Smith’s attack on emissions cap a preview of post-carbon tax politics

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OTTAWA — A new battle brewing between Alberta and Ottawa over the incoming federal cap on oil and gas emissions could mark the start of a new era in Canada’s climate politics, with the carbon tax now all but defeated.

One expert says to expect a very different sort of fight this time around.

Trevor Tombe, an economist with the University of Calgary’s School of Public Policy, says that regulatory mechanisms like the emissions cap can be a more elusive political target than direct carbon levies as their costs to consumers are largely hidden.

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“The costs (of regulations) are foregone economic opportunities rather than actual cash flows,” said Tombe in an interview. “Psychologically, that might be easier for people to live with than explicit taxation.”

This could be one reason why the Alberta government is trying to pre-emptively define the emissions cap in cross-Canada ads claiming that it will “make groceries more expensive” for Canadian families, a claim that Tombe and other economists have called misleading as the proposed cap would have little to no direct impact on food prices.

“We’re challenging proposed policy that would stifle our energy industry, kill jobs and ruin economies by launching a national campaign that tells Ottawa to ‘scrap the cap,’” Alberta Premier Danielle Smith said in defence of the out-of-province ad buys last week.

Draft regulations outlining the cap on oil and gas emissions, first announced last December, are expected in the coming weeks. The federal government has indicated that the new regulations will apply to LNG and upstream oil and gas facilities, including offshore facilities.

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The policy aims to cap 2030 emissions at 35 to 38 per cent below 2019 levels, a target critics have called unrealistic.

Emitter-focused mechanisms like the oil and gas cap are one of few tools left to policymakers who want to lower carbon emissions, says Tombe.

“Industrial pricing is the only sustainable type of carbon pricing from this point forward,” said Tombe. “Thanks to the (federal) government.”

There will be a strong argument to make that the (federal emissions regulations) impermissibly intrude into provincial areas of jurisdiction

The once-popular federal carbon tax has quickly become a political liability amid rising affordability concerns. Prime Minister Justin Trudeau further damaged the tax’s credibility last fall when he agreed to a “carve-out” exempting home heating oil, a fossil fuel used to heat a quarter of households in Atlantic Canada and just six per cent of households in the rest of Canada.

The Atlantic Canada-focused heating oil carve-out led political leaders in other parts of the country, including Manitoba’s NDP Premier Wab Kinew, to seek similar carbon tax breaks on home heating fuels.

Tombe told the National Post in December that the emissions cap announcement was a sign that the Trudeau government was “backing away” from the carbon tax as the central plank of its climate policy.

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Since then, several prominent centre-left politicians have come out against the carbon tax, including federal NDP Leader Jagmeet Singh and British Columbia Premier David Eby.

Liberal Susan Holt, who was elected to be New Brunswick’s next premier on Monday, has promised to petition Ottawa to let her adopt an alternative to the federal carbon levy.

Holt called in March for a pause on that spring’s scheduled carbon tax increase until April 1, 2025.

An ex-NDP officeholder from Alberta, speaking on the condition of anonymity, said that the business-friendly consumer carbon tax was always an odd thing for progressives to rally behind.

“(We) lost the plot the plot in defending what essentially amounts to a conservative policy,” said the source; adding that the carbon tax is the option that “best shields industrial emitters from any scrutiny or attention.”

Tombe said that equity could be a key selling point of regulatory approaches like the emissions cap.

“With regulations, you might be better able to target where these costs land,” said Tombe. “An issue with the carbon tax being so broad-based is that everyone pays part of the cost, which strikes some as unfair.”

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The Trudeau government has tried to make the carbon tax more equitable by paying out quarterly rebates to most Canadian households, a practice that looks to have done little to shore up the policy’s popularity with voters.

Tombe said it could be tricky for the federal government to get an oil and gas emissions cap through the courts, citing its uneven regional impacts.

“It effectively targets a specific region (Western Canada) for reasons that are largely political,” said Tombe.

Geoffrey Sigalet, the director of UBC’s Centre for Constitutional Law, agrees.

“There will be a strong argument to make that the (federal emissions regulations) impermissibly intrude into provincial areas of jurisdiction, namely over the management of natural resources under section 92A of the Constitution,” Sigalet told the National Post.

Ryan Fournier, a spokesman for Alberta Environment Minister Rebecca Schultz said the province was ready to fight the federal emissions cap in court.

“We will use every legal tool at our disposal to defend our constitutional jurisdiction and the livelihoods of all Albertans,” said Fournier in an email.

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A senior official with Environment and Climate Change Canada said the ministry was confident the federal cap will hold up in court, noting that the policy targets emissions, not the actual production of energy.

The official said Alberta and other energy-producing provinces can continue to expand oil and gas production under the cap if they scale up emissions-reducing carbon capture and storage technologies.

National Post
rmohamed@postmedia.com

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