Carbon tax myths and other contradictions messing up Canada’s climate change strategy

Environmental groups agree carbon pricing is an important tool in reducing emissions, but its importance should not be exaggerated



Justin Trudeau is out selling the idea of a carbon tax rebate as a way to meet Canada’s emission targets under the Paris Agreement. Trudeau promised a 30 per cent reduction by 2030. But is it achievable? 

Mark Jaccard, a professor of resource and environmental management at Simon Fraser University in Vancouver, argues that “emissions pricing is not necessary,” for Canada to meet its emissions goals. “Any honest economist will tell you that.”

Jaccard says more flexible regulations, for example, that would encourage the building of zero-emission vehicles and technologies, would be more impactful.

He argues that a carbon tax to fight pollution, which is whipping up political controversy in Ontario and elsewhere, is just one of the many myths that prevent making meaningful cuts to Canada’s pollution output. 

So why is a carbon tax one of the cornerstones of the Trudeau government’s plan? 

Some believe it’s because Liberals have no desire to force the powerful oil and gas sector to clean up its act. In fact, by supporting the construction of pipelines like Trans Mountain and Keystone, tar sands production in Alberta is set to almost double by 2038. 

At the moment, Canada is producing 722 megatons of carbon dioxide  per year – of which 26 per cent (190 megatons) comes from Canada’s oil and gas sector. In order to reach the Paris climate target of 517 megatons by 2030, Canada must cut more than 200 megatons over the next 12 years. The proposed carbon tax will cut only 60 megatons

Yet the Liberal government is imposing weak emission restrictions on the oil and gas industry, while projecting the sector will grow. Instead, the plan is almost entirely on the backs of consumers, says Catherine Abreu, executive director of the Ottawa-based Climate Action Network

She says “It’s absolutely unfair the rest of the economy, and therefore Canadians, are expected to compensate for the lack of action happening in the oil sands.”

But the coddling of the oil and gas sector is not only undermining Canada’s efforts to meets its Paris obligations. It’s also bad economics given the growth in renewables.

The energy sector accounts for less than seven per cent of Canada’s gross domestic product (GDP), of which the tar sands accounts for no more than two to three per cent. As Green Party leader Elizabeth May notes, “roughly the same size as tourism.” 

Today, 190,000 people are employed by the oil and gas sector. And something like 60,000 to 65,000 of those work directly in upstream oil and gas extraction, according to Jordan Brennan, an economist with Unifor, a trade union that represents some 12,000 workers in the oil industry. 

By comparison, the financial services sector, which also accounts for seven per cent of GDP, employs some 800,000 people. 

Unifor has lobbied against the building of new pipelines on the grounds they ship raw, unprocessed bitumen to be refined outside of Canada – in Asia or the U.S. – costing jobs here. Far more jobs are created in refining than in extraction, yet 23 refineries have been shuttered in Canada since the early 1980s. 

“We are shipping bitumen down pipelines but shipping thousands of jobs with it,” says Steven Shrybman, an Ottawa lawyer who’s represented Unifor before the National Energy Board. 

And then there’s the myth that the tar sands have developed due to free market forces. In reality, they’re a creation of massive government intervention. 

Even though Alberta is the third-largest deposit of oil in the world, separating oil from tar is prohibitively expensive, and Alberta is landlocked. 

When Peter Lougheed became premier in 1971, there was only one tar sands operation producing a mere 30,000 barrels a day. 

But as a 2017 report from the Canadian Centre for Policy Alternatives notes, Lougheed’s Alberta government, “used all the power and money it had at its disposal in the 1970s to kick-start tar sands development” – which meant subsidies, tax breaks and gutting environmental regulations to let companies off the hook when it came to paying for ecological damage. Today the industry continues to receive $3.3 billion annually in taxpayer-funded subsidies. 

Another myth is that the energy sector fills government coffers. 

In fact, it generates modest tax revenue, comparatively speaking. Back in the 1990s, royalties paid by the oil companies to Alberta were chopped to one per cent and remain low compared to other countries. 

So in 2016, for example, Syncrude had gross revenues of $3.4 billion – yet paid only $37 million in royalties. In 2015, the federal and provincial governments collected a total of $711 billion in taxes. Of that, the oil and gas sector contributed some $4.4 billion in royalties, and a total of $12.9 billion in taxes, or about 2.4 per cent of total government revenues. 

Last year, Greenpeace released a study culled from government data that revealed Canada imposes taxes on oil companies that are a fraction of what they are even in corrupt countries like Nigeria, Indonesia and the Ivory Coast. In fact, oil companies like Chevron Canada, Suncor Energy and Canadian Natural Resources are paying a much higher rate of tax abroad than they do at home. 

The result? Since 2016, the Alberta government has earned more money from liquor sales and gambling than from selling almost three million barrels of bitumen a day to oil companies – while carrying a $49-billion debt. 

One-third of the oil and gas sector is owned by foreign corporate interests, which means pipelines are carrying profits out of the country. 

Meanwhile, one million hectares of boreal forest has been cleared  (or degraded) to make way for the tar sands, and 1.2 trillion litres of untreated and toxic water is sitting in tailings ponds covering 220 square kilometres of Alberta. Last year, a study estimated the cost of cleaning up the ponds would be $51 billion – which exceeds the $41 billion in oil royalties collected by Alberta since 1970. Last week, the Alberta Energy Regulator let slip that the cost of cleaning up oil and gas industry could total $260 billion. And who will pay for? “It will be out of the public pocket,” says Jodi McNeill, a policy analyst with the Calgary-based Pembina Institute.

These issues are being obscured by the battle over a carbon tax. 

Environmental groups agree carbon pricing is an important tool in reducing emissions, but they say its importance should not be exaggerated. 

“Canada’s climate plans have basically targeted reductions everywhere except upstream oil and gas, as a political compromise,” says Keith Stewart, energy analyst with Greenpeace Canada. “Rachel Notley is a key example of this. They’ve invested in wind and solar. They are doing some really good things. But it’s basically don’t touch oil and gas and go hard everywhere else.” 

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