Economy
Ottawa’s cap-and-trade plan long on costs, light on environmental benefits
From the Fraser Institute
” the Trudeau government’s new plan would reduce an already unmeasurable climate benefit to one even less measurable “
On Thursday, the Trudeau government unveiled its plan to cap greenhouse gas emissions from Canada’s oil and gas sector. The plan calls for a “cap-and-trade” system rather than a mandatory hard cap on emissions.
A previous plan would have required the oil and gas sector to reduce emissions by 42 per cent (from 2019 levels) by 2030. The new plan calls for a 35 per cent to 38 per cent cut (again, compared to 2019 levels by 2030). So the government has somewhat softened the target. However, the slight change is unlikely to improve the cost/benefit analysis for the sector or affected provinces.
As noted in a study published earlier this year, the Trudeau government’s previous plan would have resulted in at least $45 billion in revenue losses for the oil and gas sector in 2030 alone, which would imply a significant drop resource royalties and tax revenue for governments. And costs would ripple farther out from the oil and gas sector, into the plastics and petrochemical sectors, imposing more costs and threatening the employment of many Canadian workers in those sectors.
Crucially, according to the study, this economic gain would come with little or no environmental benefit. While the reductions would be large when only considering Canada’s oil and gas sector, the impact on climate change, which is a matter of global GHG concentrations, would be virtually nonexistent. The government’s previous plan called for Canada to reduce GHG emissions by 187 megatonnes in 2030, which would equate to four-tenths of one per cent of global emissions and likely have no impact on the trajectory of the climate in any detectable manner and hence offer equally undetectable environmental, health and safety benefits. In other words, the Trudeau government’s new plan would reduce an already unmeasurable climate benefit to one even less measurable.
And now, there are serious questions if the new plan will deliver even the miniscule climate benefit mentioned above. Under a cap-and-trade scheme, companies can trade in emission offsets if they’re unable to reduce emissions via their own technological processes, and to avoid cutting oil and gas production. But emission offset schemes are deeply dodgy.
As noted in a Guardian investigation of Verra, the world’s leading offset market—basically, organizations that reduce carbon in the atmosphere by tree-planting and other initiatives—more than 90 per cent of Verra’s rainforest offset credits (among the most commonly used by companies) are likely “phantom credits” and do not represent genuine carbon reductions. And as reported in the ultra-green Grist, rainforest credits are not the only bogus game in town. “In reality… the market for these offsets is ‘riddled with fraud,’ with offset projects too often failing to deliver their promised emission reductions.”
Canada’s domestic carbon offset market may be more robust than in other countries, but there’s no guarantee. If a significant share of Canada’s offsets prove to be as bogus as the international norm, GHG reductions from the oil and gas sector might be smaller still.
The Trudeau government’s new GHG cap on the oil and gas sector is a moderate improvement over the previous plan. The cap is a bit less stringent, and therefore might be easier to attain. And the use of cap-and-trade rather than a hard cap will give the oil and gas industry more flexibility, and more importantly, allow it to avoid curtailing production to satisfy the cap. But the plan still fails a critical cost/benefit analysis. It remains quite high in potential costs for Canada’s oil and gas sector, particularly in provinces which produce the most oil and gas, yet will deliver environmental benefits that are too small to measure.
Author:
From Hindsight
There is a housing crisis, cost-of-living crisis, and now even an immigration crisis. What’s happening to Canada?
From the Brownstone Institute
This lost output is made of jobs and businesses that were never started. Or were stunted by strangling regulations — mom and pops chased into bankruptcy as collateral damage to new regulations — say, a diner forced to spend $30,000 on a low-energy exhaust fan.
An Auburn University study says every single regulator destroys fully 138 private sector jobs every year you keep him on the job.
With nearly 300,000 federal regulators, the shock is that we still have any jobs at all.
The Two Scariest Words in the English Language
A lot of the excitement around the Department of Government Efficiency — DOGE — focuses on the dollars saved. But more important is all the things the federal government destroys with those dollars.
Specifically, the millions of jobs destroyed by the two scariest words in the English language: federal regulators.
A few weeks ago I mentioned how DOGE under Elon and Vivek is taking aim at the regulatory mothership that strangles the American economy and fuels the totalitarian administrative state — you may remember it from Covid.
A mother ship that is oddly enough unconstitutional according to a pair of recent Supreme Court decisions — Loper Bright Enterprises v Raimondo and West Virginia v EPA.
I asserted this could unleash the economy like nothing we’ve seen in the past century.
And the reason is because it’s hard to overstate just how destructive regulations are.
Every Regulator Destroys 138 Jobs
One 2017 study by the Phoenix Center and Auburn University found that every single full-time regulator destroys 138 jobs.
GDP-adjusted to today, that translates to $16.5 million of economic output. For a hundred-thousand dollar bureaucrat.
This lost output is made of jobs and businesses that were never started. Or were stunted by strangling regulations — which are generally bought by big corporations specifically to strangle small competitors.
Along with mom and pops chased into bankruptcy as collateral damage to new regulations — say, a diner forced to spend $30,000 on a low-energy exhaust fan.
So it’s not the bureaucrat’s hundred thousand salary that matters. It’s the 138 jobs he takes out. Every single year you keep him around.
In fact, you could fire him, keep paying him for life, and still put a hundred families in the middle class.
In recent videos I’ve mentioned research saying one dollar in taxes destroys 3 dollars in GDP. A regulator blows that out of the water — each dollar in regulator salary destory 112 dollars in output.
Given there’s roughly 288,000 full-time federal employees involved in regulatory activities, that implies an annual cost of regulation of around $5 trillion. One-fifth of our entire economy.
This means DOGE slashing tens of thousands of regulations could spark Morning in America even if we keep every last one of them on the payroll.
The Top 3 Regulatory Offenders
The worst 3 regulatory offenders are the EPA, which prey especially on small businesses least able to afford their never-ending mandates.
Second is securities mandates — namely Dodd-Frank and Sarbanes-Oxley — that have all but closed public markets to start-ups and shelter banks and insurers from competition.
And labor regulations — namely FLRA, NLRB, an alphabet soup including Obamacare mandates and occupational licensing. There are brutal for small businesses that might take a gamble on marginal workers but are locked in.
And they raise the cost of hiring to the point that companies downsize or move to China to survive.
Of course, these are just the start. The regulatory code has grown like a monster for a hundred years in literally every domain you can imagine, from braiding hair to collecting rainwater on your property to giving health advice — which is illegal unless you’re a doctor.
And, my personal favorite, the regulatory mandate to literally add poison — ethanol — to any alcohol that’s not taxed, including mouthwash. In case you thought the federal government would never poison you on purpose.
What’s Next
Deregulation is central to Trumponomics — low inflation and fast growth.
Because the best way to do both is to reduce the federal burden — the spending, sure, but above all the forest of regulations strangling our economy. Even if DOGE doesn’t manage to save a penny, gutting the regulatory state will pay us back 138-fold.
Republished from the author’s Substack
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