Emissions cap shows the government is 'backing away' from the unpopular carbon tax

The policy may be symbolic of the Liberal government’s declining zeal for what was once its flagship policy

Article content

OTTAWA — The federal government’s plan for capping emissions in the oil and gas sector, announced Thursday to coincide with the COP28 climate conference in Dubai, wasn’t as bad as Alberta’s worst fears but still earned a fiery rebuke from the province’s premier.

The policy, which aims to cap 2030 emissions at 35 to 38 per cent below 2019 levels, may be symbolic of the Liberal government’s declining zeal for what was once its flagship policy: the carbon tax.

Advertisement 2

Article content

Article content

“I think it’s pretty clear that government is backing away from the carbon tax as a central pillar of their climate policy,” said Trevor Tombe, a University of Calgary economist.

“And that means if you want to hit your target, you need to adopt other policies. And regulatory measures are the alternative to market-based approaches,” said Tombe.

The emissions cap framework still needs significant work before draft regulation can be published in mid-2024, allowing industry and advocates to weigh in on the plan.

The cap will function as a cap-and-trade system that allows heavier emitters to buy allowances from facilities that have lowered emissions, with fewer allowances being granted as the cap tightens in the future. Initially, with the flexibility of the cap-and-trade allowances, the government expects a decrease in emissions of 20 to 23 per cent below 2019 levels.

Although the emissions targets for the cap are lower than previously expected, the reaction from Alberta was withering.

“Our province is simply done with what amounts to a steady stream of economic sanctions and punitive measures thrown upon our citizens and businesses to intentionally damage their livelihoods and the economic engine that disproportionately powers our national economy and the programs that Canadians rely on,” said Alberta Premier Danielle Smith, in a statement following the government’s announcement.

Advertisement 3

Article content

An emissions cap is the inevitable consequence of the government’s decision to shoot for more stringent emissions targets, said Andrew Leach, a University of Alberta energy economist.

Canada’s original emissions target of 30 per cent below 2005 levels by 2030 was brushed aside last year for a new goal of 40 to 45 per cent below 2005 levels by 2030. Leach said the government was likely on track for the original goal, but the new one will be difficult, and especially so if any more increases to the carbon tax are seen as politically impossible.

“We’ve done the same thing we always do. We have policies in place and then we commit to targets that are more aggressive than where we’re expecting to get with our policies. And so they’ve outrun their own carbon price,” said Leach.

The politics of the carbon tax have dominated Parliament Hill this fall, at least partly because the Conservatives see it as a slam dunk vote-winner. A recent decision by the government to exempt home heating oil from the carbon tax for three years, which was widely seen as an attempt to put a lid on discontent in the Atlantic provinces, has provoked a series of similar requests across the country.

Advertisement 4

Article content

Provincial premiers in the Prairies demanded a similar exemption and a carbon-tax exemption bill for farm heating caused an uproar in the Senate before being sent to parliamentary purgatory in the House of Commons. Conservative Leader Pierre Poilievre also unveiled a motion on Thursday morning calling on the government to “repeal the carbon tax on farmers, First Nations and families.”

And as the government’s resolve to defend the carbon tax seems to weaken, and Canadians tell pollsters they have soured on the policy, it has been declared “dead” by some commentators and described as irreparably compromised by its supporters.

Not only will the emissions cap be less efficient than a carbon tax, but Tombe also fears it will further undermine the case for the carbon tax among Canadians and businesses. While a carbon tax doesn’t discriminate, because it seeks to lower emissions wherever in Canada it is cheapest to do so, the emissions cap directly targets the oil and gas industry in Alberta.

Tombe worries that will “inflame tensions” in the country.

“That’s why I can’t avoid interpreting the government’s move as just purely political calculation and setting up wedge issues. In particular, setting up Alberta as a boogeyman and ignoring the fact that Quebec is lagging the rest of the country in a meaningful way (on its climate policies),” said Tombe.

Advertisement 5

Article content

Related Stories

Earlier this year, economists Chris Ragan, Paul Rochon and Mark Jaccard argued that the discussion about the need for a sector-specific emissions cap sounds a lot like arguments in favour of phasing out the oil sands.

It is important, the authors wrote, that the government makes a “crucial distinction” between cutting emissions and fossil fuel production itself, which would be economically devastating for the country.

“The bottom line is straightforward: an intentional phase-out of oil and gas production is not necessary for Canada to achieve its net zero target, and the costs of using such a policy approach would likely be enormous. To reduce the overall cost of achieving the 2050 target, the government should be encouraged to pursue policies that apply more-or-less equally to all sectors and regions of the country,” they write.

There’s also the looming inevitability of a court challenge once the emissions cap comes into effect.

Advertisement 6

Article content

Environment Minister Steven Guilbeault said last week that two high-profile losses in court made the government go back to the drawing board on the design of the emissions cap and, consequently, tread a little more lightly on environmental policy.

Guilbeault told reporters that the government has “to be very careful not to impede on provincial jurisdiction.”

Leach said he fully expects a court challenge, almost certainly from Alberta and Saskatchewan, and that any potential decision is “not cut and dried either way.” Prairie politicians and industry groups immediately warned of forthcoming constitutional challenges.

“The question the court is going to ask is: are these toxics emissions prohibitions or are they regulation of an economic sector? And if the court reaches the conclusion that this is effectively oil and gas regulation, not prohibition of toxics emissions, then they’re going to say this is encroaching too far into provincial jurisdiction,” he said.

Our website is the place for the latest breaking news, exclusive scoops, longreads and provocative commentary. Please bookmark nationalpost.com and sign up for our politics newsletter, First Reading, here.

Article content