Capping energy industry emissions is all pain, no gain

Capping energy industry emissions is all pain, no gain
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Applies only to oil and gas sector. Quebec aircraft manufacturers, Ontario auto plants get a free ride

It’s hard to wrap one’s head around what $45 billion represents. It’s such a huge number that, for most of us, it essentially becomes meaningless.

And yet, it’s about as much as our federal government spends in a month. It represents nearly $1,200 for every man, woman, and child living in the country. And it’s also the annual loss in economic activity Canada can expect if Environment Minister Steven Guilbeault goes forward with his plan to cap oil sands emissions.

Simply put, what Ottawa is proposing is to put what amounts to a hard limit on greenhouse gas emissions, specifically from oil and gas producers. Respecting that limit would require our country’s energy industry to lower its emissions by about half by 2030.

This federal requirement would only apply to Canada’s oil and gas sector. Aircraft manufacturers in Quebec, say, or auto plants in Ontario, would be free to increase emissions however they pleased. But it’s not like one tonne of greenhouse gases emitted by these is any better or worse than one emitted by energy producers.

The good news is that Canada’s emissions per barrel have been going down for a while. Since 1990, greenhouse gas emissions per barrel of oil extracted from the oil sands have fallen 33 per cent.

The bad news is that energy producers will probably not achieve a larger reduction in seven years than they did over three decades. More likely, they’ll keep dropping at the same rate as in recent years, which would mean a 12 per cent reduction in per-barrel emissions by 2030.

That is no mean feat – it should even be celebrated – but it would still leave the industry far short of nearly halving its emissions, as this federal measure would require. Accounting for existing production and demand forecasts, this would mean a drop in annual production equivalent to at least $45 billion.

Of course, if an industry loses $45 billion in revenue, that means thousands of people out of work. It also means a significant drop in government resource royalty and tax revenue.

At a time when our federal government is grappling with a large $36.4-billion deficit, and when an aging population is helping to bring our provincial health-care systems to their knees, our governments can ill-afford to kill the golden goose like this.

Some might argue that it’s all worth it to prevent climate change. Unfortunately, it’s unlikely it’ll even make a dent.

That’s because our oil industry is primarily export-oriented. Roughly 80 per cent of the oil we produce gets shipped abroad by rail, pipeline, and boat.

In a global market such as this one, a permanent and foreseeable drop in domestic production will only lead to production elsewhere. Russia, Iran, and Venezuela would be more than happy to take their share of that $45 billion we’d be giving up.

In addition to these countries’ abysmal human rights records, their lack of regulatory oversight compared to Canada’s strict environmental norms means we might actually end up exporting production to a far more polluting locale.

That’s ultimately what’s so frustrating about Ottawa’s oil and gas emissions cap proposal. It amounts to nothing more than political greenwashing, where we get to feel like we did something, but we really just paid through the nose for something with little to no positive effect.

Put simply, an emissions cap specific to oil and gas producers would be all pain, no gain for Canadians.

By Olivier Rancourt

Olivier Rancourt is an Economist at the Montreal Economic Institute.

Courtesy of Troy Media

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