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Thomas Mulcair, the staples thesis and cap-and-trade

The NDP leader lays out his vision for resource development


 

In an essay for Policy Options, Thomas Mulcair lays out his vision for resource development.

Within a framework of sustainable development — including a cap-and-trade system and thorough environmental assessments — New Democrats would prioritize our own energy security and with it the creation of high-paying, value-added jobs, refining and upgrading our own natural resources right here in Canada — just as other resource-rich developed nations like Norway already have.

With unused refining capacity in eastern Canada already available, increasing west-east capacity is, in fact, a win-win-win — better prices for producers (and higher royalties for provinces), more jobs here at home and greater energy security for all Canadians. Shouldn’t that be Canada’s top priority for natural resource development?

As we move to seize these opportunities at home, we must also foster the international trade and foreign investment relationships that will ensure we have the capacity to meet them. In the past two years alone, state-owned Chinese companies like PetroChina and CNOOC have invested more than $25 billion in the Canadian oil and gas sector. That trend is expected only to grow.

New Democrats support breaking down trade barriers, lowering tariffs and reducing protectionism. We believe that government has a role to play in creating the predictability and clarity that potential investors count on. But we also believe that our government must stand first and foremost for Canadian interests, rather than ideological purity.

Mr. Mulcair actually mentions cap-and-trade twice, in the first reference he describes the NDP proposal as “a comprehensive upstream cap-and-trade system.”

A couple weeks ago, I noted the problems with the European carbon market and some questions about the future of carbon-pricing in Canada. I then sent those questions around to a few people. Here is a response from PJ Partington and Clare Demerse with the Pembina Institute.

While it’s frustrating that Europe’s politicians haven’t yet been able to find a way to move ahead, the argument that the EU ETS’s challenges mean cap-and-trade is unworkable misses the mark. As a PricewaterhouseCoopers analyst put it, “Emissions trading can be a very effective policy tool to drive down emissions, but only if it is backed by political commitment to action.” It’s true that the EU takes climate change seriously, but its internal politics are very complicated and not always constructive (as we’ve seen on a few other EU issues recently!).

The major reason why we’ve seen prices collapse is that the system’s targets weren’t tough enough. Governments gave away too many free allowances, which left the system vulnerable to oversupply when companies found cheaper ways to cut emissions and when the recent recession lowered demand.

Aaron, you’re right that governments that propose cap-and-trade systems going forward should explain how they’ll avoid the shortcomings of Europe’s approach (and to be fair, this isn’t the first time the EU system’s price has collapsed, so that was already a reasonable question to ask before this week’s events.) In my view, the key lesson governments can draw from Europe’s experience is that although many in industry will lobby hard against a system before it goes into place, once it’s up and running companies invariably find ways to meet its requirements at far lower costs than they predicted upfront. So governments should design new systems to hit their targets, not to placate industry’s worries.

Here are two points that seem to be missed in the Bryan Walsh analysis you cite:

Firstly, it’s not a cut-and-dry economics vs. environment issue, given many companies (including fossil fuel companies like Shell and Statoil) actually supported proposals for a higher price in the EU’s system. While that sounds a bit shocking in the Canadian context, the reality is that businesses that invest in cleaner technologies benefit from a stronger and more predictable price signal in the EU’s carbon market. Shell’s Climate Advisor listed “Market Confidence” at the top of his list of reasons the Members of the European Parliament should support the backloading proposal.

Secondly, there are good examples where the lessons learned by Europe have already been applied in designing better carbon pricing systems, particularly by setting pricing floors in trading systems like California’s and Québec’s. Faced with the same oversupply issue as Europe, the nine states in the U.S. Northeast’s Regional Greenhouse Gas Initiative (RGGI) cap-and-trade program recently agreed to lower their 2014 emissions cap by 45 per cent.

Other jurisdictions continue to move ahead. In the past year, Australia has implemented its carbon pricing system, Norway has doubled its carbon tax on the petroleum sector and several emerging economies announced plans to implement carbon pricing by 2015. Many of these are still fairly tentative first steps (Norway is the exception to that rule), but they demonstrate that carbon pricing continues to have momentum in many parts of the globe.

Implications for Canada

As we’ve seen again and again with the social license and market access issues facing Canada’s oilsands, environment and economy are linked, not opposed. Increasingly, weak climate policy can be seen as a competitive disadvantage.

A national carbon pricing approach would be the most economically efficient way to curb emissions in Canada, but there are a number of reasons why we’ll likely continue to see a patchwork of provincial policies — not least that provincial governments are interested in collecting the revenues that carbon pricing generates. One positive aspect of this patchwork effect is that provinces can be the laboratories for policies that later go national. The big question for Ottawa then becomes how the federal government ensures that provincial efforts add up to hit the national target that Ottawa has adopted.

One further wrinkle is that federal and provincial systems can co-exist, just as carbon tax and cap-and-trade systems can co-exist, so we shouldn’t assume that having a federal system would be the end of provincial efforts.

These questions apply the government’s regulatory plans as much as the opposition’s carbon pricing proposals. How will the government square its sector-by-sector regulatory approach with emerging provincial carbon pricing systems? How do we determine if an end-of-life performance standard for coal power is equivalent to an industry-wide trading system like Alberta’s, for example, or to a carbon tax like B.C’s? I expect those kinds of questions are going to get more and more attention in the coming months. 


 

Thomas Mulcair, the staples thesis and cap-and-trade

  1. “With unused refining capacity in eastern Canada already available…” – Mulcair.

