A simple way to save Keystone XL - Macleans.ca

A simple way to save Keystone XL

The answer, in three words: Cap and trade

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Is it too much to expect our Conservative government to behave like conservatives? After nearly seven years in power, and repeated abnegation of their principles—on foreign ownership, on military procurement, on corporate subsidies—should we abandon any hope of intellectual consistency from our governing party? Allegations that Prime Minister Stephen Harper has some hidden, extremist right-wing agenda now seem farcical. If the government has any ideology, it is only pragmatism—and then only aimed at re-election. Treehuggers should beg the Conservatives to rediscover their zealotry. Far from hurting, it would buoy many environmental causes if Conservatives started acting the part.

Consider the brinkmanship over the Keystone XL pipeline, which would carry Albertan oil to Gulf Coast refineries in the United States. President Barack Obama clearly wants to use the project to prove his seriousness in tackling climate change. U.S. Ambassador David Jacobson has repeatedly said improving Canada’s environmental record would make his country more accepting of oilsands imports. In the marble-mouthed world of diplomacy, this is a crystal-clear quid pro quo: tidy up the oilsands a bit and we’ll happily accept your little pipeline.

This might all prove to be posturing. Rejecting Keystone would be against the United States’ economic interests, and the pipeline itself has been thoroughly vetted to ensure a minimum environmental impact. But Canadian officials clearly aren’t willing to gamble. Federal, provincial and industry envoys have spent weeks swarming the U.S., trying to prove our country’s environmental bona fides.

They should stop wasting the effort, because there’s a simpler answer: a cap-and-tradesystem for carbon. Such a scheme would impose a limit on the carbon emissions that a company can release. Companies that don’t hit the cap could sell the excess to the companies that do. It’s pretty apparent that’s what the Obama administration wants. It’s even what the oil companies want, for heaven’s sake: Sustainable Prosperity, an Ottawa-based think-tank, recently surveyed 10 major energy companies, including Shell and Suncor, and found all of them were already incorporating a “shadow carbon price” into their decision-making, under the assumption they will contend with such regimes in the near future. While the prices varied wildly (between $15 and $68 per tonne), they showed industry will not be blindsided if government pursues the idea. Comments from leaders like Shell Canada president Lorraine Mitchelmore suggest they’d welcome it. And it’s easy to see why: unlike punitive regulations, cap and trade offers financial rewards for success. It applies market principles to solving a public-policy issue.

And yet, this government demonizes the notion. The Conservatives bought radio ads last year accusing NDP leader Thomas Mulcair, who backed cap and trade during his leadership bid, of a “carbon tax” plan that “would make everything you need cost more.” In doing this, the Conservatives mock the very idea they once supported. The party’s 2004 and 2008 election platforms both endorsed cap and trade, and the government continued to entertain the idea as late as 2009.

Why the government changed its collective mind is unclear. The best explanation is it’s trying to score crass political points against the NDP. There is also some suggestion they want to give Canadian exporters an advantage once the United States launches its own cap-and-trade regime. But that won’t work. Any policy would likely impose the same policies on imported oil, lest it risk punishing domestic producers.

Whatever their reasoning, the Conservatives have endangered a major Canadian industry by forgetting their principles. It’s true—cap-and-trade markets have had a rough start. But they’ve worked before: they were a key part of the U.S.–Canada agreement to combat acid rain in 1991. Who signed that deal? Brian Mulroney and George H. W. Bush. You can’t get more conservative than that.

James Cowan is deputy editor of Canadian Business where this column first appeared. More of his columns here.