(Policy papers 2012-2013)

A national energy policy is a necessity for a country that is a world supplier of energy. It should include a carbon tax to promote sustainability by encouraging development of cleaner energy sources and reductions in greenhouse gas emissions. National leadership could also help to rationalize Canada’s fragmented electricity market. For a secure future, we need to focus on more than just pipelines; protection of the environment will bring broader and longer-term advantages.

Un pays qui est fournisseur mondial d’énergie doit avoir une politique énergétique nationale. Celle-ci devrait inclure une taxe carbone afin de promouvoir la durabilité en encourageant le développement de sources d’énergies plus propres et la réduction des émissions de gaz à effet de serre. Un leadership national pourrait aussi aider à rationaliser le marché de l’électricité bien trop fragmenté du Canada. Pour un avenir sûr, nous avons besoin de nous concentrer sur plus de domaines que seulement des pipelines : la protection de l’environnement apportera des avantages plus vastes et sur le long-terme.

 

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We can develop our natural resources in a way that balances economic development and environmental protection. Our fundamental principle should be sustainability and sustainable economic development: the cost of any harm to the environment must be paid by those responsible — to encourage reduction and eventual elimination of that harm — and not simply passed on to taxpayers, bystanders, or future generations. Our leaders must integrate economic development, including the use of energy and other natural resources, with environmental sustainability. For example, the federal minister responsible for natural resources should have a clear mandate to pursue national goals for both resource development and sustainability. When we refer to energy and the environment as separate issues, we set up a false dichotomy and justify unprincipled public policy.

Canada is unquestionably a big energy producer, and it’s fruitless to argue that some kinds of energy development are immoral. Energy is critical to international development, and maintaining a flow of energy to global markets is essential in restoring and maintaining the health of the world economy. We have a shared stake in getting trade relations and energy markets right, as well as in carrying out our role as a world supplier of energy in the most sustainable way possible, consistent with our responsibility to protect the environment.

Leaders in the energy industries, and now the western provinces, have called for a Canadian energy policy to meet the climate change challenge. A Canadian energy policy is indeed a necessary first step, and it must be an unambiguous statement of Canada’s national interests and objectives with respect to energy: for example, free internal trade, market-derived prices that reflect environmental costs, realistic dialogue about a balanced approach to regulatory efficiency and environmental protection, and much more research and development.

Any credible Canadian energy policy has to involve the federal government together with the provincial governments, which have jurisdiction over resources. Both business and environmental leaders understand the need for strong national action — not to create new intrusions into provincial jurisdiction, but to clarify the jumble of provincial and federal laws. A national policy must also find ways to ease the transition to higher carbon costs and provide ongoing assistance to the most vulnerable consumers (like the GST rebate); for producers, it should provide time-limited adjustment assistance (like the measures that followed the Free Trade Agreement of 1988). Responsibility for the environment is shared between the federal and provincial governments, but national leadership is required in many areas. For example, the national government needs to take steps to ensure that Canadian exporters are prepared for our trading partners’ increasingly stringent foreign requirements for consistent, transparent, and visible accounting of the environmental impact of Canadian goods and services.

The national government should also do a much better job of simply collecting comprehensive and accurate Canadian energy information in one accessible place. It is bizarre that the most authoritative source for Canadian energy information is currently the U.S. Energy Information Administration. Canadian information is scattered across various federal and provincial departments and Statistics Canada and is usually available only by subscription.

An integral component of a Canadian energy policy must be an economy-wide price for carbon. Setting a realistic national price for carbon means creating a national carbon tax that is efficient and fair, that applies to all producers and consumers, and that yields substantial revenues to reduce other taxes or fund energy-related technologies. In effect, the carbon tax is a consumption tax imposed on all fuels used in Canada in proportion to their carbon content. Any national carbon pricing system has to be fully coordinated with provincial programs like those already in place in B.C. and Quebec. Like the GST, the tax would have a single structure and single rate. The revenue raised would be sent back to the province in which it is generated, to be used for whatever purpose it chooses, such as assistance to vulnerable consumers and industries.

A national carbon pricing system is essential if we want to get anywhere near acceptable targets for the reduction of greenhouse gases by mid-century. A realistic carbon price raises costs and sends a clear signal to producers and consumers to reduce dependence on fossil fuels.

Prime Minister Harper has told us that a carbon price is really a tax on everything. (He has abolished one of the most respected and consistent proponents of the tax, the National Round Table on the Environment and the Economy.) Such a deceptively simple position is nonsense and should undermine our confidence in his leadership. The principle of sustainability behind the carbon price ensures that both producers and consumers pay for the harm caused to the environment, to surrounding communities, and to the earth. In doing so, a national carbon price promotes environmentally benign, sustainable practices throughout the economy, and stimulates wealth and prosperity.