    I’m interested to know what he means by this. Do we have refineries sitting idle? (I’m not aware of any, but I can’t claim any expertise on the subject.)
    Or is he talking about supplanting imported oil with Alberta’s?
    If the latter, we will see short-term growth as we build the pipelines and upgrade the existing facilities (I think the eastern refineries handle lighter crude).
    But unless he is taking about adding capacity we won’t see lots of growth long-term unless we supplant our current imports of US-finished product &/or start exporting our own refined fuels / petrochemial products [which is where I see the real opportunity for growth].

    • If you read Mulcair’s essay, you will find that he is talking about using the Canadian workforce and capital to further process raw Canadian resources before exporting those resources, thereby gaining Canadian jobs.

      • Which would be a good thing. But hardly “unused” capacity; undeveloped would be a better term (assuming you have his intentions correct).

        • I believe I have Mulcair’s intentions correct. Unless you want to point out where I did misinterpreted Mulcair’s message of the essay.

  2. The NDP & Conservatives are far more alike than most people give credit. Harper wants the bitumen to go to China, Mulcair want it to go east. I want the government to set rigorous environmental standards, transparent rules for foreign investment, begin a rational carbon pricing scheme and then stop cheerleading and stay out of the way.

    In other words, good government involves setting good policies. Tinkering policies to try to achieve “desired” outcomes is a fool’s game. It was foolish when PET did it, it is foolish now with SH trying it and it would be foolish if Mulcair gets an opportunity to do it.

    • actually the conservatives want it to go in all directions as do most of us Tories – we need to get world price and we are at present tripling production – we need more than one pipeline in any direction!

    • The Liberals and Conservatives are far more alike than any of them are to the NDP.

  3. Does this so-called “policy” apply to all resource development? Would Mulcair oppose exporting raw lumber that isn’t processed into a finished product in Canada? Does it apply also to Canadian mining companies? Would Mulcair support David Black’s BC refinery?

    Or does this “vision” apply only for Alberta Oilsands, and only if the product is refined in Eastern Canada, and only if Cap & Trade revenues go to the Federal government?

    I suspect it’s the latter.

    • What about grain? Must grains be made into pasta and must such pasta be packaged up into fancy labeled boxes before our farmer’s durum wheat can be exported?

    • Maybe you should find out, instead of just suspecting. In fact, the BCNDP has spoken at length about the need to stop mass raw log exports and encourage value-added industry in forestry. I haven’t heard Mulcair say this himself, but it’s completely in line with his general comments about sustainable development in all areas.

  4. Mulcair goes on about how to protect Canadian jobs, and how Canada should do more with its raw resources before exporting them.

    But Canadians have known this for years that it would indeed be better for raw resources to be further developed before exporting such resources. But what is Mulcair proposing to do?

    He can either hold a gun to Canadian entrepreneurs and business people alike in order to force them to develop those raw resources further

    or

    he can start building and running companies which do the further development of raw resources.

    Are Canadians ready to be forced into how businesses should be run, and/or are Canadians ready to set up state owned companies on a grand scale?

    • What Mulcair can do for starters (and what he has pledged to do) is negotiate better trade deals that don’t lock us into the mass export of our energy and raw resources regardless of the needs of our own country. The Libs and the Cons want to fix us into trade deals that reduce our sovereignty and eliminate any opportunity to create value-added industry. You are the one supporting a plan that forces us into one model of business.

      • And what trade deals do you have in mind when you refer to Liberal and CPC trade deals that reduce our sovereignty and eliminate any opportunity to create value-added industry? Could you at least mention one!

  5. Tom Mulcair has a very simplistic understanding of how reality unfolds itself, and that simplicity comes forth out of a separated thinking.

    On the one hand, Mulcair fights for strict emission regulations, by means of cap-and-trade and a carbon tax, which will mean that electricity and other costs will be higher for Canadian businesses while other countries such as China and India will not be effected by such high taxes. Furthermore, and while still waving with the same hand, Mulcair wants the average wage for Canadians to increase dramatically, adding another substantial cost to the business of producing goods to be exported.

    And so, on the other hand, Mulcair wants Canadian businesses to be competitive so that when raw resources have been changed over into value added products, such products will still be able to sell on an international market.

    How can Mulcair have it both ways? Does he really believe that making furniture out of our lumber before exporting it, that with an increase of wage and an increase of tax and an increase of mounting regulations, that such products can actually be competitive on the world market? If business thought it would be worth their doing, they would have done so already!

    • Yes, because business never makes bad decisions. Just where have you been hiding the last ten years exactly? Businesses are too focused on quarterly reports and constantly ignore the bigger picture. This causes them to make loads of dumb decisions and frequently act against their own best interests.

      The most competitive nations on the globe are those who follow the Scanadavian model. High wages, high taxes, high public spending, and selective, protective trade. Go look it up, man. Educate yourself. This model works. It creates prosperity. Neo-Liberalism, free trade, and austerity economics, on the other hand, just leads to collapse every time. You are the one with simplistic thinking because you don’t realise that the high wages you think we can’t afford to pay people is the same money people need to buy the products in the first place.

      • Have you been in the Scandinavian countries? Do you have any idea what their economies are like? Do you know the average age of Scandinavian populations? Do you even understand that each and every Scandinavian country cannot even be compared to such country as Canada?

        Yes, of course business decisions are not always made for the right reasons. Businesses are run by humans after all. Humans are not perfect. But if you are so much against big business, or business as usual, why not take you pension money out of the stock market and set up a company which will add value to raw resources. This is a free country. You are free to start such a company!

        Or are you waiting for the state owned companies to be opened up, so that we can pay high wages to the presidents of those state owned companies? Tell us how you think economies are run realistically! I have been in business most of my adult life and I know that the more ideology is interfereing with running a business, the more difficult it becomes for getting real things done!

    • You have lack of understanding on what Mulcair stands for. In no way does he support a carbon tax.

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