On carbon, Ottawa must learn to give as much as it takes

A federal-provincial standoff looms over the carbon tax. Could a grand bargain be the way forward?

Minister of Environment and Climate Change Catherine McKenna scrums with media in Ottawa on Tuesday, Sept. 13, 2016. (Matthew Usherwood/CP)

Minister of Environment and Climate Change Catherine McKenna in Ottawa on Sept. 13, 2016. (Matthew Usherwood/CP)

Take a book, leave a book—it’s the slogan printed on the side of those delightful Little Libraries that have sprung up in neighbourhoods across Canada in recent years. It turns out what works well among neighbours is also sage advice in federal politics. If Prime Minister Justin Trudeau hopes to solve a tricky set of issues with the provinces this fall, he’ll have to learn to give as well as take.

Earlier this week federal Environment Minister Catherine McKenna vowed to impose a federal carbon tax on any province that has not yet established its own emissions price. “It’s mandatory that everyone will have to have a price on carbon,” she told CTV’s Question Period. Such an ultimatum marks a sharp turn from the co-operative approach the Trudeau government promised on climate change policy. With the four largest provinces already (or soon to be) pricing carbon—British Columbia and Alberta with a carbon tax, Ontario and Quebec with a cap-and-trade system—Ottawa’s demands are focused on reluctant premiers such as Saskatchewan’s Brad Wall, who has repeatedly threatened to challenge the constitutionality of any federal carbon tax. While a national carbon tax is desirable because it avoids economic damage caused by cross-country carbon-price differentials, the federal Liberals clearly have a fight on their hands.

Unlike previous federal-provincial jurisdictional disputes, however, Ottawa lacks the ability to bribe its way out of this situation. Not only is the federal government under severe budget constraints, but initial expectations are for Ottawa to return any federal carbon tax it collects to the originating provinces; revenue recycling is a key component of carbon-tax theory. Trudeau will have to find a non-pecuniary way to get recalcitrant provinces on board. Which brings us to the “give” side of the give-and-take equation.

The other great bugbear of contemporary Canadian federalism is the pipeline approval process, or lack thereof. Three big projects—Northern Gateway, TransMountain and Energy East—collectively represent over $30 billion in private sector investment ready to be unleashed in our country at a time when infrastructure spending is considered crucial to future economic success. Without the additional capacity and ocean access these new pipelines are meant to provide, domestic producers will continue to swallow a discount of up to 30 per cent on every barrel of oil they sell. According to a recent report from bond-rating agency DBRS: “If pipeline infrastructure is not built, Canada’s energy sector increasingly risks the eventual loss of global market share.” It is, in other words, a looming national economic emergency.

And yet due to the efforts of anti-oil activists, First Nations and municipal politicians, all three projects have been derailed or delayed. Two weeks ago the three-member National Energy Board panel reviewing the Energy East project stepped down following vexatious complaints from pipeline opponents, adjourning the entire approval process. Earlier this year a court overturned conditional approval of Northern Gateway because of complaints about a lack of consultation. The pipeline approval process is just as fraught with controversy, and the pipelines themselves just as necessary, as a national carbon tax.

The solution to both problems lies in dealing with them together, as one issue. Earlier this year Trudeau inserted himself directly into the pipeline process by creating a new political approval mechanism. As such, the possibility exists for a grand bargain on both the pipeline and carbon tax files. In either overt or backroom fashion, Trudeau can engineer a pan-Canadian agreement on carbon pricing by marrying it with expeditious approval of some or all of the contentious pipeline projects, thus mollifying opponents such as Brad Wall.

Combining what may appear to be conflicting objectives—a tax meant to curtail carbon emissions with pipelines meant to facilitate them—is not paradoxical. Rather, it’s entirely practical. Putting a price on carbon is the most efficient way to reduce emissions because it uses the power of the market to achieve an environmental end; the cost of carbon becomes an explicit factor in all goods and services. Providing Canada’s oil with sufficient pipeline capacity to reach tidewater is also a market-oriented solution. Preventing Canadian oil from reaching willing buyers will not reduce worldwide carbon emissions. In a competitive global market, the only result of our lack of pipeline capacity is to lower incomes for Canadian firms and workers. More importantly, allowing our oil and gas industry to earn a world price gives the entire economy the strength to overcome complications created by putting a price on carbon.

An efficient national carbon tax is an appropriate price to pay for an efficient national pipeline infrastructure. And vice versa.


