From the Canadian Energy Centre

By Will Gibson

Study finds legislation’s massive cost outweighs any environmental benefit

The negative economic impact of Canada’s proposed oil and gas emissions cap will be much larger than previously projected, warns a study by the Center for North American Prosperity and Security (CNAPS).

The report concluded that the cost of the emissions cap far exceeds any benefit from emissions reduction within Canada, and it could push global emissions higher instead of lower.

Based on findings this March by the Office of the Parliamentary Budget Officer (PBO), CNAPS pegs the cost of the cap to be up to $289,000 per tonne of reduced emissions.

That’s more than 3,600 times the cost of the $80-per-tonne federal carbon tax eliminated this spring.

The proposed cap has already chilled investment as Canada’s policymakers look to “nation-building” projects to strengthen the economy, said lead author Heather Exner-Pirot.

“Why would any proponent invest in Canada with this hanging over it? That’s why no other country is talking about an emissions cap on its energy sector,” said Exner-Pirot, director of energy, natural resources and environment at the Macdonald-Laurier Institute.

Federal policy has also stifled discussion of these issues, she said. Two of the CNAPS study’s co-authors withdrew their names based on legal advice related to the government’s controversial “anti-greenwashing” legislation.

“Legitimate debate should not be stifled in Canada on this or any government policy,” said Exner-Pirot.

“Canadians deserve open public dialogue, especially on policies of this economic magnitude.”

Carbon leakage

To better understand the impact of the cap, CNAPS researchers expanded the PBO’s estimates to reflect impacts beyond Canada’s borders.

“The problem is something called carbon leakage. We know that while some regions have reduced their emissions, other jurisdictions have increased their emissions,” said Exner-Pirot.

“Western Europe, for example, has de-industrialized but emissions in China are [going up like] a hockey stick, so all it’s done is move factories and plants from Europe to China along with the emissions.”

Similarly, the Canadian oil and gas production cut by the cap will be replaced in global markets by other producers, she said. There is no reason to assume capping oil and gas emissions in Canada will affect global demand.

The federal budget office assumed the legislation would reduce emissions by 7.1 million tonnes. CNAPS researchers applied that exclusively to Canada’s oil sands.

Here’s the catch: on average, oil sands crude is only about 1 to 3 percent more carbon-intensive than the average crude oil used globally (with some facilities emitting less than the global average).

So, instead of the cap reducing world emissions by 7.1 million tonnes, the real cut would be only 1 to 3 percent of that total, or about 71,000 to 213,000 tonnes worldwide.

In that case, using the PBO’s estimate of a $20.5 billion cost for the cap in 2032, the price of carbon is equivalent to $96,000 to $289,000 per tonne.

Economic pain with no environmental gain

Exner-Pirot said doing the same math with Canada’s “conventional” or non-oil sands production makes the situation “absurd.”

That’s because Canadian conventional oil and natural gas have lower emissions intensity than global averages. So reducing that production would actually increase global emissions, resulting in an infinite price per tonne of carbon.

“This proposal creates economic pain with no environmental gain,” said Samantha Dagres, spokesperson for the Montreal Economic Institute.

“By capping emissions here, you are signalling to investors that Canada isn’t interested in investment. Production will move to jurisdictions with poorer environmental standards as well as bad records on human rights.”

There’s growing awareness about the importance of the energy sector to Canada’s prosperity, she said.

“The public has shown a real appetite for Canada to become an energy superpower. That’s why a June poll found 73 per cent of Canadians, including 59 per cent in Quebec, support pipelines.”

Industries need Canadian energy

Dennis Darby, CEO of Canadian Manufacturers & Exporters (CME), warns the cap threatens Canada’s broader economic interests due to its outsized impact beyond the energy sector.

“Our industries run on Canadian energy. Canada should not unnecessarily hamstring itself relative to our competitors in the rest of the world,” said Darby.

CME represents firms responsible for over 80 per cent of Canada’s manufacturing output and 90 per cent of its exports.

Rather than the cap legislation, the Ottawa-based organization wants the federal government to offer incentives for sectors to reduce their emissions.

“We strongly believe in the carrot approach and see the market pushing our members to get cleaner,” said Darby.

From the Daily Caller News Foundation

By David Blackmon

Just eight months into his second presidency, a strong case can be made that President Donald Trump must now be considered the most consequential energy president in U.S. history. A convergence of major recent international events helps prove the case.

New Lloyd’s of London CEO Patrick Tiernan moved this week to scrap the net-zero policies invoked by his predecessor, an obvious concession to the sea change in energy and climate policy direction underway in the second presidency of  Trump.

Lloyd’s previous CEO, John Neal, put in place policies requiring that participants in the Lloyd’s insurance market quit insuring energy projects that don’t conform to the net-zero goals laid out by the 2016 Paris Climate Accords by the year 2030. Neal further pledged to transform the entire Lloyd’s insurance market into a pure net-zero business model by 2050.

“It is important that Lloyd’s remains apolitical,” Tiernan said of the company’s change in direction. “The 2050 targets are government targets. We operate in multiple jurisdictions under different governments with different targets. We have to operate under the policies and the laws of where we operate.”

Obviously, the policies and laws in the United States, the market in which so many Lloyd’s insurers maintain major interests, have undergone a seismic shift since Mr. Trump took office in January, a shift that seems destined to continue for at least the next 40 months, and possibly for years longer. Trump’s policy turnabout has had major impacts on the U.S. energy picture starting almost from his first day in office, and now the impacts are being felt internationally.

This move by Lloyd’s is far from the only recent signal that major changes are underway. Another bit of proof came from British major oil company Shell, which announced on Wednesday it will abandon its planned biofuels project in Rotterdam after a commercial and technical evaluation deemed it no longer competitive in a rapidly shifting marketplace. The facility was already under construction and would have become the largest biofuels plant on earth if completed.

Shell and its fellow UK-based major, BP, have both responded to the shifting direction of the net-zero globalist ambition by dramatically scaling back their renewables investments and reallocating capital back to their core oil and gas businesses in an effort to become more competitive with U.S. majors ExxonMobil and Chevron. It’s a race in which BP especially has fallen far behind and is now struggling to regain lost ground.

The Trump revolution has also had a big impact on wind developers that are majority owned by other governments, like Denmark’s Orsted and Norway’s Equinor. Equinor was forced in July to take a write down of almost $1 billion related to its U.S. offshore wind ventures in the face of the Trump administration’s multi-pronged assault on that sector, one of former President Joe Biden’s biggest energy-related ambitions.

Orsted, meanwhile, having failed to attract investors to assume big pieces of its own U.S. offshore projects, is now pursuing a $9.4 billion rights issue that constitutes roughly 70% of the company’s full current market value. Orsted’s U.S. struggles also complicate Equinor’s business planning since the Norwegian company owns 10% of its Danish competitor. Fortunately for Orsted, Equinor recently pledged to plow another $1 billion into the rights issue to maintain its ownership percentage; otherwise, Equinor would have seen its position significantly diluted.

Trump’s policy turnabout is also having major impacts on the international banking sector. In late August, the UN-backed Net Zero Banking Alliance announced it was pausing operations amid a flood of high profile members rushing to abandon the cause, leading to speculation that it will soon collapse entirely.

It wasn’t hard to see all these dramatic changes and many others coming once it became obvious the United States was changing its policy direction. America’s out-sized economy and consumer market have always given it out-sized influence on global events. That influence only becomes magnified when the Oval Office is held by a President with Donald Trump’s keen understanding of the power of leverage and the willingness to deploy it.

It all adds up to make President Trump without any question at all the most consequential energy policy president in U.S. history, both at home and abroad.

David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.