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Energy

Supreme Court ruling on federal environmental law a step toward brighter industrial future

Published

1 year ago

5 minute read

From the MacDonald Laurier Institute

By Heather Exner-Pirot

Now we need to build: to meet net-zero goals, to supply our allies with energy and critical minerals, to compete with the U.S. Inflation Reduction Act, to bolster our anemic economy – take your pick

In a strong rebuke to the federal government, the Supreme Court on Friday issued its long-awaited opinion on the constitutionality of the Impact Assessment Act (IAA). In a 5 to 2 decision, the majority found that the Liberal government’s regulations for major projects such as oil and gas operations and mines violate provincial jurisdiction.

The decision will have lasting impact. It is a piece of cautiously optimistic news for the industry, paving the way for realizing its greatest desire: to move away from concurrent and competing federal and provincial processes for project approval, toward a more efficient principle of one project, one assessment.

There will be immediate impacts, too. It’s hard to see how the Liberal government’s proposed clean electricity regulations and oil and gas emissions cap, which is contentious on similar grounds, can now be seen as constitutional.

In the wake of the decision on Friday, the federal government promised to amend the act. The decision provides good reason for the government to start looking at its other environmental regulations through the same lens.

The IAA, which became law in 2019 after contentious Senate hearings and months of public protests, is unpopular for wholly legitimate reasons. It duplicated and often competed with provincial processes for approving natural resources projects, adding time, money, confusion and risk for companies.

It also politicized the regulatory process, allowing the federal minister of environment and climate change to designate just about any resource project in the country for assessment, and then effectively veto it too. The results, if unchecked: a quiet quitting of investors and proponents who then move their capital to greener, more predictable pastures.

Even before the Supreme Court opinion on the IAA came out, the Liberals had promised to reform it. Friday’s decision gives the government additional impetus to do it properly.

The opportunity in those forthcoming amendments is not for the federal government to take bad, unconstitutional regulatory legislation and turn it into bad, constitutional legislation. The times demand much more. The act reflected an outdated way of thinking that saw the environment and Indigenous peoples as inherently needing to be protected from the provinces and the resource sector. But the world has changed.

Now we need to build: to meet net-zero goals, to supply our allies with energy and critical minerals, to compete with the U.S. Inflation Reduction Act, to bolster our anemic economy – take your pick. Where we once applied sticks to major energy and resource projects, we now need to offer carrots. This needs to be reflected in the amendments to the IAA.

In the Liberal government’s news conference responding to the opinion, Energy and Natural Resources Minister Jonathan Wilkinson expressed hope that this would be the last time the federal and provincial governments settled their differences in court, saying “Canada works best when Canadians work together.”

Let’s all hope that happens.

A large and critical part of Canada’s economy has found itself in the crosshairs of jurisdictional infighting. It has created polarization and uncertainty, and investors and proponents of projects abhor it. Our country needs and deserves a functional regulatory process – one that doesn’t just prevent bad projects, but advances good ones, too. The Supreme Court’s decision is an opening to create one.

Heather Exner-Pirot is director of energy, natural resources and environment at the Macdonald-Laurier Institute.

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Ottawa’s proposed emission cap lacks any solid scientific or economic rationale

Energy

Ottawa’s proposed emission cap lacks any solid scientific or economic rationale

Published on November 17, 2024

By

From the Fraser Institute

By Jock Finlayson and Elmira Aliakbari

Forcing down Canadian oil and gas emissions within a short time span (five to seven years) is sure to exact a heavy economic price, especially when Canada is projected to experience a long period of weak growth in inflation-adjusted incomes and GDP per person.

After two years of deliberations, the Trudeau government (specifically, the Environment and Climate Change Canada department) has unveiled the final version of Ottawa’s plan to slash greenhouse gas emissions (GHGs) from the oil and gas sector.

The draft regulations, which still must pass the House and Senate to become law, stipulate that oil and gas producers must reduce emissions by 35 per cent from 2019 levels by between 2030 and 2032. They also would establish a “cap and trade” regulatory regime for the sector. Under this system, each oil and gas facility is allocated a set number of allowances, with each allowance permitting a specific amount of annual carbon emissions. These allowances will decrease over time in line with the government’s emission targets.

If oil and gas producers exceed their allowances, they can purchase additional ones from other companies with allowances to spare. Alternatively, they could contribute to a “decarbonization” fund or, in certain cases, use “offset credits” to cover a small portion of their emissions. While cutting production is not required, lower oil and gas production volumes will be an indirect outcome if the cost of purchasing allowances or other compliance options becomes too high, making it more economical for companies to reduce production to stay within their emissions limits.

The oil and gas industry accounts for almost 31 per cent of Canada’s GHG emissions, while transportation and buildings contribute 22 and 13 per cent, respectively. However, the proposed cap applies exclusively to the oil and gas sector, exempting the remaining 69 per cent of the country’s GHG emissions. Targeting a single industry in this way is at odds with the policy approach recommended by economists including those who favour strong action to address climate change.

