Deborah Yedlin: Withdrawing federal emissions cap is non-negotiable as Trump wins office again

In this composite image, Republican presidential nominee former President Donald Trump waves as he walks with former first lady Melania Trump at an election night watch party at the Palm Beach Convention Center, Wednesday, Nov. 6, 2024, in West Palm Beach, Fla., left, (AP Photo/Evan Vucci), and Suncor's base plant with upgraders in the oil sands in Fort McMurray Alta, on Monday June 13, 2017, (right), (THE CANADIAN PRESS/Jason Franson).

Timing is everything.

In markets, investment decisions and apparently when the federal government opts to table its emissions cap legislation.

While this has been anticipated for over two years, the fact it was dropped on Monday, the day before the U.S. election, is a clear sign the government was hoping its ill-conceived legislation will be buried in the news cycle of the election.

It's beyond cynical.

So too, were Minister of Environment and Climate Change Steven Guilbeault’s comments warning against toppling the government, because it would mean the legislation would not be passed – and implying it would be terrible for Canada.

What would be terrible for Canada is if this legislation is ultimately passed.

Here are a few reasons.

Canada would stand as the only country in the world to move forward with a self-imposed emissions cap.

Given that our economic growth numbers have been underwhelming – and our per-person productivity lags that of the United States by $20,000, one would expect the government to be more focused on supporting sectors that are critical to economic growth rather than passing legislation that will compromise investment and hamper our growth prospects.

The numbers speak for themselves.

According to an analysis completed by the Conference Board of Canada earlier this year, this legislation – which the government continues to insist is not a cap on production – could lead to the loss of as many as 150,000 jobs, decrease GDP by $28 billion and require a drop in production of one million barrels a day.

As the owner of the Trans Mountain Pipeline, the government should be mindful that any uncertainty related to the ability to fill the uncontracted capacity of the pipeline, will compromise the valuation it gets when it is ultimately sold. It bears reminding Canadian taxpayers paid for the pipe – and any loss on the valuation is borne by the taxpayer.

Now, with Donald Trump winning the U.S. election, the prospect of tariffs being levied on Canada’s energy exports to the U.S. is almost certain.

That tab could amount to $16 billion per year. Thus, the combination of the hit to GDP from a production cut of $28 billion, with the $16 billion tariff, adds up to a $44 billion impact on Canada’s economy.

This will hurt all Canadians. Dramatically.

Also missing from the government’s analysis, is that the resulting decrease in investment because of the cap will have an impact on the opportunities for Indigenous communities through participation in resource development projects.

Consider this: in the last budget, the federal government proudly established the equivalent of Alberta’s Indigenous Opportunities Corporation (AIOC). Like the AIOC, the intent of the Federal Indigenous Loan Guarantee Program is to facilitate equity participation in projects, including energy projects.

To date, the AIOC has underwritten $680 million in loan guarantees, supporting investment by 42 Indigenous communities in Alberta. The emissions cap puts these opportunities at risk, because they will decrease in number – and by extension, compromise further progress on economic reconciliation.

Equally short-sighted is that the trading of emissions credits will be confined within the energy sector. This means companies can’t purchase credits from other sectors or companies that are producing credits through their operations. It also ignores the success of Alberta’s TIER program – which has been in place since 2007 and offers pricing certainty for carbon on a per tonne basis.

This is pure folly.

The only way the world gets to a place where meaningful emissions reductions are achieved is by collaboration across sectors.

Not only is the government penalizing one sector by this restriction, it is also taking away the incentive for the energy companies to work together and find solutions to decrease emissions. The energy sector already spends more on clean technology initiatives than any other sector in the country because investors and insurers are demanding it.

It would be far more helpful for government to recognize that market-driven mechanisms, whether a standardized carbon market, increasing access to capital for startup ventures in the clean-tech space and streamlining regulatory process would go much further than an emissions cap. What’s the point of Investment Tax Credits (ITCs) if the cap makes it all moot?

There is a significant amount of magical thinking going on in the context of the growth in clean tech.

Yes, jobs will increase as we seek to decarbonize energy sources and uses – but as noted in Andrew Leach’s book, “Between Doom and Denial,” the productivity of the energy sector is difficult to replace.

In 2021, Leach points out oil and gas accounted for one per cent of national employment, but 20 per cent of the value of Canadian exports and six per cent of GDP. In other words, one doesn’t seamlessly replace the other.

Absent from the government’s lexicon is the fact Canada’s energy sector has set the global standard for what collaboration can look like and achieve.

In 2012, 13 oil sands producers came together to form the Canadian Oil Sands Innovation Alliance – to share technologies and intellectual property with the goal of maximizing work that had been done as individual companies – for the benefit of the sector in four key areas: land, water, emissions and tailings. This was unheard of – anywhere.

The same thing holds true for the Pathways Alliance, the alliance of Canada’s six largest oil sands producers. No other sector has come together, ready to risk private capital and address what is truly a pressing issue for the planet.

That project – constructing a carbon capture pipeline network – with the private sector contributing $16.5 billion, will generate between 25,000 and 30,000 jobs and ensure continued production from the oil sands, contributing to our exports, supporting our balance of trade and generating important revenues in the form of taxes and royalties for provincial and federal coffers.

Sure, there are those that are saying the energy companies have made billions of dollars in recent years and should put more dollars on the table, but they forget the combined losses for the sector between 2014 and 2021 were also in the billions.

But this fails to be acknowledged, let alone rewarded, by the federal government.

Finally – the emissions cap would do absolutely nothing in the global quest to decrease emissions.

All it will achieve is to make Canada a less desirable place for investment; dollars have already gone to the U.S. because of the incentives provided under the Inflation Reduction Act (IRA) and protectionism promised under either presidential candidate will only diminish our competitiveness.

If the Canadian government wants to reduce emissions, it should follow the private sector’s lead – and strong track record – and withdraw the emissions cap.

With the election of Donald Trump, it’s simply not negotiable.