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The Guilbeault – Trudeau Fallout: Canada’s Oil and Gas Emissions Cap is Under Fire from Experts and Business Leaders – Resource Works

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Steven Guilbeault, Canada’s environment and climate minister, at the COP28. Photo by AP.

By Resource Works

More News and Views From Resource Works Here

Prime Minister Justin Trudeau and his eco-extremist Minister of the Environment and Climate Change Steven Guilbeault are risking hundreds of billions of dollars of investments in Alberta’s and Canada’s economies and core social programs

The federal government’s proposed cap on emissions from oil and gas has now been outlined in a draft.

While Ottawa insists that it is not a cap on the production of oil and gas, experts fail to see how the emissions cap is not also a de facto production cap, given the details of the policy.

The industry fears that, in effect, that is just what it is — with negative impacts on western provinces that produce oil and gas for domestic use and for export.

The federal government proposes to limit emissions for oil and gas at 35% to 38% below the 2019 level. At the same time, Ottawa says the new rules would allow production to increase 12% above 2019 levels.

The producers are trying to figure out the ups and downs of the policy, and there is a lot to unpack. The federal draft “framework”  is open for discussion and consultation until February 2024.

The initial reaction from the Canadian Association of Petroleum Producers was that the emissions cap could result in “significant” production cuts, and it called the government’s emissions framework unnecessary. Alberta’s oil and gas sector has been invested in decarbonization efforts and measures to reduce methane emissions, already beating a target of a 45% reduction by 2025.

Alberta Premier Danielle Smith furiously flamed that “This announced de facto production cap on Alberta’s oil and gas sector amounts to an intentional attack by the federal government on the economy of Alberta and the financial well-being of millions of Albertans and Canadians. . . .

“With their pronouncement singling out the oil and gas sector alone for punitive federal treatment, Prime Minister Justin Trudeau and his eco-extremist Minister of the Environment and Climate Change Steven Guilbeault are risking hundreds of billions of dollars of investments in Alberta’s and Canada’s economies and core social programs, are devaluing the retirement investments of millions of Canadians, and are threatening the jobs of hundreds of thousands of Albertans.”

The Business Council of Canada hammered the cap as part of a “full-on charge against the oil and gas sector,” with no other industry so targeted by Ottawa. “It all seems punitive and short-sighted.”

The sectoral specificity is alarmingly pointed.

The Indigenous Resource Network also said it was disappointed by the emissions-cap announcement — and will seek an Indigenous exemption from the cap for Indigenous communities engaged in the oil and gas sector.

And Karen Ogen, CEO of the First Nations LNG Alliance, said from the COP28 climate conference in Dubai that the federal announcement is “disheartening” because of what resource projects mean to Indigenous people. “We’re being shoved aside again.”

The emissions cap follows the unravelling of the federal carbon tax. In the fall of 2023, the Federal Government made a number of exemptions and incentives, including removing the carbon tax from home heating in Atlantic Canada only. As Premiers in the rest of Canada voice their frustration, Saskatchewan even declared it will no longer collect the federal carbon tax at all.

Then the new national chief of the Assembly of First Nations, Cindy Woodhouse, said she ‘absolutely’ supports Ontario chiefs in a push for a review of federal carbon-pricing rules. The Ontario chiefs oppose the tax because they say it is not revenue neutral, especially for those on reserves, and because electric vehicles and heat pumps are neither available nor workable in many First Nations communities.

In the face of crumbling support for its policy agenda, Trevor Tombe of the University of Calgary saw in the new approach a softening of Ottawa’s enthusiasm for carbon taxes.

“I think it’s pretty clear that government is backing away from the carbon tax as a central pillar of their climate policy. And that means if you want to hit your target, you need to adopt other policies.”

Ergo, production (emissions) caps.

Debate continues over whether Canada is overdoing its climate measures, given that it produces only 1.5% of world emissions. And that Canada is the only top ten world oil producer that proposes such an emissions cap. None of the world’s other major oil producers have an emissions cap.