The oil and gas cap also undermines the Trudeau government’s repeated claims that carbon-pricing is the main lever policymakers are using to reduce GHG emissions. In its 2023 budget (page 71), the government said “Canada has taken a market-driven approach to emissions reduction. Our world-leading carbon pollution pricing system… is highly effective because it provides a clear economic signal to businesses and allows them the flexibility to find the most cost-effective way to lower their emissions.”

This assertion is vitiated by the expanding array of other measures Ottawa has adopted to reduce emissions—hefty incentives and subsidies, product standards, new regulations and mandates, toughened energy efficiency requirements, and (in the case of oil and gas) limits on emissions. Most of these non-market measures come with a significantly higher “marginal abatement cost”—that is, the additional cost to the economy of reducing emissions by one tonne—compared to the carbon price legislated by the Trudeau government.

And there are other serious problems with the proposed oil and gas emissions gap. For one, emissions have the same impact on the climate regardless of the source; there’s no compelling reason to target a single sector. As a group of Canadian economists wrote back in 2023, climate policies targeting specific industries (or regions) are likely to reduce emissions at a much higher overall cost per tonne of avoided emissions.

Second, forcing down Canadian oil and gas emissions within a short time span (five to seven years) is sure to exact a heavy economic price, especially when Canada is projected to experience a long period of weak growth in inflation-adjusted incomes and GDP per person, according to the OECD and other forecasting agencies. The cap stacks an extra regulatory cost on top of the existing carbon price charged to oil and gas producers. The cap also promises to foster complicated interactions with provincial regulatory and carbon-pricing regimes that apply to the oil and gas sector, notably Alberta’s industrial carbon-pricing system.

The Conference Board of Canada think-tank, the consulting firm Deloitte, and a study published by our organization (the Fraser Institute) have estimated the aggregate cost of the federal government’s emissions cap. All these projections reasonably assume that Canadian oil and gas producers will scale back production to meet the cap. Such production cuts will translate into many tens of billions of lost economic output, fewer high-paying jobs across the energy supply chain and in the broader Canadian economy, and a significant drop in government revenues.

Finally, it’s striking that the Trudeau government’s oil and gas emissions cap takes direct aim at what ranks as Canada’s number one export industry, which provides up to one-quarter of the country’s total exports. We can’t think of another advanced economy that has taken such a punitive stance toward its leading export sector.

In short, the Trudeau government’s proposed cap on GHG emissions from the oil and gas industry lacks any solid scientific, economic or policy rationale. And it will add yet more costs and complexity to Canada’s already shambolic, high-cost and ever-growing suite of climate policies. The cap should be scrapped, forthwith.

Authors:

Jock Finlayson
Senior Fellow, Fraser Institute
Elmira Aliakbari
Director, Natural Resource Studies, Fraser Institute
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Economy

COP 29 leaders demand over a $1 trillion a year in climate reparations from ‘wealthy’ nations. They don’t deserve a nickel.

Published on November 16, 2024

By

From Energy Talking Points

The injustice of climate reparations

COP 29 is calling for over $1 trillion in annual climate reparations

  • A major theme of COP 29 is that the world should set a “New Collective Quantified Goal” wherein successful nations pay poor nations over $1 trillion a year to 1) make up for climate-related harm and 2) build them new “green energy” economies. In other words, climate reparations.¹
  • What would $1 trillion a year in climate reparations mean for you and your family?Assuming the money was paid equally by households considered high income (>$50 per day), your household would have to pay more than $5,000 a year in climate reparations taxes!²
  • Climate reparations are based on two false assumptions:1. Free, wealthy countries, through their fossil fuel use, have made the world worse for poor countries.

    2. The poor world’s main problem is dealing with climate change, which wealth transfers will help them with.

But free, fossil-fueled countries have made life better for poor countries

  • Free, wealthy countries, through their fossil fuel use, have not made the world worse for poor countries—they have made it far, far better.Observe what has happened to global life expectancies and income as fossil fuel use has risen. Life has gotten much better for everyone.³
  • The wealthy world’s fossil fuel use has improved life worldwide because by using fossil fuel energy to be incredibly productive, we have 1) made all kinds of goods cheaper and 2) been able to engage in life-saving aid, particularly in the realms of food, medicine, and sanitation.
  • Without the historic use of fossil fuels by the wealthy world, there would be no super-productive agriculture to feed 8 billion humans, no satellite-based weather warning systems, etc. Most of the individuals in poor countries would not even be alive today.

Free, fossil-fueled countries have made the poor safer from climate

  • The wealthy world’s fossil fuel use has been particularly beneficial in the realm of climate.Over the last 100 years, the death rate from climate-related disasters plummeted by 98% globally.

    A big reason is millions of lives saved from drought via fossil-fueled crop transport.⁴
  • The “climate reparations” movement ignores the fact that the wealthy world’s fossil fuel use has made life better, including safer from climate, in the poor world.This allows it to pretend that the poor world’s main problem is dealing with rising CO2 levels.

