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Trevor Tombe: Capping oil and gas emissions is a bad idea

Commentary

Putting a price on carbon emissions was once the backbone of the federal government’s climate policies. Today, it is anything but.

In its latest budget, for example, the federal government lists its climate priorities and the tools it will use to achieve them. Interestingly, pollution pricing is rarely mentioned. And when it is, they are mostly referring to the system that large industrial emitters face rather than the one individual Canadians doSee the main figure on page 74 that details “Canada’s Plan for a Clean Economy” and note the absence of the broad retail carbon tax..

The government, it seems, is rapidly moving away from market-based approaches to lower greenhouse gas emissions and instead opting for more targeted initiatives, such as subsidies for hydrogen projects, carbon capture and storage, and clean electricity generation. Altogether, Budget 2023 might offer the equivalent of $70 billion over ten years in such tax-funded incentives. 

It’s also turning to stricter regulations, such as on fuel suppliers and vehicle sales. And there is more to come. The government appears set to soon announce the most significant departure from efficient climate policy yet: a cap on emissions from the oil and gas sector.

This is a very bad idea.

First, greenhouse gas emissions have the same effect on our climate regardless of which sector or region they come from. A tonne is a tonne is a tonne.

To impose higher burdens on some activities but not others increases the cost of lowering emissions beyond what is necessary. Why incur $100 in costs to avoid a tonne in one activity when you could avoid a similar tonne for $50 somewhere else? For this reason, a cap would force emissions reductions at potentially significant costs.

With Canada’s productivity growth already lagging, achieving our environmental goals efficiently should be a very high priority. And that means broad-based and uniform incentives to lower emissions are generally best for the simple reason that the government does not know what or where low-cost emissions reduction opportunities are. Creating an incentive that we all face equally leaves such decisions in the hands of individuals and businesses, who often know best what the cheaper options are.

Second, a cap risks further undermining the strength of the government’s own case for putting a price on carbon in the first place. If we can lower emissions without a tax, the argument may go, why have one at all? We are already seeing such arguments mount significantly following the recent subsidy-heavy U.S. climate billAvid listeners of The Herle Burly podcast will be very familiar with this..

And a cap effectively invites Canadians to place blame upstream, which reinforces the misplaced idea that some emissions are more damaging than others. That goes against the entire rationale for carbon pricing, so may weaken public support. 

A cap on oil and gas emissions could also undermine the government’s own legal argument for its authority to price carbon in provinces that don’t want to, as University of Alberta professor Andrew Leach noted in recent testimony to a House of Commons Committee. The consistency of prices across Canada was a key aspect of the government’s argument. A cap on oil and gas emissions detracts strongly from that.

Third, a cap on oil and gas emissions is unnecessary to achieve our emissions reduction goals. 

The latest modeling by the federal government has Canada already on track to achieve our original Paris target of 30 percent below 2005 levels by 2030. 

It is true the government has recently moved the goalpost and is now targeting 40-45 percent below 2005 levels by 2030, which—putting aside the wisdom of moving our targets prior to ever achieving one—may require a more stringent policy. 

To be clear, specific emissions targets like these may be a misplaced goal and, in any case, are incredibly difficult for a small open economy like Canada to meet. GDP growth, population growth, oil prices, and so on, have massive implications for future emissions. The difference between the government’s own low-growth and high-growth scenarios for 2030 is roughly 50 million tonnes—more than the current emissions of the entire electricity sector.

But that point aside, we can lower emissions further and strive to achieve these more ambitious goals if we want by improving current policy rather than layering on new and higher-cost ones. 

Québec, for example, is a laggard when it comes to certain climate policies. In that province, the most recent results of the carbon permit auction within their cap-and-trade system had prices that were less than half of the $65 per tonne price that prevails elsewhere. Before inefficiently ratcheting up costs on certain targeted sectors, we could first ensure those lagging behind are brought in line. 

I recognize that minimizing economic costs is not the only criterion policymakers are (or should be) concerned about. No party fully embraces market-based approaches. And Canadians themselves may prefer costs to be hidden, even if that means total costs are larger.

Pricing emissions also does not always make sense, even economically. Regulations to lower methane emissions—which, interestingly, may be the biggest near-term driver of emissions reductions in the oil and gas sector—are for several reasons fairly low-cost and sometimes difficult to price.

