A carbon tax by any other name, would smell as rank…

As Alberta worries about Obama’s oil sands tariff, Ottawa talks of commensurate U.S.-Canada environmental regimes


 

Waxman-Markey, the massive climate change bill currently working its way through the U.S. Senate, contains a provision that would allow the president to impose tariffs on imports with carbon footprints bigger than U.S.-made goods. That has Alberta’s provincial government worried, particularly with creeping protectionist policies in the U.S., as well as the “dirty oil” talk from Barack Obama’s camp during last year’s primaries. “The thing that really bothers me,” Alberta Premier Ed Stelmach told the Calgary Herald’s Renata D’Aliesio, “is that they’re giving the president, presently the way it’s written, executive powers of imposing administrative taxes, border adjustment taxes.” Lobbying efforts by Alberta’s representatives in Washington, seeking to soften the bill’s “sharper edges,” have been fierce, says Alberta D.C. envoy Gary Mar. But Federal Environment Minister Jim Prentice counsels optimism–of a sort–because of Canada’s efforts to harmonize our climate change regime with the U.S.’s. “At the end of the day, we’re confident that Canada will have a commensurate environmental regime, and so those border adjustments won’t penalize Canada,” Prentice says. But the question remains–harmonize to what? Chopin’s Funeral March?

Calgary Herald


 
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A carbon tax by any other name, would smell as rank…

  1. If we had a real climate change policy, one that does as many economists and environmentalists have suggested and put a price on pollution, this wouldn't even be an issue. The W-M bill's provision putting tariffs on foreign products entering the US only occurs when the country producing those products doesn't put an appropriate cost on their carbon emissions, on par with what is in the W-M bill. I find the mention of protectionism out of place here – it's not protectionism when you put a price on your country's own products as well.

    • Craig O, you are not quite right about the provisions in the W-M bill, but in your defence it is a very complex bill. Fist, the bill stipulates that there will be "transborder adjustments" on imports from DEVELOPED (but not developing) nations that fail to adopt a set of 2020 to 205 targets at least as stringent as the USs. There will also be tariffs on imports from developing nations that fail to regulate the same sectors/activities/sources that the US regulates, even if in the absence of US-comparable regulations the exporting nation is likely to comply with its targets. And even if we implement US-comparable targets and regulations (the likes of which Environment Canada staff is not proposing at this time, likely–I am only guessing here– to Minister Prentice's consternation) the US will discriminate against Canadian exports as long as the US deems Canada's facility-level emission reporting rules to be less stringent than the US rules. The US EPA has formally registered their disapproval of Canadian facility-level GHG reporting rules a number of times since 1995. Our exports will be tariffed if we fail to meet any one of these tests, even if we comply with the other two.

    • The US justtifies discrimination against our exports as long as our emission reporting rules are not as stringent as US rules arguing that our emission inventory and reduction claims are not reliable in the absence of a more stringent reporting regime. I should note that since 1995, in addition to demanding that we change our reporitng rules, the US EPA has demanded that Canada agree to directly remit the raw Canadian facility-level data to the EPA, including substantial commercially sensitive data. The US EPA commits to hold that data confidential, but can be forced to breach that commitment under national security laws.

    • Anyway, let's assume for now that Canada meets all three of these key tests to avoid export tariffs: (1) Canada promulgates US-style facility level emission and operating data reporting and remits all of the raw facility-level data to the EPA, (2) Canada commits to a firm absolute cap on 2020 GHG emissions of 658 MTCO2e/year (including emissions from land use change, forest fires, pest infestations, etc.), which is 17% below 2005 actual emission levels, and (3) Canada implements a US-style cap and trade regime which, by definition, exempts all GHG associated with the production of exports to the US from the Canadian cap and imposes 100% of Canada's reduction obligation on entities that produce carbon-based energy and products for sale to Canadians. Note that the US-style cap makes energy and other carbon-based product manufacturers (i.e. cement and chemical producers) report and buy GHG allowances to cover all of their supply chain, production AND CONSUMER END-USE GHGs. In other words, 80% to 85% of GHG sources have to be covered by the industrial cap, not the 31% that Environment Canada currently proposes.

    • Finally, the US House proposes to obige US fuel and electricity producers, energy-intensive products manufacturerers AND IMPORTERS to surrender US GHG allowances (quota) to the US EPA covering the supply chain (domestic AND foreign), US production and US consumer end-use GHGs for the products they sell in the US. Congress then freely allocates roughly 3.3 billion free allowances to the US producers of the regulated products (whose total GHG liability totalled about 3.5 billion TFCO2e as of the end of 2007), but NO FREE US GHG ALLOWANCES TO US IMPORTERS of the regulated products. So the day after the US GHG rules are in full effect, every US importer of Canadian fuel, power, chemicals, cement, aluminum, iron & steel, etc., has to buy US GHG allowances covering 100% of the Cdn upstream and US consumer GHGs arising from the US sale of these products….from the US producers or the US Treasury.

