Published by Senator Grant Mitchell on 06 December 2010
Canada needs an energy strategy that contemplates future energy supply and demand, international versus domestic markets, energy security, alternative energy sources versus traditional sources, jurisdictional issues, international pressures and environmental issues. The proverbial elephant in this room is climate change. Of course, any energy strategy to be believable and operable must contemplate the impact of climate change imperatives on energy policy.
To deny the importance of climate change and the challenges it presents is to conjure up the undressed emperor. But that is pretty much where the government's "head is at." The government will continue to give us "spin" instead of action, but the world is beginning to shift in the face of inexorable climate change, and we are increasingly going to be exposed for being ill-prepared. We will miss and are missing huge economic opportunities as we see mounting damage inflicted on our own and international economies by climate change.
How effective will energy policy be if it neglects an understanding that climate change will drive the renaissance of nuclear power and revive the prospects of our Candu program? What lost opportunity will there be if we do not seize upon the potential for alternative energy to become the vehicle for new rural development strategies? How much cost will be inflicted upon our agriculture, fishing, forestry and northern economies if we continue to pursue an energy policy that pays lip service to climate change but does nothing about it? And what of our water supplies in a climate changed Canada? How will we defend the credibility of our energy industry (the oil sands in particular) if we cannot demonstrate to the world that we are dealing with GHG emissions effectively?
Our future is inextricably linked to energy, and energy and our future are inextricably linked to climate change. Only this government just does not or will not get it. Perhaps, it is because this effort will take profound federal/provincial cooperation, and the Prime Minister has shown little interest in that, having met with the Premiers only once in five years. Perhaps, it is because the Conservatives are simply overwhelmed by it and don't really know what to do or how to manage a government to do it. That might happen when you actually hate government as their actions and rhetoric profess to do. Perhaps, this is because their ideology prohibits them from contemplating any kind of government intervention, a must for the kind of leadership needed to fight climate change and capture the economic opportunities this fight will surely present. But then, what evidence is there that their ideology (dogma) has worked at all.
To be meaningful and successful, our energy strategy must incorporate a climate change strategy. The key for any climate strategy is an effective carbon pricing mechanism. Almost to a person, witnesses before the Senate Committee on Energy, the Environment and Natural Resources, industry and other alike, have said that it is essential to price carbon. This is an important way to establish the level of certainty that industry and society requires to make their long-term capital and consumer decisions.
The carbon pricing debate has raised concerns that net regional cash outflows would disadvantage certain regions. However, a report released last week, by Mark Jaccard and his team for the C.D. Howe Institute, demonstrated that the government could develop a climate policy that was equitable for all regions. It is, of course, the type of analysis and modeling that the federal government should be doing, but isn't.
Jaccard's models set up a cap-and-trade system with caps designed to meet the government's 17 per cent target reduction from 2005 by 2020 with auctioned permits. The federal government then would return the revenue to the provinces, based on the total revenue generated from each province. This would avoid a transfer of wealth out of carbon intensive provinces like Alberta and Saskatchewan. The provinces could then return the revenue to consumers and/or industry through broad provincial personal and business income tax cuts. Under this model, there would be less than a quarter of a percent reduction in annual GDP growth annually for both Alberta and Saskatchewan, and the rest of Canada.
These findings demonstrate two key things. Implementing a cap-and-trade will barely impact Canadian GDP growth. And, we can do it without creating regional transfers of wealth.
Another recent C.D. Howe study has dispelled the myth that Canada must wait for the United States to take action. It found that it is actually better for Canada to begin in advance of the U.S. as we have higher abatement costs than the Americans. If we link two trading systems at the same time, says the study, Canada could face large financial outflows to the U.S.
All of this is, however, in limbo since the Conservatives' official climate policy is solely predicated on waiting to do whatever the U.S. decides to do on climate change. The U.S. has now begun to establish emission regulations under its Environmental Protection Act since legislation will be out of the question with the new Republican dominated Congress. Astonishingly, our part-time Environment Minister seemed taken by surprise when asked recently what that meant for Canada.
In the absence of any national leadership, provinces and industry are making some effort to address climate change concerns. Alberta, in fact, was one of the first regimes in North America to have anything like a cap and trade system. There is an interesting conundrum in this. If it is recognized as being a big enough problem to warrant any effort at all, then someone needs to be asking whether we are doing enough. If we acknowledge the problem at all, we have to acknowledge that it needs to be solved.
Otherwise, these efforts are little more than public relations.
And if industry is acknowledging that it is a problem by taking at least some steps to deal with GHGs, then how hard are they lobbying government to demand the kind of leadership that is required to really make a difference. Industry, particularly the energy industry, is at the bleeding edge of Canada's growing international climate credibility problem. If industry makes its desire for carbon pricing clear to the government and to the public, it will help create the motivation and political space for government to push for carbon prices.
Truly, the time for talk is over. Climate change is advancing and changing the landscape both literally and figuratively. An energy strategy for the future must be a climate change energy strategy or it will be obsolete the moment it is conceived.
Alberta Liberal Senator Grant Mitchell is the deputy chair of the Standing Senate Committee on Energy, the Environment and Natural Resources. Check out the committee's new website at www.canadianenergyfuture.ca or follow us on twitter @sceenr_says