But to effectively and efficiently lower our greenhouse gas emissions, our priority should be consistent treatment of emissions across all regions and sectors. A cap on oil and gas emissions moves us further from this basic principle. And it comes with a high cost.

Peter Menzies: Is the CBC embarrassed by its government funding?

Commentary

Sometimes the fog of war reveals as much as it hides.

Such could very well turn out to be the case for the CBC which, having taken up arms with Opposition leader Pierre Poilievre and the Conservative party, pretty much lost its mind this week when Twitter applied the label “government-funded” to its government-funded tweets.

OK, OK, Twitter’s definition of “government-funded” implies a level of political interference that’s questionable, but such nuances are of little interest to the Marthas and Henrys of this world who may have caught wind of the controversy.

All they saw was the CBC’s damsel in distress response—faint, vapours-laden pleas concerning journalistic independence followed by a huffy withdrawal from the highly political social media platform. And then, of course, there was its protagonist, Twitter owner Elon Musk, perfectly adapted to the role of Bond villain, achieving peak smartass status with his replies whilst twirling a rhetorical moustache.

Sorting through the wreckage, the National Post’s Tristin Hopper dug out a chart from the CBC’s 2018-19 annual report. While the numbers themselves are accurate, the graphic presentation clearly misrepresents/understates the extent to which the CBC is dependent on government funding.

Which raises the question: is the CBC embarrassed by its government funding?

Does it harbour a desire to be a powerful, commercial news and entertainment provider? More NBC/MSNBC than BBC? Before its executives fall asleep at night do their eyelashes flutter at the thought of dominating the media landscape and crushing the competition?

There’s certainly evidence to support the idea that CBC executives are a lot more interested in leading a successful commercial entity than they are enamoured with the far less cool kids’ concept of running a competent public broadcaster.

Just ask the once passionate staff of Radio Canada International, who have been forced to watch as (in clear violation of the Broadcasting Act) the service that once took Canada to the world has been converted to, essentially, an ethnic radio streaming service competing against the nation’s private-sector (in other words, not government-funded) ethnic radio services.

Or those who reel in horror at the idea of Tandem—a new revenue line being developed to sell (there are less kind descriptions) “sponsored” advertorial content under the CBC banner as if it was standing on a street corner in fishnets, smoking a cigarette.

After all, the CBC’s executives once described themselves at a CRTC public hearing as not so much representing a public broadcaster but a “publicly-funded commercial broadcaster.” And that is exactly what the CBC has become: a subsidized behemoth rolling over its private-sector competition. It is exactly as predicted by Globe and Mail publisher Philip Crawley when he appeared before the House of Commons Heritage Committee in 2016.

The playing field is “not level if taxpayers’ dollars directed to the public broadcaster make the competition for digital ad dollars more difficult,” Crawley told the committee at the time. ”The CBC is The Globe’s largest competitor in the digital ad space among Canadian-based media. My colleagues and I in the industry do not support the notion that handing out more money to the CBC helps local or national newspapers.”

Indeed, as the Globe reported at the time, “the CBC is increasingly described as a great disruptor of the media landscape, with its recent budget increase of $675-million over five years coming as losses are growing and newsrooms are closing in the private sector.

“The CBC is specifically facing criticism over the expansion of its presence on the Internet, including the recent creation of an opinion section on its website with columns and op-eds that are in direct competition with several newspapers.”

Brian Lilley, now with the Toronto Sun/Postmedia, was before the committee in 2016 as a co-founder of The Rebel. He too asked the committee to rein in the CBC’s campaign to dominate online audience.

“You can’t have a level playing field when the public broadcaster…wants to be all things to all people,” he said. “There is no reason that they should be expanding digital-only platforms of opinion.”

At the time, the response from the CBC was pretty much “Oh pshaw, our digital advertising is only one percent of our revenue.”

But, hey, half a dozen years later, and, according to the CBC’s 2021-22 annual report, those digital revenues are more like $86 million or almost 20 percent of the company’s $440 million in advertising revenue. For context, that’s roughly the amount of money the Parliamentary Budget Officer estimates will be generated for newspapers from web giants if the Online News Act (Bill C-18) is successfully implemented. And he also estimates that CBC will be the biggest recipient of C-18 loot.

Little wonder then, that CBC was so embarrassed by the label “government-funded” being slapped on it by the vulgar likes of Mr. Musk.