The poor world’s problem is poverty, not rising CO2 levels

  • The poor world’s main problem is not rising CO2 levels, it is poverty—which is caused by lack of freedom, including the crucial freedom to use fossil fuels.Poverty makes everything worse, including the world’s massive natural climate danger and any danger from more CO2.
  • While it’s not true that the wealthy world has increased climate danger in the poor world—we have reduced it—it is true that the poor world is more endangered by climate than the wealthy world is.The solution is for the poor to get rich. Which requires freedom and fossil fuels.⁵

Escaping poverty requires freedom and fossil fuels

  • Every nation that has risen out of poverty has done so via pro-freedom policies—specifically, economic freedom. 

    That’s how resource-poor places like Singapore and Taiwan became prosperous. Resource-rich places like Congo have struggled due to lack of economic freedom.

  • Even China, which is unfree in many ways (including insufficient protections against pollution) dramatically increased its standard of living via economic freedom—particularly in the realm of industrial development where it is now in many ways much freer than the US and Europe.
  • A crucial freedom involved in rising prosperity has been the freedom to use fossil fuels.Fossil fuels are a uniquely cost-effective source of energy, providing energy that’s low-cost, reliable, versatile, and scalable to billions of people in thousands of places.⁶
  • Time and again nations have increased their prosperity, including their safety from climate, via economic freedom and fossil fuels.Observe the 7X increase in fossil fuel use in China and India over the past 4 decades, which enabled them to industrialize and prosper.⁷
  • For the world’s poorest people to be more prosperous and safer from climate, they need more freedom and more fossil fuels.The “climate reparations” movement seeks to deny them both.
  • The wealthy world should communicate to the poor world that economic freedom is the path to prosperity, and encourage the poor world to reform its cultural and political institutions to embrace economic freedom—including fossil fuel freedom.Our leaders are doing the opposite.

Climate reparations pay off dictators to take away fossil fuel freedom

  • Instead of promoting economic freedom, including fossil fuel freedom, wealthy climate reparations advocates like Antonio Guterres are offering to entrench anti-freedom regimes by paying off their dictators and bureaucrats to eliminate fossil fuel freedom.This is disgusting.⁸
  • The biggest victim of “climate reparations” will be the world’s poorest countries, whose dictators will be paid off to prevent the fossil fuel freedom that has allowed not just the US and Europe but also China and India to dramatically increase their prosperity.
  • The biggest beneficiary of “climate reparations” will be China, which is already emitting more CO2 than the US and Europe combined. (Though less per capita.)While we flagellate and cripple ourselves, China will use fossil fuels in its quest to become the world’s superpower.⁹
  • The second biggest beneficiary of “climate reparations” will be corrupt do-gooders who get to add anti-fossil-fuel strings to “reparations” dollars and dictate how it’s spent—which will surely include lots of dollars for unreliable solar panels and wind turbines made in China.

Leaders must reject reparations and champion fossil fuel freedom

  • We need leaders in the US and Europe who proudly:1. Champion the free world’s use of fossil fuels as an enormous good for the world, including its climate safety.

    2. Encourage the poor world to embrace economic freedom and fossil fuels.

    Tell your Representative to do both.

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1  Scientific American – COP27 Summit Yields ‘Historic Win’ for Climate Reparations but Falls Short on Emissions Reductions
2  Global population was about 8.02 billion in 2023.

World Bank data

About 7% of world population are considered high income, which translates into about 562 million individuals. Considering 3 people per average household in high income households, this translates into about 187 million households.
Pew Research – Are you in the global middle class? Find out with our income calculator

$1 trillion per annum paid by 187 million households means the average household would pay about $5,300 per year.

3  Maddison Database 2010 at the Groningen Growth and Development Centre, Faculty of Economics and Business at University of Groningen
4  UC San Diego – The Keeling Curve

For every million people on earth, annual deaths from climate-related causes (extreme temperature, drought, flood, storms, wildfires) declined 98%–from an average of 247 per year during the 1920s to 2.5 in per year during the 2010s.

Data on disaster deaths come from EM-DAT, CRED / UCLouvain, Brussels, Belgium – www.emdat.be (D. Guha-Sapir).

Population estimates for the 1920s from the Maddison Database 2010, the Groningen Growth and Development Centre, Faculty of Economics and Business at University of Groningen. For years not shown, population is assumed to have grown at a steady rate.

Population estimates for the 2010s come from World Bank Data.

5  UC San Diego – The Keeling Curve

Data on disaster deaths come from EM-DAT, CRED / UCLouvain, Brussels, Belgium – www.emdat.be (D. Guha-Sapir).

Population estimates come from World Bank Data.

6  Our World in Data – Energy Production and Consumption
7  BP – Statistical Review of World Energy
8  UN News – ‘Pay up or humanity will pay the price’, Guterres warns at COP29 climate summit
9  Our World in Data – Annual CO₂ emissions from fossil fuels, by world region
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