And then there’s the report from Canada’s independent parliamentary budget officer: “Canada’s own emissions are not large enough to materially impact climate change.”

He went on to say: “Consequently, Canada’s primary means of limiting the economic costs of climate change are through participation in a globally coordinated emissions reduction regime.”

LNG, anyone?

Whatever the final version of the regulatory cap looks like, we can expect to lose investment and economic activity, and the producing provinces, companies and their families can expect some pain.

That seems to be a trade-off that, to some extent, the federal government wants to make. But why is it going in this direction?

While some provinces like Quebec or Manitoba have incredible hydroelectric resources, and Ontario is Canada’s nuclear power leader, some provinces, especially in Western Canada, produce and consume oil and natural gas products.

BC produces natural gas in the northeast and is close to exporting LNG overseas. It is already contributing to transporting, refining and exporting oil that is produced elsewhere in the country.

These industries contribute to emissions, they cannot easily be phased out without serious implications for every aspect of how we live our lives. We rely on fossil fuels. So it’s not as simple as saying, “Let’s just get rid of it.”

Policy leaders globally are trying to resolve right now the question of what sacrifices and compromises are we willing to make in order to address climate change in a meaningful way; What is the rate of change and transformation that our economies are willing to accept? And that consumers — and voters — are willing to accept? What can we do without limiting human development in areas of the world where it’s still desperately needed?

We already have Ottawa’s carbon pricing (carbon taxation) scheme. The provinces have been given the opportunity to structure carbon pricing as they see fit, provided that it meets the baseline set by the federal government. Of course, not every province has wanted to do that.

Ottawa is signalling that they don’t think the carbon tax model has been working to meet the emissions (and electoral) targets that they’ve set. So now Ottawa has come up with this emissions backstop, what the feds call a cap-and-trade model for the oil and gas sector.

It’s fair to say that this scheme is a little bit more convoluted. It is going to limit industries. It will add consumer costs. It will cause even more confusion around energy. And we can certainly expect it to be challenged in court.

We’ve recently seen a number of federal environmental policies get kiboshed in courts on constitutional grounds, and criticized by judges across the country. Provincial governments have a tremendous stake in what goes on with natural resource development in their jurisdictions.

We don’t expect this issue of a federal emissions cap will be easily resolved. Look for it to be a very large part of the discussion around the next federal election.

All in all, there’s a lot of concern that, if the scheme is overly convoluted, industries could start to pull back. That could have a large impact on our ability to not only keep our economy strong and serve the interests of Canadians but also on our ability to invest in technologies that actually reduce emissions, like carbon capture or hydrogen.

Our Resource Works CEO, Stewart Muir, recently returned from the COP28 climate conference in Dubai. Among other things, he raised awareness of Canada’s role as a solutions provider to the world, from coal-displacing LNG to BC’s opportunity to become a major hydrogen energy hub.

We’ve made considerable progress in reducing emissions, especially in oil and gas. We have some of the most stringent regulations, not only on carbon and methane, but more broadly on, social and governance dimensions, how you manage local environmental concerns like water and land conservation, and protecting wildlife.

Canada has made huge progress at every level, and the energy sector is building new partnerships with Indigenous communities to ensure that they’re meaningfully included in land and environmental management and also in economic opportunities, including joint or sole ownership of projects.

We are part of addressing climate change and we are part of meeting the world’s energy needs sustainably, responsibly and reliably.

These are conversations that need to continue, and they need to inform our policy agenda as a country.

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Alberta

Is Canada’s Federation Fair?

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The Audit David Clinton

Contrasting the principle of equalization with the execution

Quebec – as an example – happens to be sitting on its own significant untapped oil and gas reserves. Those potential opportunities include the Utica Shale formation, the Anticosti Island basin, and the Gaspé Peninsula (along with some offshore potential in the Gulf of St. Lawrence).

So Quebec is effectively being paid billions of dollars a year to not exploit their natural resources. That places their ostensibly principled stand against energy resource exploitation in a very different light.

You’ll need to search long and hard to find a Canadian unwilling to help those less fortunate. And, so long as we identify as members of one nation¹, that feeling stretches from coast to coast.

