Rob Breakenridge: Carney’s chance to scrap job-destroying emissions cap

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Mark Carney will be sworn in as Canada’s prime minister on Friday and there’s now a massive test that awaits him.

To what extent is Carney prepared to depart from the Trudeau agenda and is he prepared to take meaningful steps to address what has suddenly become the country’s top priority? How he chooses to now deal with the government’s planned oil and gas emissions cap will be revealing.

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Canada’s Parliamentary Budget Officer (PBO) on Wednesday released an important new analysis of the cap, which would force industry to cut emissions by roughly a third below 2019 levels by 2030. While not painting quite as dire a picture as have some other analyses, the PBO’s conclusions are still rather alarming and should hopefully represent the final nail in the coffin of this ill-conceived policy.

The PBO report looks specifically at production trends into the first compliance period under the emissions cap, which is 2030 – 2032. The report forecasts that under current trends, oil and gas production would be 11.1 per cent higher than current levels. However, remaining within the upper limit of the emissions cap would instead mean that production would have to be reduced by 4.9 per cent. That, in turn, would represent a $20.5-billion reduction in nominal GDP and a potential loss of over 54,000 full-time jobs.

There was a time — very recently, in fact — when all of this was much more hypothetical or even moot.

After all, in November when the regulations for the emissions cap were announced, the Liberals seemed just months away from a date with political annihilation, and it was almost cute that they still envisioned themselves as dictating policy five or ten years down the road.

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Suddenly, though, Canada’s political landscape has been turned completely on its head thanks to a predatory trade war launched by a capricious and possibly expansionist U.S. president. The resignation of Justin Trudeau was also seismic in its own way.

Which means a new prime minister and a governing party with a new lease on life. That makes the policy decisions of Mark Carney much more important and consequential.

Of course, what’s also changed is the lens through which we assess these policies. Canadians have not likely abandoned the concerns — housing, inflation, immigration, just to name a few — that were top of mind only last year, but the urgent need to bolster Canada’s economy and make us less dependent on the U.S. has superseded everything else.

The PBO report underscores that we will pay a hefty price to pay for a policy that never really made sense. The government had not previously singled out specific sectors for this kind of regulation, preferring instead to put a price on carbon regardless of its source. The emissions cap flies in the face of that, and represents a much more costly and much less efficient way of reducing emissions.

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That’s not to say that the industry cannot make further strides on reducing its carbon footprint and the PBO analysis does not factor in the potential impact of large-scale, widespread carbon capture, utilization, and storage (CCUS) technology. We don’t need the emissions cap to make progress in these areas, however.

For his part, Carney has previously expressed disagreement with the emissions cap, even though he has been more broadly supportive of aggressive climate policy and net-zero targets. Carney, though, has also pledged to scrap the consumer carbon tax and could then be hesitant to further dismantle other key Liberal environmental policies.

Regardless, the concerns over the emissions cap aren’t going away and the opposition to this approach is only likely to further harden. As the joint statement from Alberta’s premier and environment minister notes, the PBO report vindicates many of their objections to the emissions cap and strengthens the case for this policy to be scrapped once and for all.

The PBO report could also help to strengthen the legal objections to the emissions cap, if indeed this all does end up in the courts (as it most likely would, if Ottawa persists). The federal government has gone to great lengths to stress that it is a cap on emissions and not on production. Alberta, in turn, has consistently referred to this as a production cap.

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It’s an important distinction, because even Ottawa has conceded that it would not have the constitutional jurisdiction to try and impose a cap on production. However, an emissions cap that makes a limit or reduction on production all but unavoidable could very well be on shaky constitutional ground.

There’s a whole host of issues that the new prime minister will have to clarify his position on, but this one should be right at the top of the list.

If Carney really is a more centrist Liberal prime minister, one who is more focused on exploiting Canada’s economic advantages and turning this country into “an energy superpower in both clean and conventional energy,” this is his chance to show it.

If Mark Carney still believes, as he previously expressed, that Canada should make a “big bet” on CCUS technology, this would be an ideal time to do just that. The six biggest oilsands players are prepared to invest billions in CCUS if Alberta and Ottawa are prepared to be willing partners.

The first step, though, would be abandoning the emissions cap. This PBO report gives the new prime minister the perfect off-ramp.

Rob Breakenridge is a Calgary-based broadcaster and writer. He can be found at robbreakenridge.ca and reached at rob.breakenridge@gmail.com  

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