Related measures include gradually reassessing and phasing out distorting tax subsidies to oil companies and other producers of energy to ensure that all producers factor in the environmental cost of resource extraction from the start. Outside the tax system, energy policy should include direct incentives that, for example, encourage industry to invest in abatement measures, and encourage consumers to reuse, recycle, and give up energy-wasting and polluting machines such as old cars, outboard motors, and lawnmowers.

Businesses are increasingly willing to engage in sensible discussions with environmentalists to work out acceptable, practical ways forward to build sustainability. We are seeing civil discussion and compromise over how best to reduce reliance on fossil fuels. One promising approach is the concept of cradle to grave sustainability. This is an approach to managing and protecting Canada’s resources that ensures that regulations and legislation oversee the life, completion, and legacy of resource development and projects. By mandating that companies finance legacy projects up front, Ottawa can enhance its role, in collaboration with industry, as a responsible steward of our land, seas and skies for future generations of Canadians.

But just when we need constructive national leadership to enlarge the emerging consensus, our current federal government is becoming more strident and even less respectful of scientific evidence and long-term environmental concerns. The federal cabinet has given itself new arbitrary powers to overturn any future National Energy Board (NEB) ruling that blocks a resource development on environmental grounds. The government seems determined at all costs to focus on only one element of the broader picture: oil pipelines. The Conservatives have declared moving oil from northern Alberta through either the Keystone pipeline (to the U.S.) or the Northern Gateway pipeline (to Asia) to be vital to the nation’s future. Environmentalists who raise concerns are characterized as enemies of the public interest.

With no national policy guidance on either environmental impacts or long-term energy goals, the NEB hearings on these controversial pipeline proposals will be swamped by the debate over broader sustainability issues that we ought to have in our legislatures and public forums. We can expect that the NEB will be unable to focus effectively on the very real project-specific concerns: the likelihood of spills and what steps must be taken to reduce that potential harm, for example, as well as the concerns of some 50 First Nations whose lands would be crossed by Enbridge’s Northern Gateway pipeline. Aboriginal Canadians may not have a veto, but the legal obligations of adequate “consultation, accommodation, [and] compensation” may well, in the end, make construction uneconomical for the pipeline companies.

With the public debate about energy so focused on oil, we sometimes overlook the serious problems in our electricity systems. Canada has a hopelessly inefficient and highly politicized electricity business. This fragmented market wastes billions of dollars every year and produces millions of tonnes of avoidable GHG emissions.

At the very least, there is a valuable opportunity for Ontario, which wants to shift away from dirty coal-fired generation, to purchase more hydro power from Quebec while subsidizing production of wind and solar power, and for Quebec to purchase surplus wind and solar energy from Ontario. Meanwhile, Newfoundland and Labrador is unable to transmit electricity by the most direct route from the Lower Churchill River hydro project to markets in New England because Quebec is demanding too steep a price for crossing its territory. So Newfoundland is planning a costly, circuitous subsea cable line, a $6.2 billion megaproject made feasible only by a federal subsidy.

New Brunswick voters rejected a deal to sell Crown-owned N.B. Power Corp to Hydro-Québec even though it could have made economic and environmental sense by replacing oil and coal for generating electricity with clean hydro. But given Hydro-Québec’s bullying of Newfoundland, New Brunswick’s lack of confidence about handing over control of its electricity grid to another province is not surprising.

We need an integrated national electricity market. The status quo in the coordination of grids across provincial and international boundaries is particularly absurd and even embarrassing. After the deeply unpopular National Energy Program of 1980, seen as a unilateral intervention into provincial energy jurisdiction, federal governments backed off from energy management so thoroughly that they have even refused to exercise their legitimate constitutional authority to regulate the electricity trade across the Canada-U.S. border. By default, the terms of transmission are set by the American Federal Energy Regulatory Commission. Our national government must re-engage and promote the national interest in this significant trade.

And so the national government muddles along without sound policies or strategies on sustainable energy development, making one-off deals with provinces — a loan guarantee for the Lower Churchill development here, a contribution to the Old Harry oil and gas development in the St. Lawrence there — and establishing toothless regulations of oil-sands projects that fail to address habitat destruction, air and water pollution, and greenhouse-gas emissions. This is not good enough. We do not have to choose between pursuing the economic prosperity that our fortunate resource wealth allows us and ensuring the preservation of our home planet’s health. With coherent national leadership, we can and must do both wisely.