On carbon, Ottawa must learn to give as much as it takes

  1. Why is the media always trying to tell the govt how to operate?

    • “Why is the media always trying to tell the government how to operate?”

      Well, the media are also constituents and they speak to other constituents. It is clear to constituents that the reason it is called global warming and not Canadian warming is because it is truly a global issue while many province want to make it only about oil drilled in Alberta and Saskatchewan rather than petroleum products consumed throughout Canada and drilled outside of Canada. That is cherry picking. If Canadians are going to use the 5000 petroleum products and fly in jets, the oil might as well come from Canada where we can make the money to run our economy from it. It is sensible. It doesn’t just fund two province’s economies, it funds many province’s economies in terms of manufacturing specialty products and employing people who have no jobs in their own province. The higher emissions are offset by using pipelines rather than trains or tankers and statistically, pipelines are the safest way to move oil. The writer of the editorial is right. People should be paying a carbon tax but perhaps not just on fossil fuels but on everything made from petroleum. Consumer consumption a fires the demand for the product. Those gadgets people love that put them in touch with all that knowledge are built with petroleum. Time to pay a carbon tax for that too. The PM should pay a carbon tax for his petroleum made kayak. Let’s be really enlightened about how invested we are in petroleum.

      • Surely you must be smart enough to know that the majority of base polymers used to produce plastics is produced from natural gas not petroleum and you would know that bitumen is not a practical input for base polymer production.

  2. My dog is smarter than this blond bimbo.

    • She’s also married to a Con writer on this site…nice going Shakespeare.

      • Oh Puhleeze Komarade E1 saying Gilmore is a Con Writer that’s like sayinf Zoolander the Little Spud is smart without his PMs® (Puppet Masters) Butts and Telford….

        • So it’s okay to be crude and rude about someone you disagree with?

          Like I said, the Con party won’t be reelected or even exist in ten years

          • You disciplining people on being rude just because you disagree with them. Pot meet kettle.

    • You ain’t givin’ your dog a whole lot of credit, you know. That’s like saying your buddy’s wife is prettier than Don Rickles.

  3. “Combining what may appear to be conflicting objectives—a tax meant to curtail carbon emissions with pipelines meant to facilitate them—is not paradoxical.”

    It kinda is paradoxical. How do you show leadership on climate change if you’re increasing the supply of oil to the rest of the world in order to bolster your income?
    FWIW, I’m not anti-pipeline, I just appreciate straight-talking.

    • It isn’t paradoxical. It is admitting that drilling and consuming are both parts of carbon emission. If we are drilling, we have some control over the emissions of what we drill and the technology we use. The US has an oil sands in Utah. What control do we have over those emissions? None. Our emissions out of the oilsands are higher but using a pipeline ads zero emissions so we come out close to even compared to using tankers and trains with sweet crude. Also, if we are buying volatile Bakken crude from the Dakotas we know that it is highly volatile. It has exploded several times. Not just in Quebec. The planet isn’t going to stop using petroleum unless you believe that people will stop taking medications, give up their cell phones and their sneakers. Canadians feel it is okay to subsidize Bombardier but not supply the jet fuel. Americans feel it is okay to deride Canada but they are going to run a pipeline from the Dakotas under First Nations land and many different tribes are there to protest. Leo Di Caprio wasn’t there. He was at the Toronto film festival promoting his documentary. Meanwhile he’d been in a car accident with his girlfriend. They were driving a Ranger Rover, not a Prius. Canadians need to understand that Americans won’t be having a carbon tax and they are only to happy to sell us the oil. Keystone was never about the environment. It was about competition. That is why Obama is the biggest oil producer on the planet and we barely have a business and a 30 billion dollar debt and we are buying from them and still ashamed that we have oil.

  4. There is no such thing as a debate on providing Canada with an efficient pipeline system: large segments of the population and industry have no access to natural gas at all and still more have no access to inexpensive western Canadian and American natural gas; in spite of the fact that Atlantic natural gas is fading fast, nothing is being done to provide an alternative supply to those markets except imported LNG. In fact, one purpose of the Energy East proposal is to reduce west->east natural gas pipeline capacity; this is compounded by the effort to move western NG to export markets through west coast ports.

  5. McKenna, the Liberals and any other Climate Change nutball needs to realize one thing. No matter how much money you steal from the people of this planet you CANNOT CHANGE THE TEMPERATURE OF A PLANET!!!!. The planet is just fine thank you very much. Wake up people.