So the basic principle of Canada’s equalization payments – where poorer provinces receive billions of dollars in special federal payments – is easy to understand. But as you can imagine, it’s not easy to apply the principle in a way that’s fair, and the current methodology has arguably lead to a very strange set of incentives.

According to Department of Finance Canada, eligibility for payments is determined based on your province’s fiscal capacity. Fiscal capacity is a measure of the taxes (income, business, property, and consumption) that a province could raise (based on national average rates) along with revenues from natural resources. The idea, I suppose, is that you’re creating a realistic proxy for a province’s higher personal earnings and consumption and, with greater natural resources revenues, a reduced need to increase income tax rates.

But the devil is in the details, and I think there are some questions worth asking:

  • Whichever way you measure fiscal capacity there’ll be both winners and losers, so who gets to decide?
  • Should a province that effectively funds more than its “share” get proportionately greater representation for national policy² – or at least not see its policy preferences consistently overruled by its beneficiary provinces?

The problem, of course, is that the decisions that defined equalization were – because of long-standing political conditions – dominated by the region that ended up receiving the most. Had the formula been the best one possible, there would have been little room to complain. But was it?

For example, attaching so much weight to natural resource revenues is just one of many possible approaches – and far from the most obvious. Consider how the profits from natural resources already mostly show up in higher income and corporate tax revenues (including income tax paid by provincial government workers employed by energy-related ministries)?

And who said that such calculations had to be population-based, which clearly benefits Quebec (nine million residents vs around $5 billion in resource income) over Newfoundland (545,000 people vs $1.6 billion) or Alberta (4.2 million people vs $19 billion). While Alberta’s average market income is 20 percent or so higher than Quebec’s, Quebec’s is quite a bit higher than Newfoundland’s. So why should Newfoundland receive only minimal equalization payments?

To illustrate all that, here’s the most recent payment breakdown when measured per-capita:

Equalization 2025-26 – Government of Canada

For clarification, the latest per-capita payments to poorer provinces ranged from $3,936 to PEI, $1,553 to Quebec, and $36 to Ontario. Only Saskatchewan, Alberta, and BC received nothing.

And here’s how the total equalization payments (in millions of dollars) have played out over the past decade:

Is energy wealth the right differentiating factor because it’s there through simple dumb luck, morally compelling the fortunate provinces to share their fortune? That would be a really difficult argument to make. For one thing because Quebec – as an example – happens to be sitting on its own significant untapped oil and gas reserves. Those potential opportunities include the Utica Shale formation, the Anticosti Island basin, and the Gaspé Peninsula (along with some offshore potential in the Gulf of St. Lawrence).

So Quebec is effectively being paid billions of dollars a year to not exploit their natural resources. That places their ostensibly principled stand against energy resource exploitation in a very different light. Perhaps that stand is correct or perhaps it isn’t. But it’s a stand they probably couldn’t have afforded to take had the equalization calculation been different.

Of course, no formula could possibly please everyone, but punishing the losers with ongoing attacks on the very source of their contributions is guaranteed to inspire resentment. And that could lead to very dark places.

Note: I know this post sounds like it came from a grumpy Albertan. But I assure you that I’ve never even visited the province, instead spending most of my life in Ontario.

1

Which has admittedly been challenging since the former primer minister infamously described us as a post-national state without an identity.

2

This isn’t nearly as crazy as it sounds. After all, there are already formal mechanisms through which Indigenous communities get more than a one-person-one-vote voice.

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Carbon Tax

The book the carbon taxers don’t want you to read

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By Franco Terrazzano

Prime Minister Mark Carney wrote a 500-page book praising carbon taxes.

Well, I just wrote a book smashing through the government’s carbon tax propaganda.

It tells the inside story of the fight against the carbon tax. And it’s THE book the carbon taxers don’t want you to read.

My book is called Axing the Tax: The Rise and Fall of Canada’s Carbon Tax.


 
Axing the Tax: The Rise and Fall of Canada’s Carbon Tax 

Every now and then, the underdog wins one.

And it looks like that’s happening in the fight against the carbon tax.

It’s not over yet, but support for the carbon tax is crumbling. Some politicians vow to scrap it. Others hide behind vague plans to repackage it. But virtually everyone recognizes support for the current carbon tax has collapsed.

It wasn’t always this way.

For about a decade now, powerful politicians, government bureaucrats, academics, media elites and even big business have been pushing carbon taxes on the people.

But most of the time, politicians never asked the people if they supported carbon taxes. In other words, carbon taxes, and the resulting higher gas prices and heating bills, were forced on us.

We were told it was good for us. We were told carbon taxes were inevitable. We were told politicians couldn’t win elections without carbon taxes, even though the politicians that imposed them didn’t openly run on them. We were told that we needed to pay carbon taxes if we wanted to leave a healthy environment for our kids and grandkids. We were told we needed to pay carbon taxes if we wanted to be respected in the international community.

In this decade-long fight, it would have been understandable if the people had given up and given in to these claims. It would have been easier to accept what the elites wanted and just pay the damn bill. But against all odds, ordinary Canadians didn’t give up.

Canadians knew you could care about the environment and oppose carbon taxes. Canadians saw what they were paying at the gas station and on their heating bills, and they knew they were worse off, regardless of how many politicians, bureaucrats, journalists and academics tried to convince them otherwise. Canadians didn’t need advanced degrees in economics, climate science or politics to understand they were being sold a false bill of goods.

Making it more expensive for a mom in Port Hope to get to work, or grandparents in Toronto to pay their heating bill, or a student in Coquitlam to afford food won’t reduce emissions in China, Russia, India or the United States. It just leaves these Canadians, and many like them, with less money to afford everything else.

Ordinary Canadians understood carbon taxes amount to little more than a way for governments to take more money from us and dictate how we should live our lives. Ordinary Canadians also saw through the unfairness of the carbon tax.

Many of the elites pushing the carbon tax—the media, politicians, taxpayer-funded professors, laptop activists and corporate lobbyists—were well off and wouldn’t feel the brunt of carbon taxes. After all, living in a downtown condo and clamouring for higher carbon taxes doesn’t require much gas, diesel or propane.

But running a business, working in a shop, getting kids to soccer and growing food on the farm does. These are the Canadians the political class forgot about when pushing carbon taxes. These are the Canadians who never gave up. These are the Canadians who took time out of their busy lives to sign petitions, organize and attend rallies, share posts on social media, email politicians and hand out bumper stickers.

Because of these Canadians, the carbon tax could soon be swept onto the ash heap of history. I wrote this book for two reasons.

The first is because these ordinary Canadians deserve it. They worked really hard for a really long time against the odds. When all the power brokers in government told them, “Do what we say—or pay,” they didn’t give up. They deserve to know the time and effort they spent fighting the carbon tax mattered. They deserve all the credit.

Thank you for everything you did.

The second reason I wrote this book is so people know the real story of the carbon tax. The carbon tax was bad from the start and we fought it from the start. By reading this book, you will get the real story about the carbon tax, a story you won’t find anywhere else.

This book is important because if the federal Liberals’ carbon tax is killed, the carbon taxers will try to lay blame for their defeat on Prime Minister Justin Trudeau. They will try to say that carbon taxes are a good idea, but Trudeau bungled the policy or wasn’t a good enough salesman. They will try to revive the carbon tax and once again make you pay more for gas, groceries, and home heating.

Just like with any failed five-year plan, there is a lingering whiff among the laptop class and the taxpayer-funded desk rulers that this was all a communication problem, that the ideal carbon tax hasn’t been tried yet. I can smell it outside my office building in Ottawa, where I write these words. We can’t let those embers smoulder and start a fire again.

This book shows why the carbon tax is and always will be bad policy for ordinary Canadians.

Franco’s note: You can pre-order a copy of my new book, Axing the Tax: The Rise and Fall of Canada’s Carbon Tax, here: https://www.amazon.ca/Axing-Tax-Rise-Canadas-Carbon

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