Looking back on his year as Environment Minister, Jim Prentice must feel like he was sent on Mission Impossible 3, just like the last two Environment Ministers appointed by Prime Minister Harper. I say this because if your boss does not give you license to deliver, it is impossible to succeed. I don't know if this was the Prime Minister's plan, but now that the Copenhagen conference is ending, the only way Canada can salvage a shred of international credibility on the environmental front is for Stephen Harper to completely revamp his approach to climate change in advance of the G8, G20, and Mexico meetings next year.
Backtracking on Promises
Unfortunately Minister Prentice now finds himself in the position of backtracking on promises his government apparently never intended to deliver. This is the third time in recent memory that Canada has backpedalled on commitments to take action on global warming.
First, Minister Prentice promised Canada would show up in Copenhagen with a comprehensive plan on how we will meet our national greenhouse gas (GHG) reduction target. In a speech on June 10 , he said:
"While the challenges are great, the responsibility is clear. And my commitment to you, to Canadians, and to the international community is that Canada will play a very strong and constructive role at Copenhagen. To engage not only with words, but deeds.
We have, for example, committed to arriving at that meeting with a full suite of domestic policies - policies that will address each major source of greenhouse gas emissions in Canada."
While the minister may have meant those words at the time, his government has since decided that the best course of action is no action at all. Minister Prentice showed up at Copenhagen with no plan, no substantial emission-reduction policies - and as a result, Canada received no prominence in the international negotiations. Let this be a lesson as we head into the new year hosting the G8 and G20.
Second, when leaked cabinet documents surfaced this week, they proposed adopting industrial emissions regulations so weak that they would prevent Canada from meeting the government's own current national GHG target. While other countries were preparing to come to Copenhagen with fair and ambitious targets, Canada was working behind closed doors on a plan to avoid meeting its own weak targets. No Canadian can be proud of that.
Third, the same leaked documents suggest special treatment may be given to the oilsands - the fastest-growing source of GHG emissions in Canada. This flies in the face of what Bill Rodgers, a spokesman for Mr. Prentice, said just two weeks ago: "All the sectors and provinces will be treated equally," he said. "Everybody has got to share the burden equally."
Special Treatment for the Oilsands
If the oilsands get special treatment, it would create outrage in Quebec and Ontario, especially since our recent economic analysis shows that the oilsands sector does not need any special treatment. Even if Alberta does its part to meet the federal government's national GHG target, the province's economy would grow as fast in the next decade as it did in the overheated previous decade, and oilsands would almost double in production.
Giving a special deal to the oilsands would also further damage the sector's image - as well as the federal government's. Upon hearing the news of the possibility of a special deal, one person emailed me with this comment: "No wonder CAPP (Canadian Association of Petroleum Producers) did not send anyone to Copenhagen, it was cheaper to send Prentice."
The last thing progressive companies need is a real or perceived special deal while they are trying to convince the world that they can clean up their act.
But let's look at the practical side of the question - does the oilsands sector need or deserve a break?
We need to think about the atmosphere as a limited asset, a capital stock. So far, all of us have had essentially unlimited and free access to the atmosphere as a dump site for our GHG pollution. Nearly all economists agree that if we are going to change behaviour, we can no longer treat the atmosphere as an unlimited and free asset. Instead we need to charge for its use.
Putting a Price on Pollution
Putting a price on GHG emissions is a market-based solution. To be effective and fair the price has to cover emissions across the economy. So far the only jurisdiction to implement this is British Columbia (Quebec also has a carbon tax but it is very modest). Most politicians are too concerned with protecting their political interests to make the unpopular, but necessary, decision to require users who dump carbon into the atmosphere to pay for the privilege.
If you give the oilsands sector a special deal, we need to call it what it is, a subsidy - and potentially a massive one, that would be very difficult to justify. .
Let's put this in perspective. At a charge of $100 per tonne of CO2 pollution, leading companies in the oilsands sector would be exposed to a cost of roughly $6 per barrel. That is manageable given the current and projected market value of oil. The oilsands also have a competitive advantage as a massive reserve located in a safe democratic country, supported by a skilled work force that enjoys a high quality of living.
The oilsands has benefited from a decade of subsidies through significant tax breaks. Because of the success of the industry, the current federal government has committed to phasing out the accelerated capital cost allowance (ACCA) between 2010 and 2015.
Finally, at the provincial level, the oilsands sector got a massive break during the reform of the royalties structure - the provincial government tweaked the oil sands royalty regime, when what was needed was a significant overhaul. Some would argue this happened at a cost to the smaller conventional oil and gas companies who were also targeted for reform but whose profit margins are a fraction of those of oilsands companies.
In short, the oilsands do not need a special, relaxed target for reducing GHG emissions - instead, the industry has the capacity to do its fair share, and needs to step up. Progressive companies will rise to the challenge, non-progressive companies may not be able to build their projects, but that is the strength of applying a market-based approach - the most innovative companies win.
It's high time for the Canadian government to put a credible plan on the table to meet our short term and longer term targets - and implement it. We can solve this and prosper. It will take work, but most of all it will take political leadership. Time appears to have run out to show that in Copenhagen - but we will have a new opportunity when Canada hosts the G8 and G20 meetings in 2010.
