By Kenneth P. Green
and Taylor Jackson
The Fraser Institute
Canada’s premiers concluded their most recent meetings last week with the release of Canada’s Energy Strategy, a document that “charts a path for shaping the sustainable development of Canada’s energy future.” The plan includes such undefined recommendations as to “promote energy efficiency and conservations,” “transition to a lower carbon economy,” “facilitate the development of renewable, green and/or cleaner energy sources,” and “promote market diversification” for Canada’s energy resources, among others.
The real problem with the strategy is that, on many levels, it continues the somewhat contradictory approach the premiers have long displayed regarding energy development.
While playing up the importance of the energy sector to the Canadian economy, the premiers’ report actually promotes policies that will cripple it. While lauding the industry that directly contributes 10 percent of Canada’s GDP and directly and indirectly employs more than 900,000 Canadians, making it one of Canada’s most important industries, they then accept politically-derived climate change goals that would require most of that industry to stop growth in only a few years if the targets are to be reached.
For example, the premiers accept the internationally set goal of limiting climate change to 2 C. But a recent study in Nature, a weekly journal, suggests that to achieve this Canada will have to leave 85 percent of its bitumen in the ground. Another study of fossil fuel growth potential under the 2 C target, recently re-crunched by environmentalists, concluded that we must produce zero net new emissions by 2018.
If the premiers mean what they say about that 2 C target, they’re accepting the end of Canada’s hope for fossil fuel production growth in only three years.
Pipelines are another area that come in for the “we love you, we love you not” treatment. Pipelines, or rather “energy infrastructure,” did get some positive (although it appears hard fought for) attention in the national energy strategy, with the commitment of ensuring access to market for Canadian energy products. But while often trumpeting the benefits of pipelines, provinces have been slow to actually approve the pipeline infrastructure desperately needed to ensure that Canadian energy makes its way to refineries. From the West Coast to the East Coast, proposed pipeline projects continue to languish, contributing to increases in the amount of oil transported by rail.
Indeed, the Canadian Association of Petroleum Producers projects that rail movements of oil will increase from 185,000 barrels per day in 2014 to between 500,000 and 600,000 barrels per day by 2018. The increase in transporting oil and gas by rail in the absence of pipelines poses unnecessary risk to Canadians, since on a comparative basis pipelines experience fewer incidents.
Another good example of contradictory energy policy is playing out in Alberta where the province’s new premier gave a veritable barn-burner of a speech to oil sands industry executives during Stampede while increasing the carbon levy, establishing a panel to recommend further actions for the Alberta government to take on climate change, and striking a new royalty review which, if it’s anything like the last one, will only drive investment out of the energy sector or into competing jurisdictions.
The premiers’ report recognizes the critical contributions that energy production makes to Canada’s economic health, and that demand for energy will only increase in the future. But there and elsewhere, the premiers accept any number of things that will cut against that contribution.
It’s nothing new when politicians speak out of both sides of their mouths. Indeed, a cynical person might claim that’s the norm. But when it comes to a sector as important to the Canadian economy as energy, the usual kind of contradictory policy-making is something Canada can’t long endure.
Kenneth P. Green is Senior Director and Taylor Jackson is a Policy Analyst in Natural Resource Studies at The Fraser Institute.