg-saskatchewan-1.3884765

Australia and Carbon Tax

Berg says the Australian carbon tax, which was introduced in 2012 and repealed in 2014, failed

because it raised taxes on household consumables and energy prices.

His organization was a strong opponent of the Australian carbon tax, having pushed heavily for

it to be repealed.

Speaking to CBC Radio's The Afternoon Edition, he said a carbon tax in an economy the size of

Australia's would not have done anything to stop the progress of global warming.

"We need to do a large, international effort if we're going to make any change in that area," said

Berg.

"When we introduced it, the rest of the world didn't follow, it was a failed policy."

Taxation and Growing Economy

“Where has massive increase in taxation grown an economy in the world”

Source - https://www.youtube.com/watch?v=5Smhn1gL6Xg&t=62s

Sensible Environmentalist / CO2

Source - http://www.bnn.ca/awash-in-red-ink-canadian-clean-tech-struggling-despite-ottawa-s-green-goals-1.729679

BNN / Cleantech

Canadian clean technology companies are

struggling to stay afloat and falling behind

global peers even as Ottawa promises to boost

the sector and move the country toward a low

carbon future, a report released on Thursday

showed.

Analytica Advisors said in its seventh annual

report that despite years of publicly funded

support for research and development, losses

for clean tech companies widened to $3.56

billion in 2015 from $3.18 billion in 2014, and

shareholder returns limped in below the

Canadian average. Figures for 2016 are not yet

available.

Source - https://www.canadianmanufacturing.com/environment-and-safety/saskatchewan-announces-climate-change-strategy-no-carbon-tax-205234/

Provinces / Carbon Taxation - Saskatchewan

The Saskatchewan government

has introduced a climate-change

strategy that inches toward a

price on carbon emissions, but

leaves large parts of its economy

untouched.

And it doesn’t include a carbon

tax, which Environment Minister

Dustin Duncan was happy to

point out.

Federal Environment Minister Catherine McKenna said the

plan is a good step toward carbon pricing.

“Saskatchewan’s new plan proposes a performance

standard for heavy industry that includes a carbon market.

Momentum for carbon pricing is growing.”

But she said it will have to be wider to satisfy Ottawa.

“Based on what’s in today’s plan, Saskatchewan’s price

likely wouldn’t hit our standard, because it applies only to

heavy industry instead of being economy-wide.”

2015 Election PromiseJustin Trudeau also pledged to hold annual first ministers' meetings. The last such meeting was in early 2009, when the prime minister and premiers gathered to discuss the economy.Source: http://www.cbc.ca/news/politics/canada-election-2015-learned-this-week-aug22-1.3200542 - Results -Ottawa is dictating Carbon Pricing to the Provinces

Minister McKennahttp://torontosun.com/news/national/goldstein-trudeau-will-fall-66-mt-short-of-2030-greenhouse-

reduction-targets

Here are things to consider:

1. Plant Absorption - https://theconversation.com/plants-absorb-more-co2-than-we-thought-but-

32945

2. Some trees absorb CO2 more than other trees https://www.thoughtco.com/which-trees-offset-

global-warming-1204209

3. Poor Forest Management - http://dailysignal.com/2017/10/13/environmentalist-policies-

exacerbating-wildfires-time-rethink-forest-management/

4. Australia talk about coral including debunking Suzuki on the coral reefs -

https://www.youtube.com/watch?v=C35pasCr6KI

5. Environmental Policies/Air quality - https://qz.com/794542/air-pollution-map-by-country-fine-

particulate-matter/

6. Environmental Policies/Water Quality – How many these countries get foreign aid -

https://www.usnews.com/news/best-countries/slideshows/10-countries-with-the-worst-water-

supply

7. Environmental Policies/Land Management - https://blogs.scientificamerican.com/guest-

blog/which-countries-are-the-best-and-worst-stewards-of-the-planet/ How many of these

countries get foreign aid

8. Carbon tax punishes people and does little to curb emissions -

http://www.cbc.ca/news/canada/saskatoon/australian-carbon-tax-opponent-chris-berg-

saskatchewan-1.3884765

9. Hurricanes – urban sprawl - https://www.theguardian.com/commentisfree/2017/aug/31/real-

villains-harvey-flood-urban-sprawl

10. Canada and CO2 is not the issue - http://business.financialpost.com/opinion/canada-may-

already-be-carbon-neutral-so-why-are-we-keeping-it-a-secret

It takes time to move ideas from incubation to market (Testing)

Canada is small market as such raising capital is very difficult compare to countries like United States that have a large venture capital market

Cleantech requires extraction, refining, fabrication, delivery and installation

Cleantech is not truly clean tech until it is installed. You can not harness wind, solar or methane without turbines, panels, storage and delivery systems

Businesses need to be viable without subsidies. In the 1990s there was a big push for ethanol. The problem is once you removed the subsidies ethanol as not profitable

Climate change is overrated. You can put 30+ climate change specialist in a room and get 30+ different answers. More information can be found by searching the internet or google. Here is one example - https://www.youtube.com/watch?v=5Smhn1gL6Xg&t=595s

CO2 is foundation for life on this planet. Plants need CO2 for their development cycle.

Summary / Cleantech