    • For example, US aluminum output is typically 2x more GHG intensive than Cdn aluminum output. But US aluminum producers and their fuel/electricity suppliers will receive free US GHG quota, while US importers of Cdn aluminum (85% of Cdn output) have to buy 100% of the US allowances required to cover 100% of Cdn aluminum production and related electricity demand GHGs. So Cdn exports, through the cap and trade regime, are taxed for 100% of their GHGs, even if/when those exports are far less GHG intensive than US-produced competition. So when the US agrees to drop direct transborder adjustments on our exports because we comply with the first three tests, our exports still face an indirect continuing tariff through the cap and trade quota allocation process. I have discussed these details with the drafters of the US House bill and developing Senate bills. Specifically, I have asked if the allowance purchase burden on US importers will be discounted if/when Cda imposes CO2 taxes on the exported products. The answer is a consistent and definitive "no".

    • Sorry, in my first post I said "will also be tariffs on imports from developing nations…" In that sentance, "developing" should be "developed" (read: Canada).

  2. What a joke.

    I would have LOL'd if it were not so serious. CO2 is the least of our problems…

  3. What's the size of the carbon footprint on oil tanked from countries 'that don't like them very much'?
    And dirty coal generated power?

    And just how 'dirty' is the oilsands?

    Oil sands not so dirty: study; Emissions average only 10% higher, not 40%
    http://www.capp.ca/aboutUs/mediaCentre/IndustryNe

    • A study by a consulting firm whose main clients are energy companies? That's got to be objective!

    • A study by a consulting firm whose main clients are energy companies? That's got to be objective!

      • Wilson is correct, sort of. Wellhead to refinery gate GHGs range from about 5% below to 20% above the GHGs for that portion of the refinery supply chain for the most common conventional sweet crude oil feedstocks, depending on extraction and upgrading methods. Averaged over all of the Alberta extraction and upgrading operations, Alberta oilands wellhead to refinery gate GHGs are roughly 10% higher than the global average for all conventional sweet crude supplied to US refineries. Wellhead to refinery gate GHGs are actually highest for light, sweet crude that originates in Nigeria (the US's 3rd largest source of crude supply). 2/3 of the oil produced in Califlrnia ia heavy oil, and has a GHG extraction/upgrading profile that is 20% HIGHER than that of the Alberta oilsands.

        CAPP is not the source of these numbers. You can find all of these numbers in the (publicly available) background calculations for the US GREET full fuel cycle model, which the US EPA and state of California have used.

    • If 2/3 of California's oil production is more GHG intensive than Alberta's heavy oil, on average, why are we not hearing about that? ith the specific purpose of discriminating against two particular crude oil sources–Alberta oilsands and Venezuelan imports–the US legislators have elected to create a single default wellhead to refinery gate GHG factor for ALL of the crude that is refined in California (which does not include Alberta or Venezuelan crude and mostly comes from the Persian Gulf), another single factor for all of the crude that is refined in the rest of the US NOT including Alberta or Venzuealan feedstocks, and a separate factor for Alberta oilsands which they also apply to Venezuealan feedstocks. By blending California heavy oil (2/3 of all of that state's production) with Persian Gulf sweet crudes to establish one GHG factor for all Califronia refinery feedstock, the US legislators create a competitive advantage for California refineries that rely on California crude at the unfair expense of feestocks that originate in Alberta or products that are refined in Ontario from Alberta's heavy oil and bitumen.

    • It is not the intention of US legislators to cut back their imports of Canadian heavy and synthetic crudes. They anticipate that the new tariffs will not be passed through to US refinery customers as prices increases but will be absorbed by the Canadian exporters, reducing Canadian tax and royalty share of the price US consumers pay for products derived from those exports. This is the 4th time the US has tried to use "cap and trade" and a manipulative US emission quota allocation to effect a transfer of wealth from entities that refine resource-based products for sale to US customers. Each time in the past the US "cap and trade" was enormously successful at affecting a wealth transfer from us to them. I am at a loss as to why the editors of McLeans have consistently supported "cap and trade" when the sole purpose of this quota-based supply management refime has always been trade protection and not environmental protectionism. The first time the US nailed Canadian investors with "cap and trade" was during the leaded gasoline phase out. Interested parties should look hard at that history.

  4. What's the size of the carbon footprint on oil tanked from countries 'that don't like them very much'?
    And dirty coal generated power?

    And just how 'dirty' is the oilsands?

    Oil sands not so dirty: study; Emissions average only 10% higher, not 40%
    http://www.capp.ca/aboutUs/mediaCentre/IndustryNe

  5. This is actually good news. This might encourage Canadian oil companies as well as other industries to look west and build better transportation for both oil and manufactured goods to asia instead of sucking up to US markets.

    • Coastlogger,

      US cap and trade, by design, affects a wealth transfer from carbon-based energy, food and building products exporting nations to nations that import those commodities. The principal goal of current US-China negotiations is to get China to construct a US-style cap and trade regime—remember, it exempts GHGs associated with the production of exports from the national cap and puts temporary direct and long-term indirect (through the cap and trade system) taxes on carbon-based imports. The US negotiators argue, in China, that the US and China working in tandem can force all energy, food and building product exporting nations into price-takers. They argue this is much better for China than competing with the US for those exports. Japan and South Korea have already agreed to collude with the US and launch US-style cap and trade. Cda should diversify out markets. More importantly, we should focus on building a less export dependent, more self-